This article first appeared in The Edge Malaysia Weekly on February 24, 2020 - March 1, 2020

Shares of AirAsia Group Bhd and its sister company, AirAsia X Bhd (AAX), have fallen about 17% and 12% respectively since news broke that authorities in Malaysia will be looking into whether any wrongdoing was committed after two of their top executives were implicated in a US$4.0 billion bribery settlement between Airbus and the UK’s Serious Fraud Office (SFO).

As it is, airline stocks are already under stress because of fears over the Covid-19 outbreak, which has prompted China to consider cash injections and even mergers to rescue its airlines from collapse as air travel comes to a virtual stop.

All eyes are now on the release next week of AirAsia’s and AAX’s results for the last quarter of 2019, which analysts expect to be not good — and this will reflect only the pre-Covid-19 period.

Moving forward, research house CGS-CIMB Research is projecting that AirAsia could be heading for a record loss in FY2020 and has slashed its target price for the stock to RM1.03 from RM1.43 currently. It has drastically revised its FY2020 projection for AirAsia from a net profit of RM147 million to a whopping net loss of RM1.1 billion!

The brokerage says AirAsia’s significant exposure to flights to China, Hong Kong and Macau means that it will be badly hit if the epidemic is prolonged. AAX is not doing any better and needs a major cash injection to keep it afloat.

Any company will need all hands on deck to deal with a crisis. Unfortunately for AirAsia and AAX, their two principal shareholders — Tan Sri Tony Fernandes and Datuk Kamarudin Meranun — have had to relinquish their executive roles until internal and external investigations are completed — expected to be within two months.

That was the right thing for them to do. But for AirAsia employees and shareholders, that will be two very long months, so it will be better for everyone if an outcome is achieved earlier.

Apart from their initial statements, both the airlines as well as Fernandes and Kamarudin have maintained their silence. However, a news report last week, quoting unnamed sources,  said the boards of directors of AirAsia and AAX had given the go-ahead for Fernandes to source for funds to brand the airlines via the Caterham F1 racing team owned by him and Kamarudin.

If true, this should provide some relief for Fernandes as it would show that he had not asked for Airbus sponsorship money covertly.

But questions remain.

The boards of directors will have to explain why they agreed to it since Caterham is owned privately by Fernandes and Kamarudin. Were any concerns raised about conflict? Wasn’t there a better way for AirAsia to do a global branding? What exactly was the mandate they gave to Fernandes? Was it a general one or were there specifics as to how it was to be done and did he stick to it? If Airbus and the SFO had known that Fernandes had the mandate from his boards of directors, would the sponsorship money be viewed differently? And why was the first US$61 million paid to Caterham not a subject of the SFO settlement? Does that mean it was not considered a bribe by the SFO? In that case, why was the second US$50 million deemed a bribe? Was there other evidence that has not been made public?

There are many questions that are in need of answers. The sooner an outcome — whatever it may be — is achieved, the better it will be for the shareholders of AirAsia and AAX and their larger group of about 24,000 employees in Malaysia.

They need to know fast if their two chief pilots will be cleared to navigate them through the current turbulence. Or will alternative plans need to be put in place?

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.