June 25, 2015 / 3:22 AM / 2 years ago

AirAsia CEO Fernandes casts other work aside amid accounting worries

An AirAsia logo is pictured at the ticketing counter at Changi Airport in Singapore December 29, 2014. REUTERS/Edgar Su

SINGAPORE (Reuters) - AirAsia Bhd (AIRA.KL) boss Tony Fernandes has told staff and analysts he will spend more time working on the budget airline and put his other business and sporting interests to one side, after a report questioning the company’s accounts sent its share price tumbling.

The chief executive has said his other work will take a back seat as he focuses on repairing the financial damage done to Asia’s largest low cost airline, according to analysts and two AirAsia executives who spoke to Reuters on condition of anonymity.

Analysts covering the airline say Fernandes told them that he, and his long-term business partner Kamarudin Meranun, would become more hands on.

“Tony told us in a conference call last week that he and Kamarudin will take a back seat to everything else and focus on AirAsia,” said Mohsin Aziz, a Maybank Investment Bank analyst in Kuala Lumpur.

“He’s back, and he’s getting more involved in many of the decisions,” added one executive.

AirAsia declined to comment on the matter while Fernandes and Kamarudin did not respond to Reuters enquiries.

Fernandes, one of Asia’s best known corporate leaders, has built a sprawling business empire over the past decade that includes English football club Queens Park Rangers, a hotel chain and an insurance business.

That has led to concerns among some AirAsia staff that he was spending too much time away from the airline just as it was expanding in Japan and India and facing an increasingly competitive landscape in Southeast Asia.

AirAsia is the worst-performing airline globally out of mid and large-cap stocks so far this year, its share price falling losing more than 40 percent to give the carrier a market value of 4.5 billion Malaysian ringgit ($1.20 billion).

Some executives said he delegated most of the running of the company to the heads of the group’s individual airlines and that he was in the office less-and-less.

Worries about his absences were exacerbated after a June 10 report by little known GMT Research said AirAsia uses related-party transactions with loss-making associate carriers to boost its earnings. AirAsia shares are down 24 pct since the report was published.

The report has caused investors to question whether AirAsia is too reliant on its associates - semi-independent airlines in countries around Asia that share its branding and pay it fees to lease planes - given they owe increasingly large increasing amounts of money to the parent company.

Fernandes refuted GMT’s report at the Paris Airshow last week, saying AirAsia has a solid balance sheet and business plan. He is now working increasingly hard behind the scenes to put the finishing touches on a turnaround plan for the group’s beleaguered Indonesian and Philippine associates, according to staff members.

“He’s telling people that AirAsia is a small company without deep pockets or a savior, and that everyone needs to pull together and work harder to prove that the report is wrong,” said the executive.

Last week the company said it expects its Indonesia unit to break even and its Philippine business to have returned to profitability by the end of this year.

BUSINESS EMPIRE

    Since 2007, Fernandes and Kamarudin have launched a chain of budget hotels, a mobile phone group, a school and ventured into financial services through their holding company Tune Group.

    Last year Fernandes sold Caterham Formula One team, after owning it for five years. He remains chairman of loss-making Queens Park Rangers, which has problems of its own after it was demoted from England’s top league and is being scrutinized by The Football League over whether its accounts breached the sport’s “Financial Fair Play” rules.

However his biggest challenge is the tough business terrain facing AirAsia, that was worsened by the crash of an Airbus Group (AIR.PA) A320 jet operated by the Indonesian affiliate that killed 162 people late in December.

The crash led to a drop in the number of passengers for the group’s Indonesia unit and it scaled back marketing activities out of respect for the victims.

Stronger competition from the likes of Qantas Airways Ltd (QAN.AX) unit Jetstar, Indonesia’s unlisted Lion Air, and Singapore Airlines (SIAL.SI) subsidiaries Tigerair TAHL.SI and Scoot contributed to losses in fourth-quarter 2014, the first since 2008, though the carrier returned to profit this year.

Still, analysts say Fernandes is the best person to turn the airline around and that its strong route network and brand recognition mean its long-term prospects remain healthy.

“It may look ugly now and there are some challenges to overcome but AirAsia will get through the current turbulence,” said Brendan Sobie, a Singapore-based analyst with aviation consultancy CAPA.

“Its position in the Southeast Asia market remains strong and the envy of competitors.”

($1 = 3.7640 ringgit)

Additional reporting by Yantoultra Ngui and Al-Zaquan Amer Hamzah in KUALA LUMPUR, Anshuman Daga in SINGAPORE and Cindy Silviana in JAKARTA; Editing by Kenneth Maxwell and Rachel Armstrong

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