There are two sides to Tony Fernandes, global chief of Malaysia’s low-fare carrier AirAsia Berhad and the country’s most popular businessman: one is of flamboyance, coolness, easy camaraderie and accessibility, and another is of a ruthless businessman with a penchant to control what he gets into, often earning the ire of his partners.
Fernandes, also, takes reckless decisions and lands in trouble (it has been of the regulatory kind in India). He also elevates people and close associates as randomly and as instinctively as he chooses to abandon them. These characteristics mark his maverick moves, which at times lead to beautiful but often disastrous results. Here are two instances of AirAsia’s branding activities to elucidate the point.
In 2015, AirAsia painted one of its aircraft with Andy Warholstyle murals of Bo Lingam, its deputy CEO. The words, “Bo Rocks”, were painted on the plane. It was a touching gesture, an endorsement of Lingam, Fernandes’ closest aide and confidant, who joined as ground operations manager in 2001 and slogged his way up to be second-incommand. It also underlined Fernandes’ qualities as a generous leader and colleague.
Last month, a decision to have a plane sport the livery Hebatkan Negaraku (Make My Country Greater), the slogan of Malaysia’s former PM Najib Razak’s party Barisan Nasional, landed Fernandes in deep trouble. He was criticised for supporting a politician who was under fire for alleged wrongdoing.
Razak was defeated by a four-party alliance led by Mahathir Mohamad in the historic May elections. Fernandes posted a video apologising for supporting Razak, saying he “buckled” under pressure from the former government. He said he was trying to “appease” Razak who, Fernandes alleged, wanted to remove former trade minister Rafidah Aziz, a Mahathir supporter, as non-executive independent chairman of the airline’s long-haul subsidiary AirAsia X. The government and the company were also at loggerheads over the introduction of 120 cheap promotional flights, he added in his apology video.
While Razak is currently tangled in accusations of money laundering, Fernandes’ support of the previous government could have possible got him off on the wrong foot with the Mahathir government. The relations have yet to thaw.
Ironically, it was Prime Minister Mohamad, who had, in an earlier stint, practically handed over the then defunct airline to Fernandes – for just 25 cents in 2001. Fernandes took it over and turned it around to one of the most aggressive low-cost carriers in the world.
The second story, which highlights Fernandes¡¦ aggressive, going-for-broke trait, also has strange thematic parallels with his predicament in India. Two successive governments and Fernandes’ conflict with them.
However, the crisis in India is much more serious. It won’t be solved with an apology video on social media by Fernandes. The implications are dire. Last week, the Central Bureau of Investigation (CBI) named him, his colleagues and suspected aides in an FIR alleging criminal conspiracy with government officials to change rules to get overseas flying rights.
Fernandes has been summoned by the CBI to appear before its officials on June 6. According to sources, the Enforcement Directorate, too, is in the process of filing a case of money laundering against those named in the CBI FIR.
AirAsia applied for a flying licence during the previous UPA government. It started flying in July 2014, two months after the current BJPled National Democratic Alliance (NDA) came to power. The government relaxed the overseas flying rules in 2016.
Fernandes himself hasn’t made any statement on the issue, save for a tweet blaming the media for getting the facts wrong. He didn’t allude to the FIR at all. Trade pundits have already estimated a loss of RM300 million to AirAsia Berhad in the remote eventuality of AirAsia India shutting down.
AirAsia Berhad and Tata Sons own 49% each in AirAsia India. The rest is owned by non-executive director R Venkataramanan, a Tata Trusts managing trustee, also named in the FIR, and chairman S Ramadorai.
There is a long-standing accusation of Rs 22 crore being paid to two fictitious companies – Singaporean and Indian – from AirAsia India where no service was documented as received. The FIR alleges that the money was paid as bribe to government officials.
There are alleged meetings with government officials, lobbying for licence and change in rules. There have been investigations on related transactions between AirAsia India and companies affiliated to AirAsia Berhad like a lessor and an insurer. The jury is out on this – and will be for some time.
At the heart of the ongoing controversy are issues that reflect Fernandes’ signature working style. There is a contentious brand licence agreement between AirAsia Berhad and its Indian joint venture that mandates that in lieu of using the AirAsia brand, AirAsia India has to consult it for almost all operational decisions right down to promotional fares. There should be a “preference” to AirAsia Group companies while outsourcing functions. All of the Malaysian carrier’s existing agreements with group companies should be upheld.
The document also says that Fernandes “will provide input and approve annual budgets for each airline within AirAsia Group including the licensee (AirAsia India)”. India’s aviation regulator – the Directorate General of Civil Aviation – gave it a clean chit in February 2017 after a court directed an examination of it the previous year.
But that hasn’t stopped the CBI and the ED from going over it with a fine-tooth comb and finding several issues in it that fall foul of foreign investment norms in India.
People close to the matter have said Fernandes wielded a controlling hand over AirAsia India’s decisions. At many board meetings, he had reportedly made it clear that AirAsia Berhad would make decisions on several aspects regarding AirAsia India, including its revenue management. This was supposedly done in the presence of all board members.
Leaked emails have shown that Fernandes asked key management personnel at AirAsia India to not interfere when they had flagged issues such as payments – some of them related to lease rentals, maintenance reserves and outsourcing of support functions for finance, accounting and HR – at higher than market rates.
Emails from a former AirAsia India board member, Bharat Vasani, revealed that corporate governance issues had cropped up at the airline as early as 2014 when it started flying.
Issues of fierce control in decision-making have affected Fernandes’ other airline ventures. In 2013, Japan’s All Nippon Airways (ANA) dissolved a joint venture with AirAsia on differences over cost-control measures and customer service. Each sides critiqued the other’s style of functioning.
“ANA clearly told Tony that he couldn¡¦t run things his own way,” says a Kuala Lumpur-based analyst who did not want to be named.
The other, more curious aspect points towards Fernandes’ idiosyncrasy in choosing people. The seeds of the ongoing investigation can be found in a Deloitte forensic report a couple of years back. It had raised practically all issues of irregular transactions that are now being highlighted.
The only difference was that all the findings primarily pinned one man: AirAsia India’s first CEO Mittu Chandilya. Months before the launch of the Indian airline, Fernandes had announced the shortlisting of Chandilya in a tweet. “A very smart boy from the South, Madras.
An amazing CV…will impress all,” he wrote. The appointment of Chandilya surprised all. He has MBA degrees from INSEAD in France and Singapore and from Tsinghua University in Beijing and had gone to school in India but he had never worked in the country or with an airline before. A part-time model, he was previously the head of the services practice for Asia-Pacific at executive search firm Egon Zehnder. He quit Air Asia in 2016 and is currently the CEO of Adani Group‘s logistics business.
Chandilya seemed to have a great rapport with Fernandes, often bantering with him at press conferences to give his Indian joint venture money to buy more planes.
However, the forensic investigation, commissioned by the company’s promoters themselves, said all irregular transactions were directed by Chandilya. It insinuated that Chandilya had used the lobbying services of individuals – chosen to push for AirAsia’s licence – to advance his personal ambitions, including the setting up of a badminton team.
The CBI FIR all but obliterates Chandilya’s name from the case except to say that he was pressured by promoters , primarily Fernandes and his colleagues, to direct these transactions.
Fernandes’ supporters and AirAsia’s lawyers, however, repeatedly hark back to the Deloitte report that names Chandilya. His detractors cite the brand licence agreement and Fernandes’ penchant for control and say that none of this would have happened without his go-ahead The Kuala Lumpur headquarters of AirAsia is a floor above its check-in counter at the airport. During a Chinese Lunar Festival, Fernandes donned the garb of Laughing Buddha, wearing a red, open-chested robe and. He went around as AirAsia passengers checked in. The Chinese among the passengers touched his belly for good luck through the year.
In the coming days, Fernandes may need all the luck to overcome the twin problems – one at home in Malaysia and the other, fast-unravelling crisis in India.