KUALA LUMPUR (June 23): AirAsia Bhd said it wants to consolidate the accounts of its foreign associates in Indonesia, the Philippines, Thailand and India, but is unable to do so due to aviation regulations in the four countries.

"Contrary to the GMT Research report that AirAsia did not want to consolidate its associate companies, we were compelled not to consolidate as a result of the opinion of our auditors. Consolidation would have attracted an audit qualification," the budget airline's audit committee chairman VU Kumar said in a statement yesterday.

"So, while we are of the view that consolidation would present a true and fair view of AirAsia’s relation- ships with its associate companies, we have been advised to do so would be a breach of the Malaysia Financial Reporting Standard (MFRS) 10 and in addition the ‘true and fair’ override would also not be allowed," he said. Kumar went on to say that the airline's audit committee, its board of directors and management are "somewhat distressed and peeved" to have been accused of corporate governance abuses and condoning accounting gimmicks by GMT Research.

Kumar also noted that the airline has for the past 12 months been meeting with its auditors PricewaterhouseCoopers, legal advisers, management of the associate companies and aviation regulators to effect consolidation of its associate companies.

"These meetings were not mere discussions, but supported by board papers and opinions from our auditors and legal advisers from the territories in which the associate companies operate," he said.

"Due to its inability to consolidate, AirAsia presented full disclosure of the associate companies' financials and also its operating statistics, as given in the first quarter of 2015 announcement, for stakeholders to have information on the performance and financial position of the associate companies," said Kumar.

Shares in AirAsia recovered lost ground last Thursday after losing more than 27% or RM1.58 billion of their value since June 9. This followed a report by Hong Kong-based research firm GMT Research which had questioned AirAsia's accounting and cash flow. A main concern was whether the airline would be able to retrieve outstanding amounts due from its loss-making associates.

To stem the share selling and to reassure its investors, the budget airline had on June 17, issued a four-page statement that it has a “strong balance sheet, is rich in assets and has a good business outlook”.

It had also said that its next quarterly financial statements will reflect the results of its associates, and that its accounts were transparent and prepared in line with global and local accounting standards.

AirAsia shares rose as much as 3.1% to hit an intra-day high of RM1.66 (59.4 cents) yesterday, before easing to close at RM1.64, giving it a market capitalisation of RM4.56 billion. It was the third most active stock on Bursa Malaysia, with 37.03 million shares done.

Separately, Reuters reported that Thai Airasia X will temporarily suspend services from Bangkok to Sapporo in Japan from Aug 1 due to an aviation safety downgrade by an international audit agency.

Thai AirAsia X, part of AirAsia X Bhd, will continue to fly to Tokyo and Osaka in Japan and Seoul in South Korea, it said in a statement yesterday.

Thailand's civil aviation body is under scrutiny after the United Nations' aviation agency downgraded its safety ratings for failing to properly oversee airlines under its jurisdiction, the Department of Civil Aviation said last week.