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.
