Friday, January 31, 2020

UK Crown court decision naming AirAsia, AirAsiaX and directors turns spotlight on Khazanah directors, senior managers-MACC and police investigation cannot be avoided, especially after Khazanah police report attempting to cover-up MAS-Airasia deal

by Ganesh Sahathevan








On 24 January 2020 The Edge reported:

Upset and shocked by what appears to be a leak of the entire board papers on Malaysia Airlines Bhd, Khazanah Nasional Bhd wants police to act. Sources said the country's sovereign wealth fund lodged a police report on the matter yesterday.
It appears that the entire set of confidential board papers on the various options being considered for the troubled national carrier was given to the news portal which published them in a series of articles earlier this week.
The main pieces were on the proposed merger of Malaysia Airlines with AirAsia Group Bhd and AirAsia X Bhd.


It now appears, from a UK court decision, that AirAsia and AirAsiaX were themselves subject of a corruption investigation in which Airbus admitted to paying AirAsia and AirAsiaX directors and employees significant bribes.The relevant parts of the judgement are reproduced below:


Case No: U20200108
IN THE CROWN COURT AT SOUTHWARK
IN THE MATTER OF s.45 OF THE CRIME AND COURTS ACT 2013
Royal Courts of Justice Strand, London, WC2A 2LL
Date: 31 January 2020
Before :
THE PRESIDENT OF THE QUEEN’S BENCH DIVISION (THE RT. HON. DAME VICTORIA SHARP) ---------------------
Between :

Director of the Serious Fraud Office - and -
Airbus SE
--------------------- ---------------------
Applicant Respondent
James Lewis QC, Allison Clare, Katherine Buckle and Mohsin Zaidi (instructed by the Serious Fraud Office) for the Applicant
Hugo Keith QC
and Ben FitzGerald (instructed by Dechert LLP) for the Respondent

Hearing date: 31st of January 2020 ---------------------
Approved Judgment 


  1. Count 1: Malaysia
  2. The first count alleges that contrary to section 7 of the Bribery Act 2010, between 1 July 2011 and 1 June 2015, Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by AirAsia and AirAsia X airlines from Airbus, namely directors and/or employees of AirAsia airlines where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.

  3. AirAsia and AirAsia X are two major airlines in Southeast Asia, headquartered in Malaysia and were significant customers of Airbus at the time of the 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. 


  4. The improper payment consisted of $50 million (and Airbus employees also offered but did not pay an additional $55 Million) paid to directors and/or employees of AirAsia and AirAsia X airlines as sponsorship for a sports team. The sports team was jointly owned by AirAsia Executive 1 and AirAsia Executive 2 but was legally unrelated to AirAsia and AirAsia X. The additional improper payment was prevented by the October 2014 freeze on payments to BPs described at para 29 above.


The extent of the cover-up , for that is what the police reports by Khazanah seem to have been intended to achieve is wide ranging ,as reported on this blog just under two weeks ago(see story below).



END 



Monday, January 20, 2020


The AirAsia-MAS takeover proposal: Have Khazanah directors breached their fiduciary duties : RM 8 Billion in costs, plus Indian & UK investigations being treated trivially, Khazanah may need to be investigated

by Ganesh Sahathevan

Esha Gupta blasts Air Asia for changing arrival of flight without information Photo: Reuters, Twitter
Esha Gupta blasts Air Asia for changing arrival of flight without information Photo: Reuters, Twitter
Esha Gupta blasts AirAsia for changing arrival of flight without information. Calls them disgusting






If the FocusMalaysia story below is true, Khazanah Malaysia's directors and senior managers will have much explaining to do for they would seem to have breached their fiduciary duties to their shareholder, the Government Of Malaysia.

However, the RM 8 Billion cost to Khazanah is not the only problem

Air Asia faces legal problems in India.The financial and reputaional damage to MAS and the Malaysian Government from any merger into those problems seems to have been ignored.Then there are the British Serious Fraud Office issues:


AirAsia CEO Tony Fernandes. ED has pressed charges under PMLA to probe the trail of funds used to create illegal assets. (Bloomberg)



AirAsia CEO Tony Fernandes. ED has pressed charges under PMLA to probe the trail of funds used to create illegal assets. (Bloomberg)


Khazanah's management insistence on the merger needs investigation.

END 



AirAsia’s takeover of Malaysia Airlines may cost Khazanah over RM8 bil | FocusMalaysia
 | 14 hours ago | 
AirAsia’s takeover of Malaysia Airlines may cost Khazanah over RM8 bil
AIRASIA Group Bhd’s (AAGB) proposed takeover of Malaysia Airlines Bhd (MAB) will include key exclusions which may take the initial cost to Khazanah Nasional Bhd (which owns all of MAB) to over RM8 bil, documents sighted by FocusM show.
These include an RM5.4 bil financing gap for MAB’s six A380s, the exclusion of an RM2.5 bil sukuk, costs of staff layoffs, and the cost of cancellation of 25 Boeing 737 MAX 8 orders as well as other fleet rationalisation. All these total up to well over RM8 bil that Khazanah will have to bear even if MAB is acquired by AAGB.
The documents showed that last month AAGB chief executive officer Tan Sri Tony Fernandes pitched to Khazanah managing director Datuk Shahril Ridza Ridzuan a merger between AAGB, its long-haul unit AirAsia X Bhd and MAB (MergedCo).
This MergedCo would be listed on Bursa Malaysia and be a “Malaysian/Asean champion.” These were some of the pull factors that entitled AAGB to be MAB’s strategic partner.
It is also understood that Shahril and the Khazanah management were in favour of the deal but it was shot down by the board. It is believed that the proposal is still making rounds and being considered as the fund needs to decide on a strategic partner for MAB soon.
According to Prime Minister Tun Dr Mahathir Mohamad, there are five proposals. Economic Affairs Minister Datuk Seri Mohamed Azmin Ali also said Khazanah is still on the lookout for a strategic partner. The fund will need to settle on a name soon.
AAGB’s bid is one among four bids currently on the table and is probably the leading bid, followed by Japan Airlines, the other two being Air France-KLM and Malindo Airways.
But AAGB had the leg up as Khazanah believes the synergy derived from the MergedCo would amount to roughly RM1.4 bil a year, which is sufficient to cover MAB’s operations of RM1 bil a year.
Here are the salient points of Fernandes’ initial proposal to Shahril:
1) AirAsia Group is in the process of consolidation
AAGB, through AirAsia Bhd (AAB or AK), is in “the process of acquiring” AirAsia X Bhd (AAX or D7). This will see both airlines merge into one airline operation, retiring AK and D7 and only using one IATA code AK.
This enlarged group will serve the low-cost market, covering domestic and international segments, from short to long haul. This is also the crucial step in merging with MAB to form the enlarged MergedCo.
2) MH will be retired and placed under AirAsia group
MAB will be placed under Asia Aviation Investment Ltd (AAIL) which is 100% owned by AAGB. The IATA code MH will be changed to MY but will target the “premium segment” for both domestic and international markets.
AK, which is the merged company between AirAsia and AirAsia X, will aim for the low-cost segment for both domestic and international markets.
Further, AirAsia plans to retain the blue colour of the current MH but “with a refreshed, modern image and branding” while its low-cost offerings under AirAsia Group remains with its red and current branding.
3) No golden share
Post-transaction, the Malaysian government or Khazanah should not have any golden shares, or preference shares in MAB. AAGB also is demanding for complete control of management, including the appointment of key senior personnel, including the chief executive officer.
Fernandes wants “minimal government intervention” as MAB will be under the AAGB umbrella. But Khazanah may be allowed to have a seat on the board of the MergedCo.
4) Khazanah to bear staff layoffs and settle RM2.5 bil sukuk
AAGB wants to have full discretion on who to hire and fire from MAB but Khazanah has to execute the rationalisation exercise.
This includes bearing compensation and costs related to the exercise which may involve voluntary separation schemes (VSS) and/or mandatory separation schemes (MSS).
AAGB might retain pilots and cabin crew for future growth but other divisions are subject to “further deliberation.” AAGB will also not take up the RM2.5 bil corporate perpetual sukuk issued in 2012.
5) AAGB is seeking government and Khazanah’s help for clearance from the Malaysian Competition Commission (MyCC)
Having a MergedCo consisting AAGB, AAX and MAB is expected to trigger anti-competition problems. AAGB is seeking for the proposed transaction to be approved by MyCC. This is done to protect AAGB and its stakeholders’ interests.
6) AAGB will look to cancel, exclude and retire a number of MH planes
Six Airbus A380-800 are to be sold or disposed by Khazanah prior to the merger transaction. The reason is, according to AAGB, the group does not need to use the A380s as part of its operations.
Also, these six Airbuses have yet to be fully paid for by MAB. There is an RM5.4 bil loan financing gap for the six planes. AAGB does not want to bear that either.
AAGB also wants Khazanah to cancel the 25 Boeing 737 MAX 8 orders. This is to streamline planes to ensure that they originate from a single manufacturer, Airbus. Also, AAGB is worried about “current issues associated with the B737 MAX aircraft”, so it doesn’t see the benefits of adding the Boeing fleet into its current Airbus stable.
Khazanah is to bear any penalties arising from the cancellation, prior to the proposed merger.
AAGB will also seek to retire six Airbus A330-200 which are around 10 to 14 years old. These planes, according to AAGB, operate different engines, and ultimately would impact MAB’s turnaround.
7) Firefly to be excluded, MASwings to be sold, Brahim’s to be acquired
There are two options for MAB subsidiary Firefly. First is to exclude the airline entirely from the proposed merger. The second option is to include Firefly as part of the transaction but keep it as a separate company from MH and not as a subsidiary of MH.
Firefly can come under AAGB but be transformed into a business jet arm providing connectivity from Subang Airport, similar to London City Airport.
But AAGB is proposing that the Sabah and Sarawak state governments take over MASwings and for them to operate the Rural Air Services (RAS) routes.
AAGB wants to buy over Brahim’s to streamline in-flight catering operations to ensure cost efficiency and operations. – Jan 20, 2020

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