AirAsia shares drop after CEO says sorry for backing ex-PM

Shares of regional budget airline AirAsia plunged Monday after its chief Tony Fernandes publicly apologized for supporting defeated Prime Minister Najib Razak in a historic election last week.

The vote ended with a victory for a four-party alliance led by Mahathir Mohamad, resulting in Malaysia’s first change of government since it gained independence from Britain in 1957.

Fernandes praised Najib’s coalition in a video released ahead of the polls. He was also pictured with Najib in an AirAsia plane emblazoned with the coalition’s campaign slogan, with the cabin crew’s signature red uniforms swapped for ones in the coalition’s signature deep blue.

Fernandes apologized Sunday for “buckling” under government pressure. He said he was asked to remove former trade minister Rafidah Aziz, who openly supported Mahathir, as chairman of his long-haul budget unit AirAsia X and also to cancel extra flights at low fares ahead of the polls.

He did neither. But in his comments over the weekend Fernandes said he was part of a highly-regulated industry where nearly everything requires government approval and was foolish to think that his endorsement would appease the government and protect jobs.

“Under the intense pressure, I buckled. It wasn’t right; I will forever regret it,” Fernandes said in videotaped comments. “It is still the happiest moment of my life that we have a new Malaysia that will give everyone an amazing chance to reach the skies.”

AirAsia stocks fell as much as 13 percent from their last traded price last Tuesday before market holidays during and after the May 9 election. They recovered some of that lost ground by midday Monday, trading at 3.55 ringgit, down 4 percent from Tuesday’s close.

The benchmark index also rebounded after opening lower, gaining 0.4 percent, while Malaysia’s currency dipped in a knee-jerk reaction to uncertainties over the change in government.

The dollar was trading at 3.95 ringgit ($1) as of midday after climbing as high as 4.05 ringgit ($1.03).

Malaysia’s economy grew at a robust, three-year high pace of 5.9 percent last year, but some are concerned over his government’s pledges to abolish an unpopular 6 percent goods and services tax, revive fuel subsidies and review big projects linked to China’s regional infrastructure initiative.

Mahathir has moved swiftly, naming as finance minister Lim Guan Eng, who headed the small but wealthy state of Penang for a decade. Lim is the first ethnic Chinese in 44 years to be appointed to the powerful post.

Mahathir also set up a special five-member economic council that includes a renowned former central bank governor and Hong Kong-based billionaire tycoon Robert Kuok, Malaysia’s richest man.

Those moves should underpin market confidence given that Lim, a trained accountant, has a track record of boosting Penang’s economy with investor-friendly policies, Mizuho Bank in Singapore said in a research note. “Crucially, the appointment of the “Council of Elders” comprising pre-eminent policy-makers… lends credence and confidence to economic, financial and investment stewardship.”

It said any volatility will likely be short-lived as investors look to progressive policies.

Shares of construction companies and those linked to former politicians tumbled Monday, but consumer stocks were boosted by hopes of an end to consumption tax.