MAS and AirAsia Shares Swap

[Jason 0]

I heard rumours that the reasons MAS pulled out from JNB and FCO are to give way for AAX to go there. MAS B777 stopped flying to TPE is to give way to our friend also.

 

If all these are true, where are the justice ? Too many untold stories behind doors.

Edited May 6, 2012 by Jason

[flee 5]

Fernandes: We could have made a difference

 

ONE of the key characters embroiled in the Malaysia Airlines-AirAsia Bhd saga is the colourful Tan Sri Tony Fernandes.

His detractors say his dominance in MAS, after the share swap agreement was inked last August, was too much of a culture shock to MAS. The deal has also been seen as one that was more beneficial to Fernandes and AirAsia. And then there were also concerns of it transgressing competition laws But Fernandes' proponents say he was probably the only hope of saving MAS.

Fernandes himself admits to being nave about how the whole share-swap-inspired tie-up had been so negatively perceived by the public. Neither did he expect the amount of resistance to change from MAS.

 

In his defence, Fernandes enthuses that the deal didn't favour AirAsia over MAS. He strenuously also denies another allegation: now that both parties are walking away from the share swap, is Fernandes and AirAsia in an unfairly advantageous competitive position now that they have seen the inner workings of MAS?

 

“What operational secrets do I need to learn from MAS? Conversely, we have shared many aspects of our business plans with MAS' management, so they know just as much about us as we know about them,” he tells StarBizWeek in a recent interview.

The conspiracy theorists also have it that Fernandes was making inroads into controlling the Malaysian airspace with the MAS deal by having MAS under his wings, so to speak.

 

Conceptually though, it is hard to knock the rationale for the deal. With increasing competition in the global airline space, MAS and AirAsia should collaborate where possible. This is a mantra that Fernandes had been preaching for a long time and he had on many occasions expressed his displeasure at MAS wanting to take AirAsia head on, explaining that such a strategy was wasteful from a national perspective.

 

But then there was also the QPR thing, which stoked the flame for those unhappy with Fernandes' involvement. Just about a month after the share swap agreement, MAS and and Air Asia signed a jersey deal with then recently-promoted Queens Park Rangers (QPR). Both signed a two-year sponsorship allowing the MAS logo to adorn the QPR jersey on home games while the AirAsia logo was to be used on the team's away games. Note that Fernandes had then only recently acquired his 66% ownership in QPR. The sponsorship deal naturally cooked up a storm of protest.

 

Fernandes, unsurprisingly, retains the view that the deal was a great one for MAS' branding and believes that it led to more sales for the national carrier's KL-London route. While declining to reveal the exact price for MAS' sponsorship deal, he says its closer to 10% of the 18 million pounds per year that was widely speculated.

 

The sponsorship amount, Fernandes points out, is less than what QPR pays for buying a single football player, emphasizing the view that QPR didn't gain enormously from the MAS sponsorship deal.

 

When pressed further on questions as to the benefits AirAsia was to get out of the share swap deal with MAS, Fernandes posed the question back to StarBizWeek. “Tell me how exactly?” he asked. What about favourable route rights for AirAsia? Fernandes said that AirAsia had already fought and won all the major battles, especially route rights, before they entered into the share swap with MAS. What about AirAsia X getting its Sydney route?

 

“If you think Kamarudin and I had invested RM1bil into MAS (via Tune Air's giving up its 10% in AirAsia for a 20.5% stake in MAS) for a Sydney route, which incidentally AirasiaX had deserved, then I will shut up from now on,” quips Fernandes.

 

Another concern was that Fernandes was looking to kill off Firefly. His retort: “But that's an airline with 8 planes. We have 100. We are not worried about Firefly. We have been fighting with the big boys.”

 

And as far as any allegations of transgressions of competition law is concerned, Fernandes view is that AirAsia only really competes with the customer, who has a choice of not flying if fares are too expensive. And taking the opportunity to delve in competition, Fernandes laid out this fact: Before AirAsia existed 10 years ago, “anyone could charge anything.”

 

“I'm sad that the swap is being unwound only because I feel (Datuk) Kamarudin (Meranun) and myself could have made a much bigger difference. But the collaboration is being strengthened. And that's a good thing,” says Fernandes.

 

Excerpts from the interview:

 

Did you feel the tie up favoured AirAsia more than it did MAS?

No, that's a ridiculous scenario. That's one of the frustrations of being in Malaysia. People tend to look at things as someone winning and someone losing in a tie up. The deal favoured both. Every day there's increased competition in the global airline space, it seems silly and wasteful for these two companies to compete.

 

Why did AirAsiaX close certain routes after the deal with MAS?

The closure had nothing to do with MAS. That model didn't work for AirAsia X, it didn't make economic sense. There were not enough seats on the Airbus A340s for the prices we charge. We will look at London and Europe when the Airbus A350s come out, which have 349 seats with 2 engines so it will be more economical. These are some of the myths that have been propagated, that we closed those routes down for MAS to benefit. But we did it because the routes were just not making us any money.

 

You said you are leaving the tie-up with MAS with unfinished business. Where does this leave AirAsia?

Yes, I feel I have tremendous energy now, and revitalised. We've got Japan coming up and Philippines has just started and we're listing Thailand. I have more energy and focus on these things now. I think Indonesia and Thailand can double their growth. Then there are three or four more new countries that will be announced in the next 12 months that will keep me occupied. So the future for AirAsia is phenomenal. Our first quarter growth is unbelievable in this economic climate. Our margins are pretty good despite oil prices being where they are.

 

Tell us about the whole QPR sponsorship saga.

Firstly, the figure (that MAS is speculated to have paid) is not 18 million pounds a year. That's far from accurate.

 

So what's a more accurate figure?

I'm not at liberty to say. But it is closer to only 10% of what was speculated. MAS has had phenomenal branding from that. If there's one thing AirAsia has been good at it has been branding. We've built a brand from nothing to one that's known throughout the world and we did it using a lot of sports. Lets look at things in perspective. One QPR player costs more than the advertising paid by MAS. It's not like the shareholders of QPR benefited immensely from this. In any case, AirAsia had wanted to do it all in the first place. And there were two other sponsors. But we went with MAS in the spirit of collaboration, we were all in a euphoria. I never expected the negativity that has been surrounding this transaction. I thought it would be welcomed universally. I can put my hand on my heart and say that MAS got great value in that sponsorhip deal and it shows in their London load factor.

 

But can you tell if the London load factor was a direct result of the QPR branding deal?

You can never tell exactly but you can say that the deal certainly gave it a much higher profile. This whole transaction has been distracted by noise. If I was MAS (management) I would have activated this sponsorship deal more. It is wrong to say that the QPR sponsorship was a waste of money. You have to brand to get the topline. Why are so many airlines branding football clubs? The question then is why don't pick a top team but if picked say Manchester United, you would paying closer to 20 million pounds. The detractors have won in creating so much noise that it has distracted MAS' management from effectively putting in a good business model. It is silly to say that MAS can't afford the QPR sponsorship. If you don't fix the brand how are you ever going to fix the top line? How did AirAsia grow from 200,000 passengers to 33 million in ten years? We grew by sponsoring sports and continue to do so. No Malaysian company has done this or built a brand like this. It came out of hard work and a lot of investment. This is where the negativity in Malaysia frustrates me sometimes. It took us seven long years to get the Kuala Lumpur-Singapore route. We had nasty battles with MAS. So if an idea is mooted that lets not fight against each other but work together, then I'm all for that. I am an idealist. But sometimes my ideas don't' make sense and sometimes they don't work, as in this case.

 

Do you think you were nave about the whole thing?

Yes I was, as to the public perception of the deal and the resistance to change.

 

But when you entered into the deal, surely you must have had a sense that AirAsia or yourself would benefit form the deal?

Yes of course we would have benefited. Collaboration rather than slugging it out against each other would benefit both airlines in this globalised world. So we thought both our share prices would rise. But we now have a scenario in which both airlines can prosper because we are still collaborating and sticking to our respective strengths. We went into the deal without doing a due diligence and did it because we thought of “Team Malaysia”. We are idealists. It has been hurtful being victimised in the media as we have been from this deal. We did this deal as Malaysians first and profits second. If personal wealth came first, we would have done a thourough due diligence. But we still beleive that collaborating is much better for both partiesin this tough globalised world

 

But with the share swap, wasn't it going to be easier for AirAsia to do what it wanted to do?

Lets take a step back. What has AirAsia not got now? All the battles were done and all the route rights we wanted had been won before we entered into this transaction.

 

What about the Sydney route?

Sydney is AirAsiaX. If you think Kamarudin and I invested RM1bil into MAS for a Sydney route, which AirasiaX deserved, then I will shut up from now on.

 

What about Firefly?

Firefly has eight planes. We have 100. We are not worried about Firefly. We have fought SIA, Lion Air, Thai Airways and even the subsidised MAS. We put in RM1bil into MAS. Could that really be for say the Sydney route or to kill off Firefly?

 

Did you see there being any downside to you or AirAsia in going into the share swap agreement?

No, because I'm an optimist. Everyone thought it was a great idea. Up to that point, so many people had said to me, “Why don't you get into MAS and fix it. So I thought everyone would support this, from a country perspective. This was to be Team Malaysia.

 

Were considerations of the Competition Act looked into when this deal was structured?

In the Competition Act, ultimately the consumer decides, right? Firstly, there was no AirAsia ten years ago and so theoretically, people could charge whatever they wanted, as there wasn't any real competition. Competition in terms of international routes, there's plenty of it. At AirAsia, we survive on low fares. Our competition is really the consumer. If we charge too much, consumers have a choice of not flying. And AirAsia survives on volume. It does not suit our model to charge high rates simply to make more money. Our model is we want to stimulate the average Joe into flying.

 

Another related issue to competition, having gone into the MAS board and been part of its management, haven't you seen the inner workings of MAS, which could put you in an advantageous position to compete with MAS?

But honestly, what operational secrets do I need to learn from MAS?

 

What about the AirAsia personnel who had joined MAS after the share swap. Will they stay?

It's a free market. They can choose to stay or leave as they please.

 

Collaboration without equity participation. Would it be as meaningful?

Equity interest was an idea from the financial guys. But it still can work without equity. We are in a far, far better place than before. Collaboration with or without equity is critical in a very competitive global place.

 

Source: http://biz.thestar.com.my/news/story.asp?file=/2012/5/5/business/11224849&sec=business

 

 

 

Can MAS make it on its own?

 

After its share swap deal with AirAsia has been unravelled, analysts are sceptical on MAS future odds. However, its chairman Tan Sri Md Nor Yusof sees a silver lining in the dark clouds.

 

THE deal that was designed to save Malaysia Airlines (MAS) ended with more bitter than sweet memories for all those involved.

The fractious relationship, almost from the get go when the share swap agreement was inked eight months ago between Khazanah Nasional Bhd and Tune Air Sdn Bhd owned by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun was met with growing resistance especially from the MAS Employees Union.

 

There was no denying that some elements in the original blueprint designed to save the national carrier were good, but the deep distrust that exists between the employees of MAS and AirAsia given their historical battles proved too big an obstacle to overcome.

 

Of course the unions and some politicians found the upcoming elections a boon to pressure the Government to reverse the share swap.

 

Whatever the reason, MAS is back seemingly at square one.

 

There are those who doubt if MAS will be able to pull itself from the rut it is in but there are others who are a lot more sanguine about its prospects.

 

Standard & Poor's senior aviation analyst Shukor Yusof believes the cancellation of the share swap agreement is the best thing for MAS as the share swap does not add value.

 

The unravelling was done on Monday and announced on Wednesday, a day after Labour Day.

 

Now that it is undone, the heat is not on AirAsia because it is on a steady growth path, but on MAS, which has structural and fundamental issues that has yet to be addressed for nearly a decade.

 

Analysts seem to have lost confidence in the carrier and despite a team being set up to engage with the employees and make things work, the odds aren't looking good for MAS, at least in the near to medium term.

 

It faces a possible downgrade by Skytrak, an important aviation measure for service standards. Investors are seen to be dumping the redeemable convertible preference shares for fear that MAS may have problem redeeming them this year.

 

But more critical is that it needs to spend RM6bil and only has RM958.81mil in cash at the end of last year. Going by what MAS group CEO Ahmad Jauhari Yahya (AJ as he likes to be called) said in his memo to staff recently, a copy made available to StarBizWeek, the burn rate of cash is RM5mil a day.

 

The question asked is: Can MAS return to the black and change all the negative perceptions on the airline and how much time does it have given that crucial time has been lost over the past eight months?

 

Revisit the plan

All is not lost, says chairman Tan Sri Md Nor Yusof when he sat down with StarBizWeek on Thursday morning.

 

He says a lot has been achieved behind the scenes, including mopping up a lot of the mess.

 

“Plenty has been done and we are more focused on sales now,” adds Md Nor.

 

The first thing on the agenda is to re-visit the business plan to see if there is any need for a re-setting. That is key as earlier plans call for MAS to remain a full service premium carrier. AJ adds there is no need to craft a new business after the collapse of the share swap, only the need to tweak.

 

Md Nor was in MAS a decade ago but left to head the Securities Commission at the government's call. His return was just days before the Aug 9 share swap. A decade of restructuring and a new business plan but still the need to re-visit the plan?

 

“Massive work needs to be done and I believe the current set of people are unlikely to pull it through. As every corner you turn there are problems and the issue is structural and fundamental, be it financing, operations, an aging fleet, the product - all this needs to be revamped. It is going to be tough and I feel sorry for them but for how long more are they going to (do surface restructuring instead of deep restructuring and how long more will MAS remain in the red),'' says Shukor.

 

An industry expert adds that “Somewhere along the line, the losses will crop up if the root cause of the problem in MAS is not addressed. They have a fleeting chance to undo a lot of things now if they care about cleaning up the airline once and for all. Other global carriers which were in MAS' state of affairs have done it and are now flying high. You got to get to the root cause and fix it and cutting cost or reducing the number of employees are not the solution.''

 

Md Nor admits there are structural and fundamental issues.

 

“The liquidity crises facing MAS is chronic in nature. Its fundamental cause is structural but no one has sat down to look at that. That is why MAS is always on a financial drip from stakeholders. Even we know about it and yet we are not looking,” he says.

But things will change, he assures, and adds, that there will be no shortcuts and no quick fixes.

 

“We are immediately going to sit down and review everything and then look at how we can (turn everything around),” Md Nor says.

 

Radical changes perhaps, as that is also what AJ said in his recent memo to the staff.

 

Shukor adds that “redefining and tweaking the business plan does not excite me as I have heard it all and also all the business turnarounds. They have implemented the financial and operational engineering in the past and it had not worked. So if they are thinking there is a silver bullet, then it has to be a combination of many processes in order to overcome various issues they are facing now.''

 

“They had so many restructuring but not deep enough, will another make MAS a more efficient airline,'' CAPA Centre for Aviation analyst Brendan Sobie asks.

 

The emotional factor

MAS has also been accused of selecting a handful of outside talent in the strategy planning and for the running of the airline during the share swap period when there are a lot of untapped talent from within. So this time the re-visit of the plan involves the employees.

 

“We need to re-visit the business plan. This time it will be more inclusive in that we need to have staff engagement. We have asked them for ideas and we gave them a tough deadline by Friday. We believe there will be plenty of good ideas but what is needed is to focus on what to do first and therefore the wish list cannot be too long. Part of our problem thus far has been what is seen as priority,” Md Nor says.

 

Today the board is meeting to set the direction for the company. It would have input from the unions and head of units on what their wish list for the airline's strategy going forward. The unions and Md Nor met again yesterday.

 

AJ adds that “we have many experienced staff and they often talk about contributing. We are ready to listen to them now and even previously. The difference this time is that I believe without the distraction' caused by the share swap, our employees will be more focused on giving good workable ideas on improving processes, improving efficiency and productivity that can help MAS better its current position.”

 

The buy in from the employees to take the company forward is vital as it was the unions that had a hand in tearing up the share swap agreement.

 

Md Nor says there is no bad blood between management and the union. He understands the reasons why it did what it did.

“(The union) is an institution that is 65 years old and that means there is three generations claiming equity. We have to manage trans-generational challenges and laggards from the baby boomers to Gen Y. And all of them have ideas of what they want to do for MAS.”

 

Although the share swap is dismantled, the remnants of the tie-up lingers in a form of cooperation in several areas like training, engineering and others.

 

There are also a number of new employees that have been parachuted into key positions within MAS, and some had previously worked with AirAsia.

 

MAS Employees Union president Alias Aziz's stand is clear on that matter,

 

“We support anyone who can help MAS earn more revenue. We do not want those who cause the airline to lose money. We are not attacking individuals, we are concerned about performance. Thus far, the feedback from staff is that they want to work with the management to move MAS forward.”

 

The low cost factor?

Md Nor says there is also a need to re-look at the network and adds, the focus will be more regional as that is where the growth will be and by capitalising on Malaysia's central location in Asia.

 

Will they go back to the low cost game they gave up because of the share swap. Will they get there as most carriers in the region have low cost units to tap that end of the market?

 

“Can they still realise the benefits by just remaining in the premium market when much of the growth in this region is going to be in the low end of the market,'' said CAPA Centre for Aviation analyst Brendan Sobie.

 

Md Nor said that “we will not compete with a low cost model.''

 

He believes MAS can tap the regional market by being a premium carrier as this is a catchment area. Our middle class is growing significantly. So there is traffic.''

 

But Md Nor did say that Firefly would continue with its turboprop operations.

 

“We just have to re-configure what we want to do with the turboprops and fill the aircraft. Beyond that, Firefly can be re-branded. That is a consideration, and to explore if it can also fly beyond the 1.5 hours (range). All that will come under our regional network strategy.”

 

While it is limiting itself to a specific market, the long term solution to remain a premium players means it has to address a combination of factors, says an industry expert.

 

“It will need to renew its aging fleet, have better branding (re-look at the A380 branding), ensure the product is top class and make certain there is network breadth and scale. MAS will also need to invest in a reliable customer revenue management system to manage its premium passengers, be aggressive in marketing like the way AirAsia is or even better.

 

“This will allow MAS to get higher yielding passengers and MAS is still an amazing brand operating in Malaysia, which has the lowest cost structure than many other countries. It is in the middle of the Asia Pacific region that has huge intra- and inter-regional traffic and growth. There is no other way and cutting routes and sacking staff is not going to solve their problems,” the expert said.

 

Financing option

While the analysis is that the current structure is flawed and the business model seems weak without the low cost component, MAS is also in dire need of funds. This is notwithstanding that there has been about RM3bil-RM4bil cash injection the past few years.

 

MAS is caught in a vicious cycle, says Md Nor as what the airline earns is not enough to cover its expenses and the cost to maintain its fleet is pricey because it is aging.

 

The good thing is that “we are breaking that cycle as by end 2013 we will have 26 next generation aircraft and 50 by 2014. That would mean lower maintenance cost and our compounded annual growth rate ratio will rise, hopefully we are on a good start,” Md Nor says.

 

As at end of last year, MAS has about RM1bil cash but with the cash burn rate at RM5mil a day and with 100 takeoffs daily, the cash can be depleted in three to four quarters if nothing is done soon.

 

Whatever, MAS needs fresh injection of funds and a cash call is not on the cards for now, those in the know claim.

 

In its audited accounts submitted to Bursa Malaysia recently, MAS said it had secured a RM1bil short term advance from a local financial institution. It is like a bridging loan till it gets the financing for the aircraft sorted. MAS is taking delivery of its first A380 soon and will use the aircraft for its KL-London route beginning July.

 

For now, MAS deputy CEO and head of group finance and aircraft finance and management Mohd Rashdan Yusof is working on an innovative financing package to address all the financing needs, but he will not discuss this with StarBizWeek at this juncture because it is not complete.

 

However, those in the know claim it is indeed comprehensive, there is demand for the instruments from local institutional investors and it will be an asset backed type of facility which could be issued in two weeks time.

 

AJ says MAS will issue a RM3bil Islamic bonds and Md Nor adds that “there is ample liquidity in the domestic market, why go overseas to get aircraft financing.”

 

Md Nor adds that “whatever the instrument, the rightful owners of the aircraft will still be MAS.”

 

But financing is only one part of total problem that is on Md Nor's or AJ's mind. Both are now thinking of conservation and they know they cannot spend like “rich kids.”

 

“We need money and we need to conserve spending and spend only on income generating activities and not for the feel good factor things,” says Md Nor.

 

To break away from the vicious cycle, Md Nor says that will mean “the focus has to be on generating revenue.”

Previously, MAS looked at cutting cost but arguments have been made that the fat in MAS is still aplenty.

 

Md Nor says the “cost structure is not bloated but we need to push up our sales, that is very urgent. We have to reduce our CASK (cost of available seat-kilometer) and raise the RASK (revenue of available seat-kilometre). We have to fill up the seats. Now our average load factor is 70% and we want to push it to 80%, we are getting the numbers, but we still have to push harder.”

If Md Nor and AJ are really keen to get to the bottom of the problem, then cost cuts alone is not the solution and Md Nor says “we have to look at all the cost levers and go beyond blaming rising jet fuel prices as the cause of all our problems. The rise in fuel cost is a given in the industry and it affects all players, he adds.

 

“The reality is that we need better inventory management, particularly since our fleet is ageing, We are spending too much maintaining old aircraft as there are just too many repairs and naturally the operating cost goes up. We have to zoom into all areas, strip and check one by one,” he says, adding that, don't even get into the fuel hedging business.”

 

MAS feels that once the newer aircraft arrives, its maintenance bills will fall. But the cost to service the debt taken for the new aircraft, though, will inch upwards.

 

Still the pessimists feel that a 25%-30% cut in staff strength is necessary to bring down the cost as MAS is seen to have too many employees and the productivity level is low. The comparison often made is that with AirAsia, which is essentially a low cost carrier and an unfair comparison. Any comparison should be with Singapore Airlines. MAS has 20,600 employees.

 

Md Nor is not talking about cuts but to get everyone motivated, having proper work scheduling systems to keep productivity levels up and reducing the need for after hours work.

 

“It is about a mindset and inertia issue. We need to address all this issues so that the overall productivity level is up ... it is not something impossible,'' he adds.

 

There is hope

Despite all the negativity, there is still hope and Md Nor is adamant things will change.

 

What he and AJ needs is probably another 18 months.

 

What will help isthe next generation aircraft it will take delivery of. That will put MAS on par with some of the regional airlines and reduce its cost. And getting the unions and employees engaged will hopefully get productivity levels and morale up.

The other plus factor is its entry into oneworld as that will help bring in passengers.

 

As Md Nor put it, “there is hope, it is about how we reshape ourselves and how fast we can do that to tap the opportunities,”

 

“This is probably the last chance for MAS to prove its worth and the tax payers are not going to be happy if more money is pumped into the airline as there cannot be another bailout,” says an observer.

 

Source: http://biz.thestar.com.my/news/story.asp?file=/2012/5/5/business/11234059&sec=business

[Cheng Long 0]

Now that the share swap is over, a lot of people said after all this fuss, MH is now back to square one. In my view, MH is not back to square one, they are tossed many squares back in the negative. In other words, they are worse off than before the share swap. A lot damages done, now they need to crawl back to square one.

[flee 5]

Malaysia Airlines And Airasia Making The Right Moves, Say Analysts

 

KUALA LUMPUR, May 6 (Bernama) -- The supplemental collaboration agreements (SA) signed between Malaysia Airlines and AirAsia will pave way for the country towards becoming a regional airlines maintenance hub, say analysts here.

 

Vice-President, Head of Retail Research, Affin Investment Bank, Dr Nazri Khan said under the SA, both airlines have agreed for a joint venture in procurement and maintenance activities, which are seen as good moves and a huge business opportunity.

 

"That means they want to buy airplanes together. Component parts will be bought together (through a joint venture company) so it will make Malaysia a regional maintenance hub, if they work together," he told Bernama in an interview here today.

 

It was reported that the procurement initiative between the airlines is expected to lead to efficiencies by exploring the potential of outsourcing their procurement activities to a mutually owned joint venture (JV) company.

 

Among the key areas to be explored could include high spend items such as fuel, insurance, information technology and communications.

 

As for the aircraft component maintenance, support and repair services, he said the airlines would jointly explore the setting up of a JV, including identifying its viability and structure.

 

Nazri said at the moment, the national carrier's balance sheet was not strong with only RM1 billion cash in hand and RM3 billion in bonds.

 

He said the airline would need to have another RM2 billion to fulfill the capital expenditure of RM6 billion this year.

 

When asked whether Malaysia Airlines will go through another round of cost-cutting, he said the airline had done a lot of cost-cutting with two transformation plans over the past decade.

 

"I think it is rather restricted. Malaysia Airlines and AirAsia have different models so the airline should learn from Singapore Airlines (SIA) rather than AirAsia.

 

"The SIA during a volatile period, spent more on service to win customers loyalty so I think cost-cutting is not feasible. Air Asia is different as it plays on cost effectiveness," he said.

[BC Tam 2]

We did this deal as Malaysians first and profits second.

Oh please, spare us

[S V Choong 4]

Oh please, spare us

Agreed. TF's explanations like another politician statement to me! No suprise there at all.

[Mohd Suhaimi Fariz 2]

Agreed. TF's explanations like another politician statement to me! No suprise there at all.

 

Didn't Tajuddin Ramli used the same reason - buying MAS for national service?

 

Some MH officials were spotted at LGW. Is MH planning to add a third frequency into London?

 

Some discussion going on here: http://www.airliners...d.main/5455876/

 

It's a contingency plan for the Olympics and the havoc that will be caused in LHR.

[BC Tam 2]

..... ultimately the consumer decides, right? Firstly, there was no AirAsia ten years ago and so theoretically, people could charge whatever they wanted, as there wasn't any real competition

Has Tan Sri failed to sense that a major part of opposition to this share swap is so that the consumers are not brought back to precisely those dark ages ?

Notice the fares already heading north for both MH and AK immediately after dismissal of FY jets ?

They can go on and on about different business models etc, but your average Joe Bloke need no proficiency in rocket science to realize that when the top two provider of a service/goods get into bed together, the Bloke's family purse will get scr.....

Ah Jib Gor, to his credit, managed to grasp the sentiment (eventually) and I suppose acted in such manner so the consumers are more inclined to decide on their spending habits rather than at the voting booth in not too distant future

[BC Tam 2]

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

One wonders what proportion of 'facts' actually go into advice at that level whereby

".....Nazir, Azman and Tony were punting down the river a quintessential Oxford activity ....."

http://biz.thestar.com.my/news/story.asp?sec=business&file=/2011/8/13/business/9276350

 

 

Quoted from same source

“The fact that it took a long time is a reflection of how much effort and thought went into this. It wasn't a spur of the moment deal or one that was driven by a specific event,” the deal's advisor and chief architect, CIMB Group Holdings Bhd's Datuk Seri Nazir Razak tells StarBizWeek.

 

But Tan Sri now says

We went into the deal without doing a due diligence and did it because we thought of “Team Malaysia”

Well, well, well ......

[flee 5]

BC,

You are doing "creative quoting".

 

Of course, CIMB, as a banker and advisor has to do the homework. Unlike MAS, TF does not play with taxpayers' money, so does anyone really care if he does due diligence or not. It is his money to lose if he is careless with it.

[BC Tam 2]

BC,

You are doing "creative quoting".

Oh ? How so ?

[JuliusWong 0]

Singapore's Business Times put it very bluntly......it's all about politics....

 

Politics dictating future of Malaysia Inc, says Singapore paper (full text below)

 

May 07, 2012

 

KUALA LUMPUR, May 7 — Politics is dictating the future of Malaysia Inc, Singapore’s Business Times said today, suggesting that the nation’s economy may suffer at the hands of self-serving politicians anxious to win electoral support in order to stay in power.

File photo of a MAS aircraft at KLIA. BT said politics was dictating the future of Malaysia Inc, including MAS.

 

The business paper noted in its Malaysia Insight column today titled “What the unions have wrought” that with the end of the much-vaunted share swap deal between Malaysia Airlines and AirAsia, there was no more incentive for Asia’s bestselling budget airline to help resuscitate the ailing national carrier.

 

It noted that AirAsia has said it would continue its collaboration with MAS and AirAsia X, its long-haul arm, in key areas such as “procurement, aircraft component repairs, training initiatives, technical and operational efficiencies, as well as championing common industry issues” that would help boost MAS’ performance.

 

“Does anyone really believe this? Without anything to incentivise it — and the share swap did — why would AirAsia go out of its way to help MAS?” the paper questioned.

 

“Whichever way one slices it, it looks like only one conclusion: politics is dictating the future of Malaysia Inc. And that is scary,” it said.

 

“But it was the unions that made up the government’s mind over fears that the share swap might result in massive job cuts,” it added.

 

BT noted that the deal was scrapped following protests from the national airline’s powerful unions that put political pressure on the Barisan Nasional (BN) government which is expected to call a general election in the next few months.

 

Most of MAS’s 20,000 employees are resident-voters in Selangor, a key state currently under Pakatan Rakyat (PR) government that Prime Minister Datuk Seri Najib Razak has openly stated he wants back.

 

The paper asked: “With such losses, does MAS really need 20,000 employees?”

 

“The unions should really think about what they have wrought. Without an airline, there will be no jobs,” it said.

 

Source: http://www.themalays...singapore-paper

 

To those who say MH should be left alone as it is, then let it rot to death!! 20,000 employees with dwindling profits and high overhead! Like it or not, MH is a REALLY A BURDEN for tax payers. Over and over again, the government has and had used the taxpayers' money to rescue or restructure MAS.

 

Every few years, MAS is in deep trouble and needed to be rescued. It is utterly shameful!! No wonder the public like to compare it with CX and SQ.....soon GA!! Shameful!! I think MH should stoop till like Eastern Airlines......go bankrupt by itself.

 

I don't hate MH but to link election vote with the survivability of a mammoth company is totally low class of the union to do so.

Edited May 7, 2012 by JuliusWong

[BC Tam 2]

Hah hah !

You probably have here an instance of the Singaporeans twisting the dagger and pouring salt unto the self inflicted Malaysian wound

[Izanee 0]

The share swap would have allowed TF and KM to hive off MAS engineering and pilot training (both have excellent reputation) and use it to help AK cut costs.

MAS on the other hand would gain from TF's expertise... I.e give away the Tokyo Haneda route. It's crap, why would a full service airline want that route?

Only stupid airlines like BA, SQ, TG, CX would jump in and serve the Haneda route immediately.

Oh, crap, those are not low cost airlines but premium airlines that actually make money.

Er.. Ooops. I think MH just made a massive boo-boo!!!

Who the hell are MH's route planners?

Premium markets like ZRH, VIE and HND for example are ignored to our detriment. There must be demand cos as soon as MH left, SQ moved in to ZRH and MAN like a shark.

MH is more like a ikan bawal, not even a jellyfish which has a sting!

[KK Lee 5]

AirAsia to start Singapore hub soon, widening its network

 

 

By Jahabar Sadiq

Editor May 08, 2012

KUALA LUMPUR, May 8 — AirAsia has received Singapore’s approval to start a hub in the island republic soon, say sources, allowing the Malaysian airline to expand its network in the growing regional low-cost market segment just a week after Putrajaya aborted its share swap with loss-making Malaysia Airlines (MAS).

 

The Malaysian Insider understands that Singapore has informed AirAsia it will get an air operator’s certificate (AOC) as soon as possible, ending years of lobbying by Asia’s biggest low-cost carrier to set up operations in the city-state, a leading Asian financial centre.

 

“Singapore has agreed in principle to issue the AOC. It will be issued soon,” an industry source told The Malaysian Insider.

 

 

 

AirAsia chief executive Tan Sri Tony Fernandes was quoted last February as saying he aims to get clearance this year from the Singapore aviation authorities to fly to more destinations from Singapore.

 

Fernandes told Channel NewsAsia he proposed to make the country a regional hub for his low-cost airline, alongside Malaysia, Indonesia, the Philippines and Japan, naming India and China as key countries to which AirAsia is seeking approval to fly to.

 

AirAsia will focus on creating an ASEAN brand with an operational hub in all Association of Southeast Asian Nations countries within the next five years, he said. It currently has local joint-venture units in Indonesia, Japan, the Philippines and Thailand, apart from long-distance low-cost carrier AirAsia X.

 

The budget carrier began flying two flights a day into the city-state from Kuala Lumpur in 2007, seven years after it began operations as a low-cost airline. It now flies 12 times a day from Kuala Lumpur apart from other direct flights to cities in Indonesia, Malaysia and Thailand.

 

“This is a good boost for AirAsia as the current economic climate means more people will fly low-cost airlines for leisure and even business from Changi, which is an international hub,” another source said, adding AirAsia can compete with Singapore Airlines’ budget carrier unit Scoot.

 

The Singapore budget airline’s first route will be a daily Singapore-Sydney service from June using a Boeing 777-200, said company officials, with a Singapore-Gold Coast route to follow. The airline said future international destinations will include China.

 

AirAsia’s biggest market remains Malaysia but it has seen growth in Indonesia and Thailand, which have large domestic operations. It has just started its operations in Japan and the Philippines and is said to be eyeing Myanmar, which has opened up its economy in the past year.

 

Fernandes, who took over AirAsia for RM1 and debts in 2001 when it was a two-plane operation, has turned it into Asia’s biggest low-cost carrier within a decade. His success prompted Malaysian sovereign wealth fund Khazanah Nasional Berhad to finally agree to work with him to turn around MAS, which lost RM2.52 billion last year.

 

But the share swap signed last August faced fierce opposition from some politicians and the flag carrier’s unions, who represent the majority of the 20,000 airline staff, pushing the government to abort the deal on May 2.

 

The unwinding of the share swap saw Khazanah transfer its 10 per cent or 277,650,600 ordinary shares in AirAsia back to Fernandes’ Tune Air Sdn Bhd, while Tune Air transferred its 20.5 per cent or 685,142,000 ordinary shares in MAS back to Khazanah. It was a cashless transaction 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.

 

OSK Research had pointed out that AirAsia was to benefit more with the unbundling of the deal, saying “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.”

 

 

http://www.themalaysianinsider.com/malaysia/article/airasia-to-start-singapore-hub-soon-widening-its-network/

[JuliusWong 0]

 

...OSK Research had pointed out that AirAsia was to benefit more with the unbundling of the deal, saying “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.”

 

http://www.themalays...ng-its-network/

The last paragraph summarised everything for Malaysian's preference....

[Mike P 0]

And so if SIN is approving AK to start a hub there, they might as well to approve RedQ...

[flee 5]

Options for MAS

 

 

Azman Ujang

 

"FOR the first time in my life, I didn't know what to do. I didn't feel I had enough control to defend myself." These were awesome words indeed, coming as they did from Tan Sri Tony Fernandes, the CEO of AirAsia, our home-grown brand name that has won the world's best budget airline award three years in a row.

 

It was his way of saying how helpless he was in trying to save the eight-month share swap deal signed between Khazanah Nasional Bhd which controls Malaysia Airlines (MAS) and Tune Air Sdn Bhd owned by him and partner Datuk Kamarudin Meranun, which in turn owns AirAsia.

 

The share swap unravelled last week without being given a chance 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 says the union met Prime Minister Datuk Seri Najib Razak three times to tell him that the swap is not good for MAS and is grateful to him for listening.

 

On hindsight, everyone involved in packaging the deal had underestimated the animosity MAS employees had for AirAsia for reasons best known to the unions themselves.

 

Khazanah, when announcing the termination of the share swap, said it had become a distraction to management's effort to turn around MAS.

 

Fernandes was stung by the intense negativity surrounding the transaction because being a self-confessed dreamer and believer he thought everyone would support it since MAS is continuously running losses.

 

"Everyone would think it's a great idea. Because up to that point so many said: 'Why don't you get into MAS and fix it,' " he said in an interview.

 

He had a valid point when he said the whole transaction had been distracted by "noise". The detractors have won in terms of creating so much noise that it distracted the management from effectively putting in a very good business plan.

 

Surely it is not that difficult for everyone, including the unions, to see that if MAS doesn't turn around or continues to bleed, the losers are the public.

 

Fernandes has strong feelings on this. He said: "I would rather that money be spent on education, poverty eradication ... rather than billions going into inefficiency. Simple as that."

 

The AirAsia founder is someone with the track record to be able to make a difference for the good of MAS and it's an irony that while he's recognised globally for his business model that turned AsiaAsia into a phenomenal success within 10 years, the unions within MAS have chosen to let sentiments get the better of them.

 

As he put it: "That's one of the frustrations of being in Malaysia. This is where the negativity in Malaysia frustrates me sometimes. People tend to look at things as someone winning and someone losing in a tie-up. The deal favoured both. Every day there's increased competition in the global airline space, it seems silly and wasteful for these two companies to compete."

 

He puts his money where his mouth is. In 10 years, AirAsia has grown from 200,000 passengers to 33 million and from just two aircraft to 100. If only common sense had prevailed.

 

But the good thing is that both airlines will collaborate in areas like joint maintenance services and the establishment of a special purpose vehicle jointly owned by MAS, AirAsia and AirAsia X, its long-haul affiliate, to extract procurement synergies such as fuel, aircraft components and parts.

 

The onset of the Asean open skies policy due to be operational in 2015 has made collaboration even more necessary.

 

Two company chairmen I spoke to for reaction on the termination of the share swap said they believed there was a lack of transparency by the management in dealing with the MAS unions over the comprehensive collaboration framework (CCF) signed between both sides that included the share swap exercise.

 

In the CCF, the problems were not identified and solutions were not stressed and that's why the unions did not see the real solutions coming. There were changes made at engineering, pilot training and procurement but no changes were introduced in airline operations like scheduling and marketing.

 

"Instead they cut the routes here and there like fighting wild fires. The real structured 'go forward' plan is still not coming," said one chairman.

 

In his view, it's not about share swap. It's about MAS losing money and losing money is not due to share equity. It's about low revenue and high operating costs.

 

So what's the prescription? "Get someone to run and improve the business models. Talk, talk and talk but no clear Go Forward Plan for MAS ... MAS is sick, bleeding but where is the doctor," he asked.

 

The company chairman, himself a prominent entrepreneur who spoke on condition of anonymity, said there was also no Turnaround Plan that was as clear, concise and meticulously crafted as was presented by Datuk Seri Idris Jala when he helmed MAS from 2005 until his appointment as cabinet minister in early 2009.

 

From a nine-month loss of RM1.3 billion in 2005, Idris succeeded in turning around the airline in less than two years – a full year ahead of schedule – achieving a record profit of RM851 million in 2007.

 

Idris planned it meticulously, inspired it through leadership and personal engagement, and communicated its need with every stakeholder tirelessly, according to the then MAS chairman Tan Sri Dr Munir Majid.

 

I caught up with Idris last week soon after the announcement was made on the unwinding of the share swap deal for his comments.

 

"It is better for the prime minister and Khazanah to provide the steer on shareholder issues from a government perspective and also the MAS board and management for the business," said the minister in the prime minister's department.

 

"In the context of accountability, I am confident the PM, Khazanah and MAS board and management have made the right decision in unwinding the share swap deal," Idris said.

 

As another option for MAS, both company chairmen suggested that the government or Khazanah dispose its stake in the national carrier just like the state investment holding arm has been selling its companies, the latest being national carmaker Proton.

 

The other chairman cited the example of Qantas, the Australian airline, which is not government-owned but which has very strong unions. He said airlines do not have to be government-owned and whoever runs them will have to ensure that they become competitive and profitable.

 

The government has some tough decisions to make on the future of the national airline because as rightly pointed out by some analysts, MAS just cannot afford another failure.

 

Azman Ujang is a former editor-in-chief of Bernama.

 

Source: http://www.thesundaily.my/news/371632

[Mohd Suhaimi Fariz 2]

Two company chairmen I spoke to for reaction on the termination of the share swap said they believed there was a lack of transparency by the management in dealing with the MAS unions over the comprehensive collaboration framework (CCF) signed between both sides that included the share swap exercise.

 

There's the main cause right there.

 

It's blatantly clear that there was no transparency in the deal & management's dealing with the unions from the beginning.

[T Azahan 1]

He had a valid point when he said the whole transaction had been distracted by "noise". The detractors have won in terms of creating so much noise that it distracted the management from effectively putting in a very good business plan.

 

 

What effective business plan??? Where???

 

 

 

Fernandes has strong feelings on this. He said: "I would rather that money be spent on education, poverty eradication ... rather than billions going into inefficiency. Simple as that."

 

So why asked cash strapped MH to hugely sponsor a team that is majority owned by you? That is selfish. That is tantamount to conflict. That is why the union was not happy. It should have been given to MH staff to eradicate low morale!

 

 

 

The AirAsia founder is someone with the track record to be able to make a difference for the good of MAS and it's an irony that while he's recognised globally for his business model that turned AsiaAsia into a phenomenal success within 10 years, the unions within MAS have chosen to let sentiments get the better of them.

 

Oh yeah. You started late so u learned from others' mistakes. But i have no problem with that.

 

 

 

As he put it: "That's one of the frustrations of being in Malaysia. This is where the negativity in Malaysia frustrates me sometimes. People tend to look at things as someone winning and someone losing in a tie-up. The deal favoured both. Every day there's increased competition in the global airline space, it seems silly and wasteful for these two companies to compete."

 

They were negative of your entry because you had been criticizing MH and MAB all these years. And there was no value added after you came in. MH stock price has gone down since the end of last year.

 

 

He puts his money where his mouth is. In 10 years, AirAsia has grown from 200,000 passengers to 33 million and from just two aircraft to 100. If only common sense had prevailed.

 

Congratulations! Proud of a Made in Malaysia product. But it is not rocket science. Everyone would scramble for cheap fares. But i salute for what you have contributed to Malaysia. But please be grateful to MAB too laaa.

 

 

But the good thing is that both airlines will collaborate in areas like joint maintenance services and the establishment of a special purpose vehicle jointly owned by MAS, AirAsia and AirAsia X, its long-haul affiliate, to extract procurement synergies such as fuel, aircraft components and parts.

 

If u send your aircraft to MH for maintenance, make sure you pay.

 

 

 

Two company chairmen I spoke to for reaction on the termination of the share swap said they believed there was a lack of transparency by the management in dealing with the MAS unions over the comprehensive collaboration framework (CCF) signed between both sides that included the share swap exercise.

 

Yes, it wasn't transparent. That created a lot of suspicion and uncertainty to the staff of MH.

 

 

 

In the CCF, the problems were not identified and solutions were not stressed and that's why the unions did not see the real solutions coming. There were changes made at engineering, pilot training and procurement but no changes were introduced in airline operations like scheduling and marketing.

 

I think i have to agree with this!

 

 

 

"Instead they cut the routes here and there like fighting wild fires. The real structured 'go forward' plan is still not coming," said one chairman.

 

Agreed 100%. And cut DXB because you claimed no traffic. Of course laaaa, pax not stupid. Why fly on your jurassic year 95' equipment where they can opt for brand new Dugong? Offer good products bro.......not creative accounting!

 

 

[Radzi 2]

A simple fact. Just like most of everything else in Malaysia, you can't take things at face value. Whatever is said on papers and articles will always point out the honesty and good intention of the swap. Of course, somehow, things in real life is very much different.

[BC Tam 2]

A simple fact. Just like most of everything else in Malaysia, you can't take things at face value. Whatever is said on papers and articles will always point out the honesty and good intention of the swap. Of course, somehow, things in real life is very much different.

Some may have detected a shift in direction of reporting by the MSM towards demonizing (for want of a better term) the unions for reversal of the deal, which inevitably would have caused a few red faces about and lost opportunities for some other(s)

I suspect this could be preparatory ground work for yet another 'deal' in the making - if it was worth it in the first place, it's sure worth pursuing again

It was perhaps fortuitous for the union guys to have the GE13 card at hand this time round

Few months down the road, that card will be obsolete (at least for next few years) - better prepare other weapons for battle

[Nik H. 3]

Some may have detected a shift in direction of reporting by the MSM towards demonizing (for want of a better term) the unions for reversal of the deal, which inevitably would have caused a few red faces about and lost opportunities for some other(s)

I suspect this could be preparatory ground work for yet another 'deal' in the making - if it was worth it in the first place, it's sure worth pursuing again

It was perhaps fortuitous for the union guys to have the GE13 card at hand this time round

Few months down the road, that card will be obsolete (at least for next few years) - better prepare other weapons for battle

 

Capt Radzi, tell the Unions and Associations the Fat Lady have not yet started to sing. Kinda like a Cobra recoiling for the next strike. Collateral damage for the innocent will be massive. Better hold the purchase of the new car until the end of the year.

 

Good Luck.

[BC Tam 2]

Kinda like a Cobra recoiling for the next strike. Collateral damage for the innocent will be massive

Yes, bear in mind the 'next strike' (if there is to be one) will likely commence from within

And it will be vicious - no one wants to risk being embarassed twice in a row

[Izanee 0]

Fat Lady of Malaysia still hasn't started to sing??! bloody hell, there is no end to this saga (apart from Proton saga).