Tuesday, June 23, 2015


           AirAsia Bhd had to defend its accounting practices against more allegations from Hong Kong’s GMT Research yesterday ahead of a full report this week.
GMT founder Gillem Tulloch accused Asia’s biggest budget carrier of dubious accounting practices that was unsustainable in the long run.
Tulloch said AirAsia needs a capital injection of RM7 billion to address the financial health of its units in Indonesia, Thailand, India and the Philippines, which include servicing debts of RM12.7 billion.
Tulloch, who spoke in a video posted on the company’s website said, over the last six years AirAsia inflated profits by “some RM1.1 billion through leasing and selling aircraft to its associates”.
"The group's structure appears to have been designed to remit profits and cash at the operating level to the parent company from its airline associates," Tulloch said in the video.
Preliminary reports from GMT about AirAsia’s financial methods had forced AirAsia to issue counter statements defending its bookkeeping methods.
The research house is scheduled to release its full report this week. Among its accusations, GMT claimed that AirAsia’s foreign units have stopped paying bills and need support from AirAsia.
“Real profits have collapsed and AirAsia now needs a thorough recapitalisation and restructuring that will dilute existing shareholders by more than 100%,” Tulloch said. AirAsia’s chairman of its audit committee VU Kumar has come out with a statement to counter the allegations.
He said the company was “distressed and peeved” at being accused of abuses and condoning accounting gimmicks by GMT.
Kumar said GMT should check with AirAsia before making public accusations that could tarnish the airline’s reputation.
Countering one of GMT’s accusations, Kumar said local regulations in Indonesia and the Philippines prevented the airline from consolidating its foreign associates.
"(The company) has for at least over 12 months, had a whole series of meetings with PricewaterhouseCoopers (PwC), legal advisors, management of the associate companies and aviation regulators to effect consolidation of its associate companies," he said.
However, due to aviation regulations in Indonesia, the Philippines, Thailand and India as well as local business laws, Kumar said AirAsia could not have legal control or legal power over its associate companies.
AirAsia owns only 49% of AirAsia Indonesia and 40% of AirAsia Philippines.
Kumar said AirAsia risked losing operating licences of its foreign associate companies if it changed equity holdings in those companies.