AirAsia shares take a beating as bad news piles up

They fall 5% on Tuesday to RM2.49, taking the total loss in value since the crash to 15%

SHARES of AirAsia Bhd continued to come under selling pressure on Tuesday after it was reported that some RM1.3 billion (S$486 million) in receivables owed to the budget carrier by its Indonesian unit could be in doubt because of the latter’s alleged violation of licensing conditions.

An investigation is on-going by the Indonesian authorities into whether AirAsia Indonesia (AAI) breached its permit by flying on Sunday – a day that was outside its authorised flight schedule – and comes on the heels of the Dec 28 crash of QZ8501 into the Java sea en route from Surabaya to Singapore.

AirAsia owns 49 per cent of AAI and its shares slipped nearly 5 per cent on Tuesday to RM2.49 after sliding by a similar amount on Monday. It has lost 15 per cent of its value since the crash.

Last week, Indonesian Transport Minister Ignasius Jonan lashed out at officials of AirAsia for the alleged violation and threatened to revoke AAI’s licence.

The knock to AirAsia’s reputation aside, UOB Kay Hian research highlighted that AAI’s potential violation could have ramifications on indemnity against claims on the aircraft and other liabilities.

In a report on Tuesday, it said that although AirAsia would not face direct liability – its equity interest in AAI has been written down fully – AAI has outstanding payables of about RM1.3 billion which could be impaired. This amounted to 47 sen per share as at September or nearly a fourth of its estimated 2014 book value, observed UOB which has downgraded the stock to a hold.

However, Singapore has confirmed AAI’s Sunday flight had been approved on its end, adding to the confusion. Many question how the flight could have taken off from Surabaya if not sanctioned by the Indonesians.

Malaysian Transport Minister Liow Tiong Lai has called for less public speculation on whether the Sunday flight was authorised – its authorised schedule is said to be Monday, Tuesday, Thursday and Saturday – noting it was more important to ascertain what caused the crash.

It is unclear how long AAI had flown the Sunday flights or when the findings into the licence breach would be announced. But in the interim, its Surabaya-Singapore route has been suspended, and four air traffic control officers from Surabaya airport have been removed from their posts, local media reported.

AirAsia has said that it would cooperate with the investigations.

Tony Fernandes, its founder, has described the crash – the first in the carrier’s 12-year history – as his “worst nightmare”, now made worse by allegations of licence violation in its biggest market in Asean outside of home base Malaysia.

The investigation is also untimely since only some 37 bodies out of the 162 people on board the ill-fated Airbus A320-200 have been retrieved so far because bad weather has hampered recovery efforts.

No one is believed to have survived the crash which initial crash probes suspect was the result of a violent storm and ice formation on the wings, causing the plane to stall.