AirAsia 'vigorously rejects' bribe allegations, Garuda also named in judgement

AirAsia has denied allegations that its directors have received a US$50 million bribe from Airbus. According to the judgement by UK's Royal Courts of Justice seen by A+M, UK's director of the Serious Fraud Office (SFO) alleged that the amount was paid to directors and/or employees of AirAsia and AirAsia X airlines as sponsorship for a sports team. The judgement added that the sports team was jointly owned by AirAsia Executive 1 and AirAsia Executive 2 but was legally unrelated to AirAsia and AirAsia X.

According to the judgement, Airbus failed to prevent individuals associated with the company from bribing others concerned with the purchase of aircraft by AirAsia and AirAsia X between July 2011 and June 2015. The individuals were namely directors and/or employees of AirAsia airlines where the alleged bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus.

The judgement added that AirAsia and AirAsia X were significant customers of Airbus at the time of offences. Between October 2005 and November 2014, AirAsia and AirAsia X ordered 406 aircraft from Airbus, including 180 aircraft secured during the indictment period by way of improper payment (made by EADS France SAS, later Airbus Group SAS), and the offer of a further improper payment.

"AirAsia wishes to clearly state that it was neither involved in any way whatsoever with the SFO’s investigation of Airbus nor given any opportunity to provide any information or clarification to the SFO," the airline said in a statement, adding:

AirAsia vigorously rejects and denies any and all allegations of wrongdoing.

It explained that the entering into of each aircraft purchase agreement was never made by any single individual decision, but instead arrived at through careful evaluation, deliberation and the collective decision of the board members after taking into account technical specifications, aircraft flight performance and operating economics.

"The superiority and reliability of the aircraft and increasingly attractive pricing being offered to maintain our competitive edge in the airline business were key considerations. As a customer of Airbus since 2005, AirAsia never made purchase decisions that were premised on an Airbus sponsorship," the airline said.

It also said that all negotiations and dealings leading to the signing of any aircraft purchase agreement have been undertaken directly with Airbus on an arm’s length basis, and without the involvement of any third parties or intermediaries. AirAsia executives negotiated rigorously in the interests of the company and had at all times acted in good faith, the statement said.

"In any event, AirAsia is aware that correspondence between the company and Airbus dating back more than a decade has been reported in the press without proper context or review, and we are concerned that views and opinions on the matter may have been formed unfairly and prematurely," it added.

AirAsia also explained that the involvement of Airbus in the sponsorship of the sports team was a well-known and widely-publicised matter bringing branding and other benefits to Airbus. AirAsia’s own sponsorship of the sports team went through due internal assessment and approvals before being considered and approved by the board.

"As AirAsia and its executives have no visibility on Airbus’ internal processes, we cannot comment on or be associated with any alleged failures or lapses on the part of Airbus to comply with its own policies or applicable legal requirements," the statement read.

Following the news, shares for AirAsia Group fell by 11% to RM1.27, the lowest since May 2016, while AirAsia X saw a 12% dip to an all-time low of 11.5 Malaysian sen, Reuters reported. Malaysian Anti-Corruption Commission (MACC) chief commissioner Latheefa Koya also said in a statement that it has contacted UK authorities and opened an investigation into the matter.

"Under the MACC Act, we have the power and authority to investigate any act of corruption performed by any citizen or permanent resident of Malaysia in any place outside Malaysia," Koya added.

AirAsia said it is deeply concerned that the allegations will have an adverse and negative impact on the AirAsia brand, reputation and goodwill. It added that it is monitoring developments in this matter and will review any allegations or negative inferences concerning or affecting AirAsia and/or any of its executives and will fully cooperate with the MACC and the relevant authorities where required.

Separately, Garuda Indonesia and its low cost carrier Citilink Indonesia was also alleged to have received a US$3.3 million bribe between 2011 and 2014. The payment was alleged to have been paid to or for the personal benefit of employees of Garuda and/or Citilink or their family members. According to the judgement, those Garuda/Citilink employees were key or significant decision makers in respect of Airbus business during that period, namely Garuda/Citilink’s purchase of 55 Airbus aircraft.

More specifically, the amount included payments made by an intermediary to a notary acting in the purchase of a residential property in Jakarta by a relative of Garuda Executive 1; payments to Garuda Executives 2 and 3 and a payment of US$1,351,915 to a company beneficially owned by Garuda Executive 1 and his wife and incorporated in the British Virgin Islands, the judgment said. In consequence of money laundering concerns raised by Garuda Executive 1’s bank as to the source of the latter payment, a substantial amount of the total of these payments was eventually remitted to an account of the intermediary in Singapore, it added.

The last of the relevant purchase agreements was dated 20 December 2012 and was for 25 A320s. The payments were intended to secure or reward improper favour by those Garuda/Citilink employees in respect of that business. Marketing has reached out to Garuda for comment.

Meanwhile, other airlines named in the judgement included Sri Lankan Airlines, Taiwan's TransAsia Airways, as well as the government of Ghana. As a result of the judgement, Airbus has agreed to pay about US$3.9 billion in respect of agreements in the UK, France and the US.