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MAS and AirAsia Shares Swap

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Perhaps this is why TF does not seem to be a bit concerned about Firefly. He knew he can finish them off from within. He has the game all in his hand.

 

I wonder if the staff in MAS were ever consulted. This is the ultimate humiliation.

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Aug 7 (Reuters) - Malaysian strategic state investment arm Khazanah Nasional on Sunday denied a report that AirAsia's major shareholders would buy a stake in the national carrier Malaysian Airline System (MAS) .

 

Khazanah, which owns close to 70 percent of MAS, said it viewed aviation as strategic and would continue to be the largest shareholder in the national carrier.

 

"The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad's portfolio," the fund said in its statement.

 

"Khazanah will continue to maintain its position as the single largest shareholder in MAS."

 

Local newspapers reported over the weekend that a deal between AirAsia's shareholders, MAS and Khazanah was imminent, and would see Tony Fernandes and Kamarudin Meranun, AirAsia's two principal founders, emerge as MAS shareholders.

 

Khazanah said those reports were incorrect.

 

AirAsia and MAS officials could not be immediately reached for comment. (Reporting by Min Hun Fong; Editing by Ron Popeski)

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Khazanah to keep main MAS stake despite AirAsia share swap

 

KUALA LUMPUR, Aug 7 — Khazanah Nasional Berhad will still remain the biggest shareholder in Malaysia Airlines (MAS) despite a share swap with AirAsia’s boss Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, the state asset manager and both budget carrier shareholders said today.

 

The Khazanah statement also said it will make an announcement about the flag carrier’s transformation plan at an appropriate time, but did not deny reports of the share swap reported by The Malaysian Insider yesterday.

 

“The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad’s portfolio. Khazanah will continue to maintain its position as the single largest shareholder in MAS,” the statement said.

 

Khazanah’s 69 per cent stake in MAS is held by Penerbangan Malaysia Berhad (PMB). The special purpose vehicle took over the MAS fleet in the wide asset unbundling (WAU) done in 2002 by BinaFikir, the consultancy headed by Tan Sri Azman Mokhtar, who is now Khazanah managing director.

 

The Khazanah statement was issued to refute print media reports that Fernandes and Datuk Kamarudin Meranun will emerge as the single largest shareholder of MAS due to the share swap.

 

“These reports are incorrect,” Khazanah said.

 

It also said that as an active strategic investor, Khazanah “constantly reviews ways to improve the performance of its portfolio companies and concurrently the competitiveness of key strategic sectors of the economy”.

 

“Further announcements will be made at the appropriate time with regard to Khazanah’s position in MAS’ ongoing transformation plan,” the statement concluded.

 

Both Fernandes and Kamarudin also issued a statement denying that they will be the largest single shareholder in MAS but they did not deny news of the share swap.

 

“We refer to the press coverage over the last two days that has reported that we would become the single largest shareholder in MAS. We wish to clarify that this is not true.

 

“As the major shareholders of AirAsia Berhad and AirAsia X Sdn Bhd, we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise,” they said in a joint statement.

 

The Malaysian Insider reported that Fernandes and Kamarudin could get up to 20 per cent of the ailing state airline in a share swap that could be inked as early as Monday.

 

It is understood that Fernandes will help pilot the airline back to the black and reclaim its position as a premier carrier after several quarters of lack lustre financial performance.

 

The share swap will also lead to both carriers rationalising domestic routes and leave MAS subsidiary Firefly to only operate turbo-prop operations from the Skypark in Subang.

 

Firefly began using the news B737-800 for flights to east Malaysia from KLIA in January, competing with MAS domestic operations and AirAsia’s budget flights.

 

Fernandes and Kamarudin’s Tune Air Sdn Bhd, which holds a 26 per cent stake in AirAsia, bought the carrier for RM1 in 2001 and turned the two-plane airline into Asia’s biggest budget airline within a decade.

 

AirAsia’s market capitalisation last Friday was RM11 billion when it closed at RM3.95 a share, more than double of MAS which has a market capitalisation of RM5.3 billion with its stock traded last at RM1.60 a share.

 

Source: http://www.themalaysianinsider.com/business/article/khazanah-to-keep-main-mas-stake-despite-airasia-share-swap/

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MH sorely needs an up-to-date long haul product that its current B744s and B772s sorely lack. Taking the A380s on board would be a very positive thing for MH to do. It can then retire the ageing and fuel hungry B744s.

Or may be they should just focus on redeploying their existing fleets.

- speed up the retirement of the 734 & old 333

- return all leased 738 & 332

- retire all 744 (after all they are having a hard time filling this plane even on the routes that they shouldn't be)

- cancel the 388 and negotiate for more new 333

- reconsider the seat configuration for their new 333 and install more seats in EY (no, seat pitch doesn't have to be compromised)

 

772 is still a very capable aircraft and definitely can still make a lot of money for the airline as proven by SIA, BA and AF. May be MAS should just focus on making the best out of their 772.

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MH are pretty lucky that they don't have a variety of fleet types, unlike TG, if they were like TG they would probably we crying. So they are lucky they can change over their fleet type if they wish too more easily.

 

I think more A333 is the way to go, possibly some A332s but the problem in the long term is that their neighbors would have a modern and up to date fleet, I can even see VN with the sparkling new fleet of A359 and 787s and possibly A380. But most of MH's routes fit well with the A333 and B772 combo and it makes more sense but these do need to be replaced in the future. An A380 right now might not be a very wise decision but it MIGHT pay for itself in the future they need them for prestige routes such as LHR, MEL, SYD & AMS in order to compete.

 

I would also like MH to change over to A320s, I know wishful thinking as the B738's are new, but I hate the looks of the 737s in general.

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Instead of battling in the own backyard, i think it is a win-win for MAS & AK (and in the interest of the nation too) to hand in hand in facing an increasing challenge environment, especially from the north & south neighbours.

 

Nevertheless, i hope this is not another collapse of Ansett Austalia in making after their merger with Air New Zealand in year 2000. Else, Malaysian taxpayer and air traveller will be the biggest loser.

Edited by Kee Hooi Yen

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Firefly began using the news B737-800 for flights to east Malaysia from KLIA in January, competing with MAS domestic operations and AirAsia’s budget flights.

 

 

FY in the first place was a bad decision. FY has canabalised MHs domestic sectors. After all, MH has tried to paint itself as a low-cost five star carrier. So what's FY suppose to be? Low-cost regional 3-star? Also, the SEA market is already saturated with a number of LCCs. FY has only canabolised MHs domestic operations. The right recipe for MH is to see itself as a premier airline. Not a TOYOTA! MH you're a Lexus. SQ is Mercedes. It's that sort've price difference you're looking at. Both are equally comparable but the Lexus is slightly cheaper. AK on the other hand has always been clear about its market and has gone out of the way to grow its market. MH seems to adopt a neither here nor there strategy. Worst still, it has done litte to its fundamentals. It still has an unproductive and enormous labour force, an ageing fleet and has been on this cost-cutting frenzy that's taken them out of the top 10 skytrax carriers list. With AK at the reigns, I hope they'll talk some sense into the MH management.

 

- speed up the retirement of the 734 & old 333

- return all leased 738 & 332

- retire all 744 (after all they are having a hard time filling this plane even on the routes that they shouldn't be)

- cancel the 388 and negotiate for more new 333

- reconsider the seat configuration for their new 333 and install more seats in EY (no, seat pitch doesn't have to be compromised)

 

772 is still a very capable aircraft and definitely can still make a lot of money for the airline as proven by SIA, BA and AF. May be MAS should just focus on making the best out of their 772.

 

 

The 772s should be retired. They'll eventually become time machines themselves. MH needs to find a replacement for them ASAP if it wants to compete or it should refurbish them before the arrival of their new wide body fleet.

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FY in the first place was a bad decision. FY has canabalised MHs domestic sectors. After all, MH has tried to paint itself as a low-cost five star carrier. So what's FY suppose to be? Low-cost regional 3-star? Also, the SEA market is already saturated with a number of LCCs. FY has only canabolised MHs domestic operations. The right recipe for MH is to see itself as a premier airline. Not a TOYOTA! MH you're a Lexus. SQ is Mercedes. It's that sort've price difference you're looking at. Both are equally comparable but the Lexus is slightly cheaper. AK on the other hand has always been clear about its market and has gone out of the way to grow its market. MH seems to adopt a neither here nor there strategy. Worst still, it has done litte to its fundamentals. It still has an unproductive and enormous labour force, an ageing fleet and has been on this cost-cutting frenzy that's taken them out of the top 10 skytrax carriers list. With AK at the reigns, I hope they'll talk some sense into the MH management.

 

 

The way I see it, FY is a good idea. They fight head on with Air Asia. This leaves MH to focus on more premium routes. Of course, MH will need to "hand over" some routes to FY, but they still keep the money in the family.

 

In the meantime, MH will join Oneworld. New planes coming in. Perhaps this will mean more premium travellers, which in turn means more revenue. Extra income can even subsidize economy pax, apply heavy pressure on Air Asia and force them into defensive.

 

So I feel the two airlines should be kept separate. I was looking forward to these interesting developments. It will be sad if competition is killed off through the backdoor.

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The way I see it, FY is a good idea. They fight head on with Air Asia. This leaves MH to focus on more premium routes. Of course, MH will need to "hand over" some routes to FY, but they still keep the money in the family.

 

 

You see that's the thing. Ideally, MH should be a premium carrier and FY a low-cost subsidary and everything should work out. However, MH has pretty much failed to promote itself as a premium carrier and neither has it tried enticing passengers on its premium routes.

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^^ Its only been a few months since FY 'became an LCC' and started jet operations and its expansion has been almost exclusively domestic so far. I think with time, we could see a whole Qantas-Jetstar thing working for MH-FY. FY needs to expand more internationally to compete with AK and MH needs to cut low-yield or unprofitable routes (give them to FY!) and work more on its premium product. Qantas has shown that this can work; a GLC can run an LCC, they can even compete on some of the routes to capture different type of travelers, because at the end of the day, whether its MH or FY that gets the pax, the money still stays within the group.

 

I'm totally against an MH-AK co-op. The lack of competition would basically mean higher fares and less seats. It could also lead to the demise of MH as we know it. While the exchange of shares isn't as severe as a takeover, one should look at Ryan Air & Air Lingus in Ireland (pretty much a mirror of MH & AK, where the budget carrier is way larger and doing much better than the ailing nation semi-full service carrier). Ryan Air tried a take-over bid some years back... http://news.bbc.co.uk/2/hi/business/5408780.stm

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Until an official statement is issued to confirm the true situation - hopefully in a language that clearly spells out the deal and not some ambiguous spin - our discussion here is purely speculative.

 

In any case, it is sad to see Malaysia Airlines in its current state. How many bailouts is needed to keep this airline afloat? How many turnaround plans have been undertaken? How many rounds of asset sales have already taken place? And how many rounds of route cuts? Perhaps one could even ponder how many times the airline has to reconsider its A380 fleet viability.

 

Personally I am not so certain that all associated with the Tune Group arrive at the table with the noble intentioin to rescue Malaysia Airlines. The past bad blood between both airlines is well known and the battle for certain destinations has been publicly fought. With a relatively affordable investment by the Tune Group, it is perhaps in a position to cherry pick what they want from the deal - destinations such as Sydney, curtail the growth of Firefly and eventually send it into extinction.

 

While the trend elsewhere has been full-service carriers establishing new LCC subsidiaries (SIA, ANA, Qantas etc), here we are seeing an LCC bailing out a full-service carrier. Talk about turning the tables in the war between full service carriers and LCCs.

 

MAS' woes have been well discussed in Mwings over the years ... and sadly, the airline has not made any real improvements beyond some consoling marketing spin. One can only wonder what's the fate of MAS' plans to join oneworld. Most importantly, what will MAS gain OR LOSE from Tune Group's interest and stake in it.

 

These are interesting times for MAS ... recent discussion here regarding MAS' ability to afford higher staffing levels because labour is cheap is probably put to rest. If MAS is able to work with a trimmer and more productive workforce and achieve staffing levels comparable to its leaner competitors, perhaps its balance sheet would have less red ink.

 

KC Sim

Edited by KC Sim

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Found this on thestar online

 

 

 

*MEDIA STATEMENT FROM KHAZANAH

 

Kuala Lumpur, 7 August 2011

 

”We refer to media reports that Tan Sri Tony Fernandes and Dato' Kamarudin Meranun will emerge as the single largest shareholder of Malaysian Airline System Berhad (“MAS”). These reports are incorrect. The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad's portfolio. Khazanah will continue to maintain its position as the single largest shareholder in MAS.

 

As an active strategic investor, Khazanah constantly reviews ways to improve the performance of its portfolio companies and concurrently the competitiveness of key strategic sectors of the economy. Further announcements will be made at the appropriate time with regard to Khazanah's position in MAS' ongoing transformation plan.”

 

*MEDIA STATEMENT FROM AIRASIA'S TAN SRI TONY FERNANDES & DATO' KAMARUDIN MERANUN

 

Kuala Lumpur, 7 August 2011

 

"We refer to the press coverage over the last two days that has reported that we would become the single largest shareholder in MAS.

 

We wish to clarify that this is not true.

 

As the major shareholders of AirAsia Berhad and AirAsia X Sdn Bhd, we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise."

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I still think that there are other options that have not been thoroughly explored to help MAS. This must surely not be the only solution or the inevitable has many put it.

 

If I may add, I am wondering if this is a "bailout" of MH or AK????

Edited by Tim Lee

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The way I see it, FY is a good idea. They fight head on with Air Asia. This leaves MH to focus on more premium routes. Of course, MH will need to "hand over" some routes to FY, but they still keep the money in the family.

 

That is exactly why FY's now flying a jet fleet, and why MH's no longer touting themselves as a Five Star Value Carrier. Alas, if only they started it earlier, things could have been different.

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The 772s should be retired. They'll eventually become time machines themselves. MH needs to find a replacement for them ASAP if it wants to compete or it should refurbish them before the arrival of their new wide body fleet.

To refurbish their 772 ? Yes. Definitely. But to retire them ? Ah... no. They shouldn't. As mentioned earlier, 772 is still a very capable aircraft and the last two were delivered just like five or six years ago. The 772 will be irrelevant eventually but it will still be good for at least another 10 years. There is so much uncertainty with the Airbus 350 and Boeing 787. At least the 772 is a proven aircraft and can be operated profitably on long-haul routes as proven by SQ, BA, AF and KE. LH & AF for instance, still have a large fleet of 343 and they can operate the planes profitably. So why not the MAS 772 ?

 

MAS is a losing money entity and they should just focus on their existing assets (good ones of course and the 772 being one of them) and make the best of it.

 

 

The way I see it, FY is a good idea. They fight head on with Air Asia. This leaves MH to focus on more premium routes. Of course, MH will need to "hand over" some routes to FY, but they still keep the money in the family.

 

In the meantime, MH will join Oneworld. New planes coming in. Perhaps this will mean more premium travellers, which in turn means more revenue. Extra income can even subsidize economy pax, apply heavy pressure on Air Asia and force them into defensive.

 

So I feel the two airlines should be kept separate. I was looking forward to these interesting developments. It will be sad if competition is killed off through the backdoor.

Totally agree with you! :drinks:

 

 

^^ Its only been a few months since FY 'became an LCC' and started jet operations and its expansion has been almost exclusively domestic so far. I think with time, we could see a whole Qantas-Jetstar thing working for MH-FY. FY needs to expand more internationally to compete with AK and MH needs to cut low-yield or unprofitable routes (give them to FY!) and work more on its premium product. Qantas has shown that this can work; a GLC can run an LCC, they can even compete on some of the routes to capture different type of travelers, because at the end of the day, whether its MH or FY that gets the pax, the money still stays within the group.

 

I'm totally against an MH-AK co-op. The lack of competition would basically mean higher fares and less seats. It could also lead to the demise of MH as we know it. While the exchange of shares isn't as severe as a takeover, one should look at Ryan Air & Air Lingus in Ireland (pretty much a mirror of MH & AK, where the budget carrier is way larger and doing much better than the ailing nation semi-full service carrier). Ryan Air tried a take-over bid some years back... http://news.bbc.co.uk/2/hi/business/5408780.stm

Very well said! :good:

Edited by Isaac

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Found this on thestar online

 

Note that there is no denial of the speculated share swap. Absence of a denial is a confirmation of Tony getting a stake in MH berhad from Khazanah. 20% in MH is equivalent to approximately 10% in AK based on Friday's closing prices.

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Note that there is no denial of the speculated share swap. Absence of a denial is a confirmation of Tony getting a stake in MH berhad from Khazanah. 20% in MH is equivalent to approximately 10% in AK based on Friday's closing prices.

 

 

So its a bailout for?

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To refurbish their 772 ? Yes. Definitely. But to retire them ? Ah... no. They shouldn't. As mentioned earlier, 772 is still a very capable aircraft and the last two were delivered just like five or six years ago. The 772 will be irrelevant eventually but it will still be good for at least another 10 years. There is so much uncertainty with the Airbus 350 and Boeing 787. At least the 772 is a proven aircraft and can be operated profitably on long-haul routes as proven by SQ, BA, AF and KE. LH & AF for instance, still have a large fleet of 343 and they can operate the planes profitably. So why not the MAS 772 ?

 

MAS is a losing money entity and they should just focus on their existing assets (good ones of course and the 772 being one of them) and make the best of it.

 

 

 

With sky-rocketing fuel prices, the 90s techonology of the B772s will prove rather detremental to MHs profitability. It's already been reported that MH is battling high operating costs in part because of its ageing fleet. MH should not fall into the same trap that it's in now. Insisting on keeping an ageing fleet to save costs, will only end up with higher costs in the future. The B787s and A350s have promised greater fuel efficiency, greater reliability and lower maintenance. I'm sure all of us now that for any business to suceed, you need to take calculated risks. To sit on an ageing fleet and wait for an aircraft to "prove itself" is just ameuterish at best. Mind you, LH and AF will eventually be phasing out their A343s. Again, to make such calculations you need a strong team of fleet experts, etc. to ensure that airlines make wise choices. All the airlines you've listed are also seeking replacement for such aircraft. Yes, some of the B772s are still relatively new. The youngest being 7 years of age, not 5-6 years. MH is a money losing entity in part because of its ageing fleet. For some reason despite having a total 10 new aircraft within its fleet, MH has yet to retire any of its existing fleet. It could easily retire 5-6 of their older A333 fleet and a couple of their B734s, saving MH on fuel and maintenance. MH could have sold off those planes to third world carriers, and make a good buck out of it. Instead, MH has used its new aircraft to introduce new routes, in particular from BKI. Essentially, the new aircraft have not done a dent in promoting cost savings, and have only added on to MHs bills. I am for refurbishing the B772 but don't keep them for another 10 years. Technically, an aircraft is designed to be good for 25 years, but doing that means exposing yourself to greater operating costs. The sucess of SQ is in part because of its young fleet A replacement needs to be found NOW! If not MH will find itself scrambling to compete with other carriers already flying MUCH MORE reliable and efficient B787s and A359s. If I were to take over MHs fleet planning here's what I would do:

 

a) Start the gradual retirment of B734s and A333s by putting them up for sale

B) Refurbish the newest B772s (9 of them delivered after 1999) with updated AVOD in Y and new J-class seats, to be deployed on long-haul routes to AKL, IST, FCO, CDG, FRA, LAX-TPE, JNB & LHR

c) Negotiate for more A330s (MH still has the option for an additional 10 A330s) to replace the older B772s (EDA: 2015) and purchase the A350 or B787s for the longer-haul B772s (EDA: 2017-2018)

d) Retire all older B772s by 2015 and the complete B772 fleet by 2019.

e) Use the money generated from the sale of old aircraft to finance the B772 fleet renewal.

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Easier said than done. MH does not own that many of their aircraft and it may not be able to retire old aircraft as the lease period has not expired yet. Many of MH's aircraft are still new (in terms of airframe life) as the aircraft utilisation is low. As such there is still a lot of life left in them.

 

Fuel costs account for around 30-40% of total operating costs - so for now, MH needs to ensure that other areas of its operations are run as efficiently as possible. As for fuel cost, MH will need to manage them as tightly as they can.

 

Its not as easy as it sounds. Perhaps having Tony Fernandes on board will be a start. However, TF needs something in return - so he is hoping that the 20% he has of MH will grow in value when he is done with rationalising their operations.

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one better alternative for FY - is for MH to cease its domestic operations and transfer all its domestic to FY with full interline and connectivity with MH as FY is still a subsidiary but separate entity from MH. this is better as FY is still a new set-up with its lower costs and still as a "clean" company. Then MH - without its high costs domestic services n staff costs - will just concentrate on its overseas destinations and try to achieve the Best Biz Airline. However still think that MH does not need the A380s or at least reduce its 380 fleet, as MH will never be able to obtain high yields with its 380s n had tor educe fares to get the numbers which will be a zero sum game.

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So its a bailout for?

 

It's not a bailout. It's a wicked way to neutralize your rival and humiliate them.

 

MH does not need a bailout. This has been tried and did not work. Just a waste of public money. The gov just need to get their sticky fingers off MH. That's the root of the problem and has led to many secondary problems which we see now, incompetent management due to gov cronies (there are many capable people around, no need TF to take over), high cost from lopsided contracts, old fleet as too poor to buy aircraft until last minute. Get rid of the main problem, you will find things will naturally improve.

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