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MAS and AirAsia Shares Swap

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Maybe as part of this deal we would see MH giving up all its Domestic to AK, FYwill b the international LCC being D7 being absorbed into FY. AK will maintain domestic and regional presence. Win win situation. MH will have additional 10 or so ready LCC frames and are now able to retire some of its older fleets and will have presence in both premium and LCC internationally ahead of SQ. KLIA2 will now be dedicated domestic + regional and KLIA will be International only…

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MAS, AirAsia share swap set for Tuesday, new CEO likely

 

KUALA LUMPUR, Aug 8 — The surprise share swap between Malaysia Airlines (MAS) and budget carrier AirAsia Bhd is slated to be sealed tomorrow in a deal that will allow Tan Sri Tony Fernandes to step in and pilot the ailing state-owned airline back to profitability.

 

The Malaysian Insider understands that the share swap will likely see a change in leadership with a new chief executive to replace Tengku Datuk Azmil Zahruddin, who took the job almost two years ago from Datuk Seri Idris Jala who is minister leading Malaysia’s economic transformation.

 

“There is a slew of meetings today to dot the i’s and cross the t’s but it’s done and has the blessings of Putrajaya,” a government source said, referring to the office of Prime Minister Datuk Seri Najib Razak, who is chairman of MAS’s ultimate owner, Khazanah Nasional Berhad.

 

Under the deal, Fernandes and his Tune Air Sdn Bhd partner Datuk Kamarudin Meranun are expected to swap a portion of their AirAsia shares for 20 per cent of Khazanah’s stake in MAS.

 

The state asset manager’s wholly-owned unit Penerbangan Malaysia Bhd (PMB) owns 69 per cent of MAS after the wide asset unbundling (WAU) restructuring programme carried out in 2002 by boutique consultancy BinaFikir. BinaFikir’s then boss Tan Sri Azman Mokhtar is now managing director of Khazanah.

 

Another BinaFikir consultant in the WAU, Mohd Rashdan Mohd Yusof, is Khazanah’s representative on the MAS board and was thought to be a potential chief operating officer after the share swap but sources say an outsider is likely to get the job.

 

“Most of the people in the MAS board are either bankers or accountants. What is needed is a person with airline experience,” an industry source said, pointing out that Fernandes himself is an accountant but has 10 years’ experience turning AirAsia into Asia’s largest budget carrier.

 

“Most of the past solutions for MAS, either the WAU or Jala’s business transformation plan, were financial in nature to keep the airline in the black. But what is needed are operational fixes,” he added.

 

The flag carrier recorded a first-quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago. Tengku Azmil took over the reins of the company on August 28, 2009 from Jala.

 

Analysts expect the flag airline to make full-year operating losses for its current financial year ending December 31, in line with higher fuel costs and falling yields. Its sales director Datuk Bernard Francis recently resigned within 24 hours despite having a few more months in his contract.

 

MAS recently named former managing director Tan Sri Md Nor Md Yusof as its non-executive chairman from August 1, replacing long-serving chairman Tan Sri Dr Munir Majid.

 

Md Nor managed the airline between 2001 and 2004 where he implemented the WAU restructuring of MAS in 2002, involving uncoupling the airline’s massive debts and transferring of the MAS fleet to PMB.

 

Khazanah said yesterday it remain the biggest shareholder in MAS, following reports of the share swap. It did not deny the share swap but said it will make an announcement about the flag carrier’s transformation plan at an appropriate time.

 

“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.

 

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.

 

The Malaysian Insider has reported that the share swap will ensure MAS reclaims its premier airline status while long-haul budget carrier AirAsia X will serve the low-cost market sector.

 

It 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.

 

Source: http://www.themalaysianinsider.com/malaysia/article/mas-airasia-share-swap-set-for-tuesday-likely-new-ceo/

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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.

 

 

Both the A330s and B734s are owned by MH. Only the A332s, B772s and B747s are owned by PMB. MH can pull strings at PMB. I'm sure.

 

“Most of the people in the MAS board are either bankers or accountants. What is needed is a person with airline experience,” an industry source said, pointing out that Fernandes himself is an accountant but has 10 years’ experience turning AirAsia into Asia’s largest budget carrier.

 

 

FOR ONCE!

 

Maybe as part of this deal we would see MH giving up all its Domestic to AK, FYwill b the international LCC being D7 being absorbed into FY. AK will maintain domestic and regional presence. Win win situation. MH will have additional 10 or so ready LCC frames and are now able to retire some of its older fleets and will have presence in both premium and LCC internationally ahead of SQ. KLIA2 will now be dedicated domestic + regional and KLIA will be International only…

 

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#77 flee

 

I doubt so. MH will still maintain its domestic serives, but will probably scale down its frequencies or focues on major routes namely those to PEN, BKI and KCH. International routes are still a big "?"

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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.

Again, airlines such as KE, TG, BA and AF all intend to operate their 772 for many more years. They can operate theirs profitably, so why can't MAS ?

 

 

The B787s and A350s have promised greater fuel efficiency, greater reliability and lower maintenance.

Promise. Exactly! It's just a promise. MAS has too much on its hands now. So let other more capable airlines to deal with all the issues they are going to have for operating such a new aircraft. It probably will take a few years before Airbus/Boeing can iron out the issues coming from their new products.

 

 

To sit on an ageing fleet and wait for an aircraft to "prove itself" is just ameuterish at best.

I'm sure many other airlines out there can prove you otherwise.

 

 

Mind you, LH and AF will eventually be phasing out their A343s.

Yes. And i used their 343 as example that even with this type of plane which is publicly known to consume more fuels than the 772 on similar mission, they can still operate theirs profitably. So making MAS 772 like they are big liabilities to the airline and they need to retire them asap is just 'duh'.

 

 

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.

Seeking. Yes. And many have yet to make a decision. And right now, MAS has an even bigger problem. So they should just focus on making the best out of their existing assets.

 

 

The youngest being 7 years of age, not 5-6 years. MH is a money losing entity in part because of its ageing fleet.

Ageing fleet ? For the 734 and old 333 ? Yes. Losing money because of its ageing fleets ? Yes. Partly so but definitely not a major contributing factor on why it is losing so much money. As said, many other airlines have proven over and over that one can still be profitable by operating a large fleet of ageing aircraft. BA and LH come to mind. Both BA and LH are phasing out their Boeing 737 and MAS already ordered the 738. So MAS is right on track on this one. And the main reason MAS is losing so much money because it is a badly managed company, not because of its ageing fleets.

 

 

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.

Why not ? You'll definitely see airlines such as BA, AF, TG, KE (just to name a few) flying theirs for another 10 years +. So why can't MAS do the same ? The oldest MAS was delivered in 1997. 772 is still very much a relevant and competitive aircraft in today's skies and will remain so for many more years. I just don't see the need to rush to retire their 772. MAS should just refurbish the planes and they will be just as good just CX and SQ's new 333. Normal passengers won't even notice some of MAS 772 are actually quite old.

 

 

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

I'm with you on this one! I don't get why they still keep so many 734 when they already have 10+ 738 in the fleet!

 

 

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.

Spot on mate!!! :drinks:

 

 

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.

Exactly!!! :drinks:

Edited by Isaac

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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.

 

Totally agree! The govt should keep their grubby hands off MH. Right now, even details like branding is deferred to PM for approval, let alone big items e.g. A380, route selection etc.

 

Anyway, here's the opinion of opposition MP Wee Choo Keong on the matter

 

IS AIRASIA BAILING OUT MAS OR MAS HAS BEEN USED AS A VEHICLE TO BAIL OUT AIRASIA?

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Game on!

 

MAS, AirAsia shares suspended

August 08, 2011

http://www.themalaysianinsider.com/business/article/mas-airasia-shares-suspended/

 

KUALA LUMPUR, Aug 8 — Trading in shares of airlines Malaysian Airline System and rival AirAsia were suspended today.

 

There were no statements issued on the suspension as at 8.40am.

 

Local media over the weekend reported that state strategic investment arm Khazanah Nasional , MAS’ largest shareholder with close to a 70 per cent stake, would buy a share in AirAsia, Asia’s largest low-cost carrier.

 

AirAsia would in turn subscribe to new MAS shares, subsequently forming a collaborative partnership between both airlines.

 

Khazanah and AirAsia issued statements yesterday denying that Tan Sri Tony Fernandes (picture) and Datuk Kamarudin Meranun, AirAsia’s two founders, would emerge as the single largest MAS shareholder because of the exercise. — Reuters

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Totally agree! The govt should keep their grubby hands off MH. Right now, even details like branding is deferred to PM for approval, let alone big items e.g. A380, route selection etc.

 

Anyway, here's the opinion of opposition MP Wee Choo Keong on the matter

 

IS AIRASIA BAILING OUT MAS OR MAS HAS BEEN USED AS A VEHICLE TO BAIL OUT AIRASIA?

 

 

Finally someone else is saying it. I thot I was alone.

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I believe like most alliances, Oneworld will expect MH to be profitable before their membership is approved..

 

If the next quarter is indeed another loss, MH's Oneworld membership may be in danger as well.

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Finally someone else is saying it. I thot I was alone.

1. I am still stunned by this news, which I have only just read by the way.

2. I agree a lot with what this minister is saying. Air Asia has received a lot of unpublicised consessions, whereas MAS has been trying to compete on all levels with its hands tied behind it's back. I hope this does not turn out to be a horrible mistake that will end up damaging MAS. I still can't forgive AirNZ for what they did to Ansett...

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I hope this does not turn out to be a horrible mistake that will end up damaging MAS. I still can't forgive AirNZ for what they did to Ansett...

There are people in this half of the nation that still can't forgive T/S TF and gang for what they did to the rural air service :D

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There are people in this half of the nation that still can't forgive T/S TF and gang for what they did to the rural air service :D

Very true.

I would prefer it if TF didn't have his finger in the MAS pie. I can see AK suddenly getting lots of lucrative routes and MH becoming smaller as a result of it... <_>

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BC Tam, a nice one for those 15 months with FAX days...haha...

 

Anyway, with the latest development; looks like they are really cooking up something that will change the aviation sectors of Malaysia...but anyway, ultimately I still hope that there will be a choice of at least one premium and one low cost for each route...that's shall be the best situation...

 

(In my own opinion) Actually, the best way for MH to do things with the 3 brands within the group should looks like this:

 

1) MAS doing all international flights.

2) MASwings do all domestic flights (provided government gives a green light)

3) Firefly be a low cost arms for MAS (still looks essential as ample of regional airlines had a LCC arm already in order to combat the rising demand for LCC around the region). Skypark operation should be turned into an LCC too.

 

Get the new fleets as soon as possible, majority of the fleets are really too old...

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I think MAS need to be hungrier and not to be the politician's puppet or even a cash cow.

As with most GLCs, there is never any hunger for success. Day in day out, clock in clock out..normal. Not much excitement. Just watch the local handling passengers at counters such as Heathrow. Awful !

Government should not meddle with the affairs of a business because politicians do not have business acumen or professional enough to run a business.

 

By all means, it could own the carrier, but leave the business running to real professionals. It's a bitter pill to swallow this merging and what's not, but it has to be done in order for the carrier to remain in existence and relevant. It may be a case of "can't fight em, join em.."

 

Probably now with AirAsia absorbed in, both carriers will achieve synergies towards a common goal, that is to be the fastest growing airlines in this region.

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Another thing, old horse of yonder years should not be consulted on the merger as it could stir negative sentiments eg.TS Aziz; which came on national news citing its a bad idea for the merger, which according him will cause a conflict of management strategies and etc. No disrespect to his view, but running business nowadays is totally different than that during his time.

 

As on the AirAsia side about this merger, they are already planning how to run MAS effectively with folks needing to "think out of the box" rather than just rhetoric nationalism. Kudos to AirAsia.

Edited by Cire

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Analysts doubt MAS, AirAsia share swap can rescue flag carrier

 

KUALA LUMPUR, Aug 8 — Tomorrow’s share swap between state-owned Malaysia Airlines Bhd (MAS) and AirAsia Bhd might not be enough to turn around the ailing flag carrier that is bleeding red ink from low yields, analyst said.

They said that the issues at the national carrier appeared to be due more to corporate culture and political interference. Under the deal, AirAsia’s main shareholder Tune Air Sdn Bhd will take up a 20 per cent stake in MAS through a share swap. Tune Air is jointly owned by Tan Sri Tony Fernandes, Datuk Kamarudin Meranun and Datuk Aziz Bakar.

 

“Even with Tony Fernandes at Malaysia Airlines, I don’t think he can do any big magic,” said one airline analyst. “The premium segment market forces are against Malaysia Airlines”.

 

The senior analyst also said that poison pen letters about MAS had resurfaced in the last few months.

 

“With Malaysia Airlines, the issue is always a people thing,” he said.

 

A report from Amresearch said that the exercise is Khazanah essentially “financing” Tune Air’s purchase of a stake in MAS giving Tune Air additional heft in bargaining for landing rights.

 

“As Tune Air’s stake is via MAS, Tune Air would seem to have the option to sell into the open market if it is not in alignment with the views of MAS’ board majority as the co-operation moves forward,” said the report.

 

“On the other hand, Khazanah’s commitment to AirAsia seems firmer given its stake via Tune Air, which is not listed, hence illiquid. This underlines AirAsia’s bargaining leverage with Khazanah on board, particularly in terms of landing rights, among others.”

 

One airline industry analyst said that the idea appeared to be to collectively work to eliminate wastages and unlock synergy or to put it in “crude” terms, “forming a cartel” whereby MAS gets to focus on premium travel and Asia’s biggest low-cost carrier cements its hold on the low cost sector.

 

“In many countries this is deemed illegal due to anti-trust laws; but it’s all OK here in the name of making sustainable profits. As an investor, your competitive risk profile has come down substantially overnight,” said the analyst.

 

He added that by partnering with MAS, AirAsia’s competitor Firefly could even potentially be disbanded which would allow AirAsia to “monopolise” the low cost carrier spectrum again.

 

The analyst also predicted that with the government investment arm Khazanah as a shareholder, AirAsia could potentially have an easier time negotiating with the government for routes, which was seen as a source of growth constraint for AirAsia in the past.

 

“For Khazanah, they just want a situation where both airlines can prosper amicably because that’s the best option for the country,” he said.

 

One senior analyst who requested anonymity due to the sensitivity of the matter said that the deal could end up being bad for customers due to reduced competition.

 

“They will likely rationalise routes and hike fares to raise yields,” he said.

 

He added that he was disappointed with the government for saying that they will reduce government involvement in the private sector but yet it is taking a stake in AirAsia, which he termed as one of Malaysia’s “rare” regional success stories.

 

He also criticised AirAsia founder Fernandes for promoting competition in the past but then taking part in an exercise that appeared to have the opposite effect.

 

Another airline industry analyst said that he saw the deal as positive for AirAsia but saw MAS as still in a “grey area”.

 

He pointed out that if Firefly was restricted to just flying out of Subang Airport it would reduce competition for AirAsia.

 

The analyst also noted that if MAS was to focus on the premium segment, it would be doing so in a, “shrinking pie” as the low cost carrier segment was where the growth is happening and that restrictions on Firefly could mean a loss of income.

 

“Even SIA is starting a low cost carrier and Qantas has Jetstar,” he pointed out.

 

The Malaysian Insider reported over the weekend that Khazanah and Tune Air could swap stakes in Malaysia Airlines and AirAsia respectively, allowing the two parties to become significant shareholders in both airlines.

 

It is understood that Fernandes will be tapped to 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 could 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.

 

The two airlines had in the past competed fiercely for the rights to fly to key destinations such as Seoul and Sydney.

 

Source: http://www.themalaysianinsider.com/business/article/analysts-doubt-mas-airasia-share-swap-can-rescue-flag-carrier/

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This is a bad news for the passenger, They monopoly in different way, next time we will be forcing pay rocket high ticket on LCC....coz we got no more choice....

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Another thing, old horse of yonder years should not be consulted on the merger as it could stir negative sentiments eg.TS Aziz; which came on national news citing its a bad idea for the merger, which according him will cause a conflict of management strategies and etc. No disrespect to his view, but running business nowadays is totally different than that during his time.

I am in complete agreement with you. When I watched the interview last night, I thought it is uncalled for - the man is from a jurassic era, he seems to be missed out/not informed on so many current affairs of aviation development in Malaysia, he himself is irrelevant to the subject and so does his views.

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This is a bad news for the passenger, They monopoly in different way, next time we will be forcing pay rocket high ticket on LCC....coz we got no more choice....

 

we still have Silverfly :rofl:

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