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F1: Will the Airbus bribery probe reach into teams' sponsorship?

Publication: 
Bryan Edwards
chiefofficersnet

Some years ago, we asked a question : how come a new team with no track record can get sponsorship from major corporations when more established teams, with a track record, struggle?

Now, by a roundabout way, that question might be under investigation by anti-corruption authorities in several countries.

I really, really, really wanted Tony Fernandes' new Formula One team succeed. He had a brave dream - to launch an F1 team with facilities in both the UK where, to all intents and purposes, F1 is based (even the teams that claim to be overseas teams have their primary bases in the UK, except Ferrari and Sauber) and at the Sepang International Circuit in Malaysia - yes, the Sepang International CIrcuit that is, even today, surrounded by signs saying it's an F1 track even though the circuit's boss scrapped F1 so that he could focus on motorcycle racing and has launched a team bearing the track's brand.

Fernandes' team was, officially, entered as a Malaysian team but the proposed centre about an hour outside Kuala Lumpur was never built. To me, Enzo Ferrari's comment that the British were "garagistas" who "could not build engines" was a compliment - after all, we had BRM, Brabham, Mclaren and a host of others and the enfent terrible of motor racing Colin Chapman and to go with them we had Coventry Climax, Ford, Cosworth and others. Ferrari could go whistle because above all of those, we had Lotus. And Lotus was the essence of the garage band of racing car manufacturers who cobbled together the very, very best of engineering and thoughts that Ferrari would often struggle to emulate much less beat. So when Fernandes announced that he had done a deal with Proton, owners of Lotus Cars to use the name "Lotus Racing" that was great. Then an undignified spat started with Proton apparently changing their mind and Fernandes announced that he'd done a replacement deal, this time with with Colin Chapman's son to use the name Team Lotus on the cars, I was delighted. True, Renault used the Lotus brand, too, but that was under a deal with Lotus Cars, which didn't own the "Team Lotus" brand. Or, as it turned out, maybe they did. I'm not sure that I ever understood the result of the litigation that followed when the Malaysian owners of Lotus Cars sued Fernandes in London for, as they said, return of the name. Later, Team Lotus would be renamed Caterham because Fernandes also bought that niche car maker which had purchased, from Colin Chapman, the original plans and rights to build the Lotus 7. Come on, keep up. Oh, and he also bought a football club.

When Team Lotus returned to the grid under the hot lights of Fernandes' justifiable grin, two things stood out: the cars were green - almost but not quite British Racing Green of the pre-tobacco sponsorship days and there were sponsors: how much money they were paying was, as always in F1, a closely guarded secret (how public companies manage that given the detailed reporting requirements placed on them I don't know) but there they were, in white lettering standing out clearly against the dark green. AirAsia, Airbus and GE.

As you'll know, in our office we are a suspicious lot and we are always looking for anomalies: the instant thinking was this - Tony Fernandes is a major shareholder in AirAsia, AirAsia use, exclusively, Airbus aircraft and they have GE engines (you might question that but if you dig into the company records of GE Aviation, you'll find that they do in fact supply, as part of a Joint Venture, the engines used by AirAsia. Also, in the mid 2000s, a deal was done under which AirAsia owned 16% of a GE maintenance plant in Asia) .

So the simple question was "I wonder if Fernandes' hobby is being partially funded by AirAsia's suppliers as a "thank you?"

We went no further than to ask the question - and I did pose it in this column, in an article now sadly lost because of a list of sequential tech problems when almost our entire previous archives, including back ups, were destroyed.

Today, it's been announced that Fernandes and his right hand man at AirAsia and the launch of Team Lotus, Kamarudin Meranun, are to stand down, apparently temporarily, from their respective positions at the pinnacle of AirAsia, the most profitable budget airline in the world (say some). It's because the investigation into bribes paid by Airbus which has, in the past couple of days, settled cases by paying large sums to prosecutors to avoid a bribery trial in the UK and the EU. It is, reports say, alleged that Airbus paid "bribes" of the equivalent of USD50 million (why it's expressed in USD I've no idea).

It may be that this is more a matter of principle than a matter of money: Airbus regional jets have a list price - which no one pays - of about...

The amount of money involved in the engine deals has had more publicity: "has sealed a US$1.5bil on-point solution engine service agreement with General Electric Co (GE) of the United States for the maintenance, overhaul and repair of the 129 CFM56-5B engines that will power the airline's new fleet of Airbus A320-200 aircraft. The agreement is for 20 years. AirAsia had earlier concluded a US$750mil purchase agreement with CFM International for the CFM56-5B engines to power its A320s. CFM International is a 50:50 joint venture between France's Snecma and GE. "https://www.thestar.com.my/bus..."): that was in 2005, five years before the F1 team and six before the F2 teams were launched.

But then there was the playful photo of Tom Enders, at the centre of all Airbus's bribery woes, and Fernandez at the Paris Airshow in 2011. "By smashing the aviation industry’s record for the number of planes in one order and becoming Airbus’s biggest airline customer with an USD18,000 million purchase of 200 jets, the charismatic 47-year-old Malaysian has surprised even himself. "I didn’t realise I was their biggest airline customer until today, and it’s a kind of an odd feeling,” Fernandes told Reuters.

So, now we can get a picture of the scale of the allegations: this is not to suggest that bribery is ever acceptable but business is a complex thing and one man's quid pro quo is another's package deal - especially as, if the Lotus sponsorship deal is anything to do with it, the whole thing is a closed loop anyway.

Out of 18,000 million, 50 million is a very small percentage - the sort of money that is easily lost in mega-construction deals through wastage, anyway. And in an industry like aviation where there are rebates for everything from squeaky cabin fittings to late delivery, that percentage seems insignificant. If, and there is absolutely no current evidence to support this suggestion, any of that money did fly in the direction of the F1 team, it is only open to question if an AirAsia order was in some way contingent upon that sponsorship.

It's difficult to believe that would happen : a nod, a suggestion, an "it would be nice if..." is not enough to be a solicitation - there has to be some kind of condition. "Oh, go on, then, if you buy five more planes, we'll send some of the price to your pet project" - but even then, even if that is true and I'm suffering from "allegedly" fatigue from repeating that there is nothing to say any of this happened, Airbus and GE got value for that payment - they put their names on the side of the cars which is exactly what every other sponsor gets for their money.

So, at worst, it seems that, if the F1 thing is in any way relevant, in the absence of specific evidence to the contrary, the only thing that happened was that the fact that their companies do big business together opened a door in which a sponsorship deal came with a recommendation from the bosses. Worse happens every day on the world's golf courses.

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