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AirAsia Shares Rise After Indonesia Concerns Ease

AirAsia shares recovered from five-year-lows after the Indonesian government eased investors' fears that the Malaysian budget carrier's local affiliate could be grounded for a lack of funds.

Days after several Indonesian officials named the airline as one of 13 carriers that must repair stretched balance sheets by July 31 or face closure, the transport ministry softened its tone, saying it would "help and support" the companies instead.

The ministry's statement did not mention anything about a shutdown, and a spokesman said the matter would be decided "in the future".

"There are tough economic times but we are not here (in Indonesia) for the short term," AirAsia Group chief executive Tony Fernandes said when asked about the loss-making but key market for the carrier.

Investors often cite regulatory uncertainty as a key obstacle to doing business in Indonesia, Southeast Asia's biggest economy.

The requirement for the airlines to boost their finances is part of a government drive to improve Indonesia's aviation safety credentials. Last week's crash of a military plane, which killed more than 140 people, came after an Indonesia AirAsia jet crashed in December, killing all 162 people onboard.

For AirAsia, the uncertainty over its Indonesia affiliate comes amid concerns about its accounting practices. Its shares have fallen by nearly 40 percent since GMT Research last month said the airline uses transactions with loss-making carriers to boost its earnings. The company has denied any wrongdoing.

(Reuters)