http://www.thesundaily.my/node/242389

Flip-flops costly to MAS

Flip-flops costly to MAS
Posted on 25 February 2014 - 08:09pm
Azman Ujang
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WHAT has become of our national airline, MAS? Yet again, it has reported massive losses to the tune of RM1.2 billion for 2013 and the bad news is that there seems to be no end to this turbulence and things can only get worse before it gets better.

This comes on top of a record RM2.52 billion loss in 2011 that was narrowed to RM433 million in 2012.

BFM radio station opened its lines last week for listeners to air their views on the profusely bleeding airline and Malaysians across the board who phoned in were overwhelming in their view that MAS should be allowed to go "belly-up" as the radio show suggested, meaning to file for bankruptcy and start from scratch.

Analysts have also told Business Times that MAS should follow in the footsteps of Japan Airlines and American Airlines and file for bankruptcy, then operate under a new company and with the same name, if the registrar of companies approves.

Both troubled airlines have re-emerged stronger after doing so in 2010 and 2011 respectively, with American Airlines merging with US Airways Group to create the world's largest airline.

The radio listeners unanimously said because of MAS's embarrassing financial performance, there was no room for sentiment even over its status as our national or flag carrier to avoid taxpayers bailing out the airline as happened in the past. Some callers said a reality check for MAS is long overdue.

Over and above fundamental and other legacy problems MAS is saddled with, I would add its flip-flops and political interference as aggravating factors as well.
MAS has had its fair share of opportunities to make genuine turnarounds but each time political considerations threw a spanner in the works.

I'm talking about Datuk Seri Idris Jala's appointment in 2005 as MAS chief executive officer. He quickly came out with two turnaround/transformation plans that resulted in a profit of RM851 million for 2007 from a loss of RM1.3 billion. He also managed to cut some RM2 billion in costs while helming the airline.

Idris was seen as the best thing to happen to MAS in a very long time. The then MAS chairman, Tan Sri Munir Majid said his plans were meticulous, and Idris inspired everyone with his leadership and personal engagement, and communicated its need with every stakeholder tirelessly.

In an ideal situation, any company would love to have someone like Idris to see through his plans but this did not happen. He was instead appointed minister in the Prime Minister's Department in 2009 and the airline began to face even more turbulence.

In 2011, MAS CEO Ahmad Jauhari Yahya unveiled another restructuring plan with the airline as he described it then "very deep in crisis".

And in the same year, MAS and AirAsia signed a share swap deal aimed at deriving synergy between a premium full-service carrier and the best and biggest budget airline.

With AirAsia founder and group CEO Tan Sri Tony Fernandes owning a 20% stake under the deal, everyone was looking forward to him using his magic wand to save MAS and make it a success story as well.

Once again, politics got in the way. The share swap unravelled eight months later without being given time to prove its worth following stiff resistance from the 20,000 employees of MAS's unionised workforce, especially the MAS Employees Union (Maseu).

Maseu president Alias Aziz was reported to have met Prime Minister Datuk Seri Najib Razak three times to tell him that the share swap was bad for MAS. And as the general election was looming then, the deal was called off.

From the business point of view, MAS has the glaring disadvantage of having several unions which can hold the company to ransom no matter how viable its turnaround plans.

And we are now seeing the folly of the termination of this mega deal.

A prominent businessman in the aviation industry told me that MAS is now an incurable diabetic patient whose "legs have to be amputated".

The cause of the airline's problems is that it has gone overboard in every aspect of its operations. MAS with about 100 aircraft has 22,000 employees while AirAsia with 300 planes has only 9,000 staff. And salaries in MAS are also higher than AirAsia's.

"In other words, MAS is not a business entity. I would say MAS has been running like a welfare department," said the businessman, who spoke on condition of anonymity.

"From Day 1, MAS has been declared a national carrier to provide connectivity . Nobody cares about its business model as much as pushing this national carrier role. First stop the bleeding so that MAS does not bleed to death."

He also blamed MAS's woes, besides politics, on its owner, Khazanah Nasional Berhad. "They just don't care. For how many years, even before AsiaAsia, Firefly and Malindo came into the picture, had MAS been having serious problems? I can bet that even if the government tenders out MAS tomorrow (for sale), a few dozen businessmen will bid for it. But this is not going to happen. Why? Ask the government."

He also said that MAS could still be saved as there are capable Malaysians who could run it like a business entity as it should be by starting out as a new company on a clean slate.

Tony Fernandes couldn't hide his disappointment, calling on Putrajaya to review aviation policies as it could not afford to spend taxpayers' money on MAS.

He said despite cutting costs, MAS still incurred such massive losses and it could afford to do so because of government support.

He said: "My point is that if you're running a private company, could you afford to cut 16% of your costs and still lose RM1 billion. It's only because of taxpayers' money that one can afford to do that. And it isn't solving the issue."

I asked Fernandes if under these circumstances, could MAS still turn around?

His initial response was "No" but added that there is a chance if it cuts capacity, focuses on premium traffic and cuts costs. Get out of what he calls the "dumb" routes, like Dubai.

Some radio callers suggested the government allow Fernandes to do "national service" at MAS given his track record.

When asked to respond, he said: "Didn't we try that (before) and the government killed it."

What's next for MAS? Does the government have the political will to stop the bleeding, or can the airline afford another failure?

Azman Ujang is a former editor-in-chief of Bernama. Comments: letters@thesundaily.com

i thought insurance company will cover the loss of the incident.

i think after the incident it will restructure to be better... anyway mas won't bankrupt la... $$$ at the end come from us lo...

since mas is in loss even having high revenue, less business mean less loss.

the mas incident will fasten the company restructuring (that is wat the investor wanted to see, not ding dong ding, one short pain then long term lost in profit)... it is priceless lesson to mas