MAS and AirAsia Shares Swap

[flee 5]

From Flightglobal: http://www.flightglobal.com/news/articles/mas-airasia-share-swap-to-be-called-off-371353/

 

Sources close to Malaysia Airlines (MAS) and AirAsia confirm that that the cross-ownership agreement between the two airlines will be cancelled on Wednesday because of growing opposition to the deal.

 

Both airlines will, however, announce that they plan to collaborate, and possibly set up joint ventures, in key operational areas such as ground handling, training and maintenance, and repair and overhaul, add the sources.

 

Trading in the shares of both airlines was suspended on Bursa Malaysia on Wednesday morning pending an announcement.

Sources close to MAS say a board meeting was held on Wednesday morning and employees were told to expect an update on Wednesday afternoon.

 

The agreement, which was signed last August, would have seen AirAsia's parent Tune Air take a 20.5% stake in network carrier MAS. National investment agency Khazanah Nasional, MAS's largest shareholder, was to take a 10% stake in AirAsia and 10% stake in long-haul unit AirAsia X.

 

AirAsia Group chief executive Tony Fernandes joined the MAS board and Khazanah's Azman Yahya joined the low-cost carrier's board after the agreement. Ahmad Jauhari, a former Khazanah executive, replaced Tengku Azmil as MAS managing director after the deal was signed.

 

The agreement, however, ran into opposition "from day one" as the MAS employees felt they were not consulted and subsequently sidelined, says one source close to the flag carrier.

 

"It became a political issue once the unions began to voice their opposition. The elections are around the corner, and the opposition parties are taking this up. The government can't afford to let this become a sore point," adds the source.

 

Another source says Fernandes effectively began to run MAS after the agreement, but his "abrasive style" and the AirAsia links did not go down well with the employees.

 

Several senior and experienced executives from the airline, as well as the MAS Aerospace Engineering and MASkargo units, left as the operations were restructured.

 

In December, former Etihad Airways executive Shihaj Kutty was appointed to lead revenue management. Former Westjet executive Hugh Dunleavy came on board to head a business unit responsible for network, alliance and strategy. Ex-AirAsia head of finance Rozman became the chief financial officer of MAS in February. Azhari Dahlan, AirAsia's former head of engineering, became chief executive of MAS Aerospace Engineering in February as well.

 

"Many of the new guys are perceived as being very close to the AirAsia guys, and did not appear to take on the views of those who report to them but have been with MAS for a long time. That led to resentment as well," said the source.

 

Even if the airlines say that they plan to collaborate on ground handling, training and maintenance, and repair and overhaul, that too could face opposition.

 

"Honestly, the MAS guys do not want to work with AirAsia - and it is true of the AirAsia guys at the ground level to a large extent," says a second source. "They have spent the last 10 years competing with each other, and each airline has its own culture. To try to be friends out of the blue is, probably, asking too much."

[Cheng Long 0]

I hope no retirement payout/bonus for TF and Kamarudin.

[flee 5]

More on this here:

 

Share swap ditched to save MAS, says Khazanah

 

http://www.themalaysianinsider.com/malaysia/article/share-swap-ditched-to-save-mas-says-khazanah/

[Arthur Van Straten 0]

What happened to the MyCC investigation, as annonunced end December 2011?

And, as per newsreport here, January 20 2012, the airlines have been givien one month to submit documents on the share swap.

It is May 2012 now. And there has been deafening silence since from the MyCC.

 

http://biz.thestar.com.my/news/story.asp?file=/2012/1/20/business/10296939&sec=business

 

@ Flee.

You refer to my earlier posting. I did not use smileys nor emoticons, hence I could be easely misunderstood,

But in retrospect I think you got my drift.

 

You are right, the share swap cancel will be shrugged off by the guys in Red. They celebrate , Mission Accomplished.

Mind you, without a share swap, there would never be a platform for a CCF. So, Share swap first, then CCF.

 

Now, fase two, abandon the share swap and retain the CCF. Was that not what it was all about?

Keep the Red fingers in the MAS pie?

And try to tell the gullible that with the presence of TF and side kicks in the MH board things would turn out ok.

Ofcourse it did. For AK.

 

And then this, quote.

"On behalf of MAS, we wish to announce that the Company has today, 2 May 2012:

 

(i) entered into a Supplemental Agreement to vary the terms and scope of the Collaboration Agreement;

 

(ii) pursuant to the Supplemental Agreement, MAS has separately entered into memorandums of understanding in respect of the following:

 

(a) to jointly explore the setting up of the joint-venture company by MAS, AirAsia and AAX to provide aircraft component maintenance support and repair services; and

 

( to establish the broad set of business principles for the proposed establishment of a special purpose vehicle by MAS, AirAsia and AAX to improve value for money and increase competitiveness and benefits to customers through procurement synergies by outsourcing to the SPV the procurement processes for identified goods and services in agreed categories; and

 

(iii) in view of the Termination of Share Swap, the Board of Directors of MAS has agreed to mutually terminate the Proposed Warrants Exchange and the warrants exchange agreement entered into between the Company and AirAsia on 21 October 2011."

 

 

So now, abandon the share swap, get the stock price for AK up again and stay in the MH kitchen via CCF.

I must admit, brilliant.

 

As asked above, what now MH??

Let me suggest and use an other out of the box way of thinking, do not do a JAL, you can't. Try to do a Garuda instead.

And let them agree that you get out of Khazanah, MH, put yourself on Ebay. (so to speak).

 

A National Carrier for sale, whole or partial, there will be buyers.

 

Cheers

Art

[JuliusWong 0]

I am beyond speechless.......What a drama?!! Can we make it into box office film???

[KK Lee 5]

History show, airline with strong union selfdom made profit and most end up in bankruptcy.

Edited May 2, 2012 by KK Lee

[Mohd Suhaimi Fariz 2]

History show, airline with strong union selfdom made profit and most end up in bankruptcy.

 

Southwest has a strong union yet there's no strife & and they still made continuous profits.

 

What's needed is a management that's honest to its unions and a union that understands the company's needs and are willing to make sacrifices in times of hardship to reap the rewards during the good times.

[Timothy 1]

superficial, but the color red leaving MH's livery has been attributed to this AK-MH share swap. Now that it's off, can MH finally have a decent "dress" for its aircraft ?

[Nik H. 3]

Arthur, you're right. As clear as day. TF is as brilliant as others are stupid. Its like taking candy from babies. MH management is more clueless than ever. What a crying shame.

[Ruiz Razy 1]

Arthur, you're right. As clear as day. TF is as brilliant as others are stupid. Its like taking candy from babies. MH management is more clueless than ever. What a crying shame.

CLUELESS as there's lack of commercial aviation expertise?

[KK Lee 5]

Southwest has a strong union yet there's no strife & and they still made continuous profits.

 

What's needed is a management that's honest to its unions and a union that understands the company's needs and are willing to make sacrifices in times of hardship to reap the rewards during the good times.

 

Only if MH is like Southwest

[flee 5]

Southwest has a strong union yet there's no strife & and they still made continuous profits.

 

What's needed is a management that's honest to its unions and a union that understands the company's needs and are willing to make sacrifices in times of hardship to reap the rewards during the good times.

A company can only be like that if everyone pulls in the same direction. MH not only has management and unions pulling in different directions but also other connected parties pulling in their own directions! So they are all tearing MH apart!

[Walter Sim 1]

[flee 5]

The investors have spoken. At 12.30pm lunchtime close, the share prices are:

 

AirAsia 3.54 up 6.3%

 

MAS 1.25 up 2.5%

 

From The Star:

http://biz.thestar.com.my/news/story.asp?file=/2012/5/3/business/20120503112021&sec=business

 

 

KUALA LUMPUR: Shares of AirAsia Bhd and Malaysian Airline System Bhd (MAS) rose in late morning trade on Thursday after the unraveling of the share swap deal.

 

At 10.59am, AirAsia was up 24 sen to RM3.57. There were 5.72 million shares done at prices ranging from a low of RM3.20 to RM3.65.

 

MAS rose six sen to RM1.28. There were 5.68 million shares transacted at prices ranging from RM1.22 to RM.34.

 

On Wednesday, MAS and AirAsia officially announced the reversal of the proposed share swap.

 

Instead, both airlines inked a supplemental agreement to vary the terms and scope of the original alliance.

 

MAS, AirAsia and AirAsia X (AAX) would also cease the separation of their respective focus areas, wherein MAS would be focusing on being full-service premium carrier, AirAsia on being regional low-cost carrier (LCC) and AAX on being a medium-to-long haul LCC.

 

Kenanga Investment Research said overall, the initiatives stated in the supplemental agreement were is tailored in such a way to lower the cost per average seat kilometers (CASK) via joint procurement.

 

"Nonetheless, we have no imputed for potential cost savings in our forecasts as we are waiting for further clarity. We are maintaining NEUTRAL on the Aviation Sector and reiterate OUTPERFORM on AirAsia (TP: RM4.06)," it said.

 

As for MAS, Kenanga Research said in terms of its business fundamentals, the collaboration could be positive for MAS, but only in a the longer term as it will take a while to feel the accumulated impact arising from potential cost savings.

 

"In the meantime, MAS is not travelling along a smooth path in terms of turning around amidst global economic uncertainties and high jet fuel prices, not to mention it also has to finance its RM3.5bil aircraft by FY13," it said.

[BC Tam 2]

This 'share swap' exercise having failed so spectacularly, you have to wonder what advice it was that CIMB managed to convince Khazanah (CIMB's parent) and Tune on viability and wisdom of the move

Surely it must have some impact upon the consultant's credibility henceforth ?

[Naim 6]

The investors have spoken. At 12.30pm lunchtime close, the share prices are:

 

AirAsia 3.54 up 6.3%

 

MAS 1.25 up 2.5%

 

...

 

Obviously some ppl are making lotsa money, and that's the objective of this 'deal' right from the outset. Tukang goreng kwayteow.

 

===

[flee 5]

This 'share swap' exercise having failed so spectacularly, you have to wonder what advice it was that CIMB managed to convince Khazanah (CIMB's parent) and Tune on viability and wisdom of the move

Surely it must have some impact upon the consultant's credibility henceforth ?

 

Not sure if it does - CIMB uses facts to offer financial advice.

 

This share swap was undone by the joker - the Malaysian PM. He cannot afford to lose 20,000 votes for UMNO/BN in Selangor!

 

Obviously some ppl are making lotsa money, and that's the objective of this 'deal' right from the outset. Tukang goreng kwayteow.

Isn't that the sole objective of people investing in stock markets, to make money?

 

@ Flee.

You refer to my earlier posting. I did not use smileys nor emoticons, hence I could be easely misunderstood,

But in retrospect I think you got my drift.

 

You are right, the share swap cancel will be shrugged off by the guys in Red. They celebrate , Mission Accomplished.

Mind you, without a share swap, there would never be a platform for a CCF. So, Share swap first, then CCF.

 

Now, fase two, abandon the share swap and retain the CCF. Was that not what it was all about?

Keep the Red fingers in the MAS pie?

And try to tell the gullible that with the presence of TF and side kicks in the MH board things would turn out ok.

Ofcourse it did. For AK.

Well the CCF is no longer valid. Now they are just collaborating on cost savings in procurement, training, etc. There are economies of scale to be had since the requirements of the two airlines will generate sufficient scale to achieve savings.

 

Tune Air is can now focus solely on its next stage of development - to be a regional giant in Asia.

 

MAS is still struggling to make its business model viable. Therefore the objectives of the two companies are incongruent.

 

It is good that they went seperate ways - the investors seem to think so too.

Edited May 3, 2012 by flee

[flee 5]

Malaysian aviation: A free market again?

 

The new collaboration agreement between Malaysia Airlines (MAS) and AirAsia Bhd could see a de-segmentation of the local aviation scene and a return to more competitive fares.

 

Under its previous agreement, the two airlines had initially apportioned markets, with MAS focusing on full-service premium travel, while AirAsia and AirAsia X on low-cost and low-cost long-haul travel.

 

In its filing to Bursa Malaysia Bhd yesterday, however, both airlines specified that the new agreement will no longer define market focus for each airline.

 

It will also no longer work together on the provisioning of routes.

 

These two areas not only raised concerns of possible breaches of competition law, but was also blamed for higher fares and reduced competition in the local market.

 

Under the new collaboration agreement, MAS and AirAsia have agreed to explore the setting up of a joint-venture company specifically to provide aircraft component maintenance support and repair services.

 

For the purpose of collaborating solely on the area of procurement, the three airlines, MAS, AirAsia and AirAsia X propose to form a special purpose vehicle on the basis of 50 per cent: 35 per cent: 15 per cent.

 

The areas of collaboration include but are not limited to procurement, training, aircraft component repairs, technical and operational efficiency and mutually championing common industry issues.

 

"I think more information is needed as the information given is still vague. Does the joint procurement mean that AirAsia will sell some of its aircraft to MAS?", said one analyst whom declined to be named.

 

In separate press statements, both airlines affirmed their commitment to continue to push for further collaboration in the name of cost savings and efficiency gains, despite the undoing of the share swap between its shareholders.

 

MAS's majority shareholder Khazanah Nasional Bhd announced yesterday the reversal of the share swap with Tune Air Sdn Bhd.

 

This will see Khazanah transfer its 10 per cent stake in AirAsia (277.65 million shares) back to Tune Air, while Tune Air will transfer its 20.5 per cent stake (or 685.14 million shares) in MAS to Khazanah.

 

Since the share-swap deal was announced in August last year, MAS shares have declined by 23.75 per cent, while AirAsia shares have depreciated by 15.69 per cent.

 

Year-to-date, MAS shares have dropped by 6.15 per cent, while AirAsia shares fell by 11.67 per cent.

 

MAS now has a market cap of RM4.08 billion and AirAsia is currently valued at over RM9.25 billion.

 

Read more: http://www.btimes.co...s/psca/Article/

Edited May 3, 2012 by flee

[flee 5]

Government interference, unions scuttled MAS-AirAsia pact, say sources

KUALA LUMPUR, May 3 — Government interference and unions’ dissatisfaction aborted the Malaysia Airlines-AirAsia share swap just nine months after the deal was hailed as the best way to save the loss-making flag carrier, which has gone through at least two business turn-around plans in the past decade.

Sources told The Malaysian Insider Putrajaya’s insistence to ensure no job cuts in MAS before the next general election and workers unhappy with AirAsia executives managing the national carrier had all but made sure the pact would not take off successfully.

 

“Putrajaya and the unions put a lot of pressure that the plan could not work at all,” an industry source told The Malaysian Insider, saying this was told to board members of both carriers when they voted yesterday to unwind the share swap.

 

The unwinding of the share swap will see MAS main shareholder Khazanah Nasional Berhad transfer its 10 per cent or 277,650,600 ordinary shares in AirAsia back to Tune Air Sdn Bhd, while Tune Air will transfer its 20.5 per cent or 685,142,000 ordinary shares in MAS back to Khazanah. It will be cashless and based on the same swap ratio of 2.05 based on the prices when the share swap was announced in August 2011, where MAS was valued at RM1.60 per share and AirAsia’s share at RM3.95.

 

But several politicians and MAS unions were up in arms against the share swap, particularly the entry of AirAsia bosses Tan Sri Tony Fernandes and Datuk Kamaruddin Meranun into the airline’s board. The duo’s Tune Air bought AirAsia when it was a loss-making two-plane operation in 2001 but turned it into Southeast Asia’s biggest budget carrier within a decade.

 

“The unions bypassed the management and met with the prime minister and other influential people, including Tun Dr Mahathir Mohamad, to complain about the deal as they feared for their jobs,” another source said. Dr Mahathir had supported the deal when it was first announced last year.

 

“MAS is an old airline with experienced management but new staff from AirAsia and instructions from Putrajaya just threw them off from working the plan,” the source added, saying the management did not have the opportunity to meet the Najib administration and present their case.

 

“Both carriers cut some routes to rationalise their operations under the comprehensive collaborative framework (CCF) but everyone felt that AirAsia benefitted more, rather than MAS,” he added, noting MAS cut its Firefly unit’s foray into Sabah and Sarawak just as it was luring passengers from AirAsia, which also got its long-sought rights to Sydney as part of the deal.

 

Analysts from Hwang DBS Vickers pointed out that two areas of the initial collaboration have been dropped — “cessation of focus areas, which specifies that MAS focus on being a full-service premium carrier and AirAsia on being a regional low-cost carrier, and assessment for collaboration on provision of network services”.

 

“The implication of the cessation of focus areas is unclear at this point. Fernandes stated in AirAsia Invest TV that he does not think Firefly will return to the low-cost segment to challenge AirAsia,” the research house said in a note today.

 

Fernandes was more diplomatic about the aborted pact and opposition from MAS old hands, saying in a tweet today: “I leave MAS with mixed emotions. A job not completed. Want to wish all in MAS best of luck and to thank the majority for the kind treatment I got while there.”

 

Khazanah itself admitted that the cross-holding of shares, which was intended to better align the economic interests of the major shareholders, Khazanah and Tune Air, had become a distraction to management’s efforts to turn around MAS which posted its largest ever annual loss of RM2.5 billion in February.

 

“Khazanah remains supportive of the compelling logic of proper collaboration between airlines so long as it complies with competition laws, but we also acknowledge the unintended and unfortunate confusion and distraction of the share swap arrangement that has become an impediment to the more important task of turning around the national carrier,” said Khazanah in its a statement.

 

The state asset manager added that it has initiated discussions with the government for a more clearly defined regulatory, policy and co-ordination environment for the aviation industry with sufficient safeguards for public and consumer interests.

 

Tune Air director Kamarudin said in a statement this evening that it remained supportive of the collaboration even though the share swap had been reversed. “We continue to believe in the ability of the collaboration to create value for all shareholders and ultimately to benefit passengers,” he said.

 

Despite AirAsia bosses’ sentiments, OSK Research said AirAsia is expected to benefit more with the unbundling of the deal.

 

“As Malaysia is predominantly a low-cost passenger market with a penetration rate of over 57 per cent, this gives AirAsia the upper advantage given its low-cost structure and vast route network, hence limiting the pressure from MAS in view of its ailing financial condition,” it said in a research note.

 

The Malaysian Insider reported as early as March that Putrajaya was having a relook at the share swap and was considering a special entity to take MAS off the hands of its then main shareholders, Khazanah and Tune Air, after the shocking losses reported earlier.

Source: http://www.themalaysianinsider.com/malaysia/article/government-interference-unions-scuttled-mas-airasia-pact-say-sources/

[flee 5]

AirAsia Flies Better Without Flag Carrier

 

With the canceled hookup between Malaysia Airlines and AirAsia, employee unions at the national carrier are shooting themselves in the foot. For the low-cost airline, though, the abandoned deal is a dodged bullet.

 

The share swap announced last August was worth upwards of $360 million and saw Malaysia Air's major shareholder—the state investment firm Khazanah Nasional Bhd.—take a 10% stake in AirAsia. In return, AirAsia's top shareholder, Tune Air Sdn. Bhd., took a 20.5% share of the flag carrier.

 

But Malaysia Air's main union leaned on the country's politicians to squash the share swap because of concerns about cost cuts. Those fears were well-founded. Malaysia Air has been bleeding losses because of rising competition and soaring fuel prices. The tie-up was meant to reduce overlap between the two Malaysia-based carriers on some routes, cut expenses and help shore up Malaysia Air's balance sheet.

 

Now the share swap is history, however, Malaysia Air's employees could find they face even deeper cuts. The deal was a key to reviving "a very sick patient," said the airline's chairman, Tan Nor Yusof, in March. Without AirAsia on board, uncompetitive routes will still have to go and other cost-cutting measures will have to be found.

 

For AirAsia, though, the breakdown of the share-swap arrangement looks like a let-off. AirAsia now has no exposure to its rival's weak results, yet it could still see some synergistic benefits as the two parties continue collaborating on certain operations, such as aircraft maintenance.

 

Also, Asia's largest budget carrier—with a $3 billion market capitalization—should pick up more passengers as Malaysia Air cuts capacity. Already in the first quarter of 2012, AirAsia's passenger traffic from Malaysia was up 12% compared with last year. Revenue was up sharply, and while net profit was down, that was mostly because the year-earlier figure was boosted by one-time foreign-exchange gain.

 

AirAsia's shares have lost about a quarter of their value since the swap was announced last year. There is room to rise. On a forward-price-to-earnings basis, the shares trade at a valuation about 20% lower than the average for AirAsia's global peers, according to OSK Research analyst Ahmad Maghfur. Without the drag from a failing government-owned national carrier, that discount looks wide of the mark.

 

Source: http://online.wsj.co...DLE_Video_Third

[jit 0]

Well, lots of report about how MH stand to lose from this reversal and TF coming on video to say his piece...(seems like Air Asia's PR dept is on hyperdrive!!) But can somebody list down 3 things that MH had benefited from the share swap? I can't think of any... but I can think of a least 6 that have benefited Air Asia..

[flee 5]

Well, lots of report about how MH stand to lose from this reversal and TF coming on video to say his piece...(seems like Air Asia's PR dept is on hyperdrive!!) But can somebody list down 3 things that MH had benefited from the share swap? I can't think of any... but I can think of a least 6 that have benefited Air Asia..

1 London and Paris routes on AirAsia X cancelled. MH gets to fill up its planes with AirAsia X passengers. Normal load factor for MH is around 70-75%. So they can now fill those empty seats...

 

2 Management has been strengthened - they brought in some people from AirAsia as well as outside people. This is supposed to improve MH's management expertise. But if politicians continue to meddle, put God in also useless!

 

3 Firefly jet - a wasteful and loss making venture into an East Malaysian market that is too small to sustain long term. Promo fares can never be sustained for the long term. So what happens when Firefly have to raise the fares? More losses? Cancelling the jet services helped to step losses.

 

4 Capacity cuts - adjust MAS capacity more in line with demand. Loss making routes are not good for MAS' financial health. No point flying routes for prestige only.

 

5 MRO - Not sure if AirAsia has sent its planes for maintenance at MAS' MRO facilities yet. But if they do, MAS can ensure that these facilities are fully utilised. MRO is profitable for MAS.

 

Anyway, it seems a bit amusing to me that many say that AirAsia benefits with the share swap. Now all the clever analysts also say that AirAsia will benefit from not having the share swap. Conversely, it also means that the share swap is bad for MAS and no share swap is also bad for MAS.

 

I am sure that we haven't heard the last of this. Next move, some sort of bailout for MAS?

Edited May 3, 2012 by flee

[Ruiz Razy 1]

1 London and Paris routes on AirAsia X cancelled. MH gets to fill up its planes with AirAsia X passengers. Normal load factor for MH is around 70-75%. So they can now fill those empty seats...

 

2 Management has been strengthened - they brought in some people from AirAsia as well as outside people. This is supposed to improve MH's management expertise. But if politicians continue to meddle, put God in also useless!

 

3 Firefly jet - a wasteful and loss making venture into an East Malaysian market that is too small to sustain long term. Promo fares can never be sustained for the long term. So what happens when Firefly have to raise the fares? More losses? Cancelling the jet services helped to step losses.

 

4 Capacity cuts - adjust MAS capacity more in line with demand. Loss making routes are not good for MAS' financial health. No point flying routes for prestige only.

 

5 MRO - Not sure if AirAsia has sent its planes for maintenance at MAS' MRO facilities yet. But if they do, MAS can ensure that these facilities are fully utilised. MRO is profitable for MAS.

 

Anyway, it seems a bit amusing to me that many say that AirAsia benefits with the share swap. Now all the clever analysts also say that AirAsia will benefit from not having the share swap. Conversely, it also means that the share swap is bad for MAS and no share swap is also bad for MAS.

 

I am sure that we haven't heard the last of this. Next move, some sort of bailout for MAS?

 

1 AT WHAT FARE? THE SEATS MAY BE FILLED BUT NO POINT IF D7 PAYS BELOW THE YIELD? do they?

2 WHAT KIND OF MANAGEMENT? HND IS A FINE EXAMPLE BEING WASTED!, HIGH YIELD MIDDLE EAST PULLOUT WAS ANOTHER WHEN THERE EASY MARKET FOR PREMIUM CABINS! MH PREVIOUSLY FAILED B'COZ SUBSTANDARD PRODUCTS PLYING THESE ROUTES! LOTS OF OPPORTUNITIES MISSED TO MAXIMISE MH RETURNS.

3 FY JETS OF COURSE DON'T MAKE MONEY IN FIRST 9 MONTHS OF OPERATIONS! NO AIRLINES DOES THAT ! EVEN AK HAD A YEAR TO BREAK EVEN! NOT A GOOD ARGUMENT!

4 PRESTIGE ROUTES? U MEAN KUL-CPT-EZE? I think there's good opportunities if rightly managed. . FYI , IT'S THE ONLY CONNECTION TO ARGENTINA FROM SOUTH AFRICA AND ASEAN? GOOD EXAMPLE SQ MANAGES GRU DECENTLY WELL OR FOR THAT MATTER HOW COULD EK/QR Manages EZE?

5 U don't need to swap share in order to get MRO Contracts from MH Engineering. If that's the case might aswell share swap with all airlines!

 

Please look at both ends and think deeper .

[Ahmad M 1]

What a huge mess.

 

Couple of things I don't understand, MH Engineering has all the expertise, infrastructures, spares etc but why the need for a JV? What will or can AK contribute in this matter? They can always enter an agreement for maintenance of their aircrafts and get a good deal along the way. The other one is training, in the almost done deal, MH was supposed to sell off their training facilities to CAE and in the JV will only get 10% of the share of the new training venture. Again here, MH is the one with the most simulators, trainers, facilities etc.

 

This matter is far from being resolved I'm afraid and there are still plenty of stuff that is not public knowledge.

 

What a huge bloody mess.

[flee 5]

1 AT WHAT FARE? THE SEATS MAY BE FILLED BUT NO POINT IF D7 PAYS BELOW THE YIELD? do they?

2 WHAT KIND OF MANAGEMENT? HND IS A FINE EXAMPLE BEING WASTED!, HIGH YIELD MIDDLE EAST PULLOUT WAS ANOTHER WHEN THERE EASY MARKET FOR PREMIUM CABINS! MH PREVIOUSLY FAILED B'COZ SUBSTANDARD PRODUCTS PLYING THESE ROUTES! LOTS OF OPPORTUNITIES MISSED TO MAXIMISE MH RETURNS.

3 FY JETS OF COURSE DON'T MAKE MONEY IN FIRST 9 MONTHS OF OPERATIONS! NO AIRLINES DOES THAT ! EVEN AK HAD A YEAR TO BREAK EVEN! NOT A GOOD ARGUMENT!

4 PRESTIGE ROUTES? U MEAN KUL-CPT-EZE? I think there's good opportunities if rightly managed. . FYI , IT'S THE ONLY CONNECTION TO ARGENTINA FROM SOUTH AFRICA AND ASEAN? GOOD EXAMPLE SQ MANAGES GRU DECENTLY WELL OR FOR THAT MATTER HOW COULD EK/QR Manages EZE?

5 U don't need to swap share in order to get MRO Contracts from MH Engineering. If that's the case might aswell share swap with all airlines!

 

Please look at both ends and think deeper .

 

1 The yields are bound to be good - if these extra pax are not there, MH would not be selling the seats anyway, since its load factors will remain at the 70-75% level. These extra sales to D7 are additional contributions that MH will not otherwise have.

 

2 Unless you are working inside, you would not know what kind of management. In any case, any changed in management are supposed to do some good. Have you ever encountered companies deliberately changing management so that it becomes bad?

 

3 Of course it is a good argument - whether it is 9 months or 90 months, the market is not big enough to sustain FY's normal fares. Yes, FY is having high load factors, but what is the yield? Can a RM 100 fare from KUL-KCH make money for FY? FY cannot forever be offering these fares as they are not sustainable. And if FY is forced to charge economic fares, will the high load factors start to disappear? And we have not yet talked about the negative impact it had on MH services on the same sectors.

 

4 Don't compare SQ with MH. They are in different leagues. I am not saying that MH withdraw permanently. Just look at JL - they cut capacity to stem losses. Then they re-assess the business. Then they expand their route network again, with improved products and lower costs.

 

5 Khazanah's intention for the share swap is so that there is financial incentives for shareholders to do the CCF. We have to keep in mind that there are shareholders in these companies and they need a return too - just like employees need their pay cheques and customers who demand value for money for their fares. AirAsia will not send their planes to MAS' MRO as they are competitors. Look at how MAS ripped off FAX for MRO of the Fokkers. They actually charged more than market rate, but that is because they have a monopoly on F50 maintenance in this region.

 

If AirAsia sends it 100 plus planes to MAS MRO, economies of scale will mean that the cost of maintenance will be lower for both MH and AirAsia. With a lower cost base, the profitability (especially for third party work) will increase.

 

There are more than 2 ends to look at. And it is not just about Malaysia. Aviation is a global business and both companies should not kill each other and let the likes of SQ, EK, QR, etc. reap the benefits. They are the real tough cookies.

 

Well we will have to wait for the Q1 2012 results to really see what effect the changes had on the company's financial health. And lets hope that with the CCF and share swap discontinued, the management can still come up with some improved results.

Edited May 3, 2012 by flee