MAS and AirAsia Shares Swap

[flee 5]

The MAS business turnaround — Song Eu Jin

Song Eu Jin was the investor relations officer for Malaysia Airlines and subsequently moved to head the Strategic Transaction Unit in the CEO’s office. He resigned from Malaysia Airlines in January this year.

 

AUG 13 — Picture the Malaysian boy having been punched to the ground, only to find himself being mugged. Reading the comments from politicians from both sides of the divide rushing with glee to proclaim the turnaround of Malaysia Airlines was a sham appears to me to be in the same opportunistic vein.

 

As someone who was intimately involved with the turnaround and later the transformation of Malaysia Airlines, I feel compelled to tell the MAS story as I saw it. The fact of the matter is that without the turnaround from 2006-2008, there wouldn’t be a Malaysia Airlines today. No MAS-AirAsia share swap!

 

When Datuk Seri Idris Jala and his management team joined MAS in December 2005, the projections were that the airline would ground to a halt by April 2006. This projection was eerily accurate, and had it not been for a few drastic measures such as the sale of the iconic MAS building in the heart of Kuala Lumpur and the Four Seasons hotel in Langkawi, MAS would have run out of cash as projected. MAS at that time had little other assets to sell, having sold all its aircraft much earlier in 2003 to Penerbangan Malaysia Berhad (PMB) under the widespread asset unbundling (WAU) exercise — way before Datuk Seri Idris came into the picture.

 

While the sale of the MAS building was a necessary pain, it merely bought a few extra months for Datuk Seri Idris and team to stem the flow of the cash bleed.

 

From a profitability point of view, MAS was also heavily in the red. Annualised, MAS lost RM1.7 billion in 2005. In Datuk Seri Idris’ first year on the job, he reduced the losses to RM133m and turned the company back into the black with a record profit of RM853m in 2007.

 

The profit in 2007 was the highest in MAS’s corporate history and was earned through massive operational cost reduction of RM745 million as well as on the back of record revenues of RM9.4 billion. The profit numbers were real as reflected in the cash balance at that time of RM5.3 billion which had grown from RM1.5 billion at the end of 2005 when Datuk Seri Idris joined MAS. One may doubt the accounting, but you cannot window-dress cash in the bank.

 

It was not a result of asset sale, which was realised in 2006, it was not a result of creative accounting (there were no accounting policy changes or one-off profits in 2007).

 

It was achieved through changes introduced by the management team, by cutting ridiculously unprofitable routes, reducing operational cost and increasing yields (the price of the ticket per kilometre travelled).

 

Other drastic actions such as the Mutual Separation Scheme (MSS), reducing the staff force from 23,000 to 19,500, were needed. However, while the staff reduction amounted to approximately 15 per cent of staff force, the largest single staff reduction by a GLC, the reality is that with a 60-year old behemoth like MAS, cultural changes will take years to happen. If at all!

 

So if the turnaround was achieved then, why does MAS find itself in the position it is now?

 

If there was a failing by Datuk Seri Idris, it would have to be his inability to truly change the culture at MAS but I believe given sufficient time, this too would have happened. For the new management team to succeed for the long term, the team understood that real changes needed to happen with the culture at MAS.

 

Many companies will profess that the life of any company is its human talent and MAS was a prime example of its people representing the company. An insight into the prevailing culture in MAS would demonstrate this.

 

Up till 2008, there was no means of performance appraisal. There were no means of measuring who performed well and who did not, nor was there the corresponding reward mechanism which followed such a performance measurement system. MAS was akin to a mini communist state, regardless of performance, everyone was rewarded equally.

 

Needless to say, MAS at that time was not a good example of how a company should motivate its employees, with hardworking employees disheartened to see their poorer performing colleagues being rewarded the same as them. There was no incentive to perform.

 

When the Performance Management Scheme (PMS — perhaps a better name should have been chosen for the scheme) was introduced in 2008, it was violently objected to by the unions. The unions preferred instead to reward employees for loyalty, with the longest serving employees receiving bonuses dependent on their years of service rather than performance.

 

After much horse trading and compromise by the management team, the unions accepted the PMS scheme with a condition that the collective agreements being negotiated guarantee as much as a 10 per cent annual increment for the duration of the collective agreement.

 

The “I want my pound of flesh no matter what” culture continues to plague MAS today. The standing joke amongst some of us was which union leader would be the first to ask the “bonus” question each time we released our financial results, regardless of profit or loss. Invariably, union leaders would never disappoint.

 

While good progress was being made, Datuk Seri Idris’ premature departure to take on his role as CEO of Pemandu and Cabinet minister was truly a loss for Malaysia Airlines and came at a time which was a critical crossroad for MAS, with increasingly volatile fuel prices and capital commitments in the form of new aircraft.

 

While it would be unfair to place the blame solely on the new CEO, Tengku Datuk Azmil’s shoulders, he was let down by a return to the pre-turnaround culture at MAS. Almost all of the management team which Datuk Seri Idris brought in to turn around the airline have since left the company, the last being Datuk Bernard Francis who left merely a month before the recent changes at MAS.

 

I believe the politicians and the self-proclaimed ‘economists’ may have gotten it wrong. The turnaround was real, and it was the transformation of MAS that was not complete. It would be interesting to see if there is any solid evidence to the contrary. Or whether it is yet another case of Malaysians refusing to give credit where it is due!

 

Even great empires the likes of Rome and Greece have fallen, and hopefully MAS can be like those empires that have fallen but have risen again.

 

As with all Malaysians, I too hope to see a stronger MAS which I can be proud to call Malaysia’s flag carrier. I wish the new management team all the very best and together with other Malaysians will look forward to a stronger MAS.

 

 

* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

 

Source: http://www.themalaysianinsider.com/sideviews/article/the-mas-business-turnaround-song-eu-jin/

[Sharil Abdul Rahman 0]

You know what i find sad in all of this?

 

MAS is never in control of its finances. it has to go through khazanah everytime. heck, even the logo change we have to go to putrajaya to get approval.

 

Aisasia as a private (before today) equity has no problem in this - hence it can do the share swap freely.

MAS on the other hand needs approval from Khazanah to even change their tyres.

[Mohd Suhaimi Fariz 2]

Minister urges merger of MAS and AirAsia

 

IPOH: A merger of Malaysian Airline System (MAS) and AirAsia Bhd will enable the two entities to compete in the global arena, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah on Saturday.

 

The move should be viewed in the long term, including the co-ordination of services to face global competition, especially from Middle East nations.

 

"The major oil producers are giving stiff competition because their airlines can afford to offer cheaper tickets, as compared to other airlines in the world.

 

"We believe, based on the collective experiences of MAS and AirAsia, their strengths could then be focused on further firming up the two entities.

 

"Through a merger, MAS, which was burdened with escalating operational costs, could be restructured," he said after visiting a Mydin supermarket project in Kampung Manjoi here Saturday. - Bernama

 

Source: The Star

[Wilson Kook 0]

Minister urges merger of MAS and AirAsia

 

IPOH: A merger of Malaysian Airline System (MAS) and AirAsia Bhd will enable the two entities to compete in the global arena, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah on Saturday.

 

The move should be viewed in the long term, including the co-ordination of services to face global competition, especially from Middle East nations.

 

"The major oil producers are giving stiff competition because their airlines can afford to offer cheaper tickets, as compared to other airlines in the world.

 

"We believe, based on the collective experiences of MAS and AirAsia, their strengths could then be focused on further firming up the two entities.

 

"Through a merger, MAS, which was burdened with escalating operational costs, could be restructured," he said after visiting a Mydin supermarket project in Kampung Manjoi here Saturday. - Bernama

 

Source: The Star

 

He wants MAS and Air Asia to merge into what?!

Then of course the government will lay their itchy hands on the airline and take them downhill.

[BC Tam 2]

Ah, there you see the wisdom/necessity in the Jakarta office already

[Rob 0]

Minister urges merger of MAS and AirAsia

 

IPOH: A merger of Malaysian Airline System (MAS) and AirAsia Bhd will enable the two entities to compete in the global arena, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah on Saturday.

 

The move should be viewed in the long term, including the co-ordination of services to face global competition, especially from Middle East nations.

 

"The major oil producers are giving stiff competition because their airlines can afford to offer cheaper tickets, as compared to other airlines in the world.

 

"We believe, based on the collective experiences of MAS and AirAsia, their strengths could then be focused on further firming up the two entities.

 

"Through a merger, MAS, which was burdened with escalating operational costs, could be restructured," he said after visiting a Mydin supermarket project in Kampung Manjoi here Saturday. - Bernama

 

Source: The Star

 

Is this guy nuts?

[Majdi 0]

Is this guy nuts?

 

yes?!

[filipeseda 0]

The problem with MAS is really a combination of many factors that makes it a hugely unprofitable entity:

 

a) Overbloated management and loads of corporate wastage

Ageing fleet in comparison with the like of SQ and CX

c) Outdated products and even outdated supposed "newer" products

d) The lack of an alliance for all these years

e) All these years it spent at trying to compete with AK where it's cost cutting frenzies and five-star value carrier sentiments

 

Simply, the problem with MAS is incompetence. Even though Idris Jala did "transform the company", he did nothing to change its fundamentals and instead just cleaned up the books. He set out on this low-cost value carrier which really took a tole on the airline as seen with its inferior hardware. He caused passengers to suffer not the people at the desk who were useless. MH is in a unique position. If it wants sucess, it has to be willing to compete with the big boys and not shy away and say I'm serving this market which is neither premium nor LCC. Even Tengku Azmil made the same mistake by insisting that MH should not become an SQ. In the SEAsian market if you're not even a TG, I don't know what to say.

[Raymund Yeoh 1]

Is this guy nuts?

 

He ain't nuts but not qualified to be a finance minister hence not even qualified to be an MP.....full of nonsence.

[Cire 0]

Perhaps his point for the merge is to play nice with Air Asia, and then out of the blue skies, MAS with Khazanah's muscle would "eat up" AK and thus clips its wings to local route. Then MAS would be free from pressure to perform better than its younger Malaysian airline.

 

In every GLC-merger, one important fact still remain dominant - Government influence. When there is a need to protect government's interest, all business sense are bungkus-ed and thrown out the window. This is where GLCs almost never be able to be successful. With the MH-AK link up, TF's new revamp team must stand independently and run the airlines as a true business entity that are rid of political pressure.

 

Another example of political-linked faltering airline in this region is Brunei Air.

[leon t 0]

Perhaps his point for the merge is to play nice with Air Asia, and then out of the blue skies, MAS with Khazanah's muscle would "eat up" AK and thus clips its wings to local route. Then MAS would be free from pressure to perform better than its younger Malaysian airline.

 

In every GLC-merger, one important fact still remain dominant - Government influence. When there is a need to protect government's interest, all business sense are bungkus-ed and thrown out the window. This is where GLCs almost never be able to be successful. With the MH-AK link up, TF's new revamp team must stand independently and run the airlines as a true business entity that are rid of political pressure.

 

Another example of political-linked faltering airline in this region is Brunei Air.

 

yes - it maybe a possible worrying trend that now TF/AK is having some cross shareholdings and cross-management and together with govt's Khazanah - will make TF/AK more politically involved that is a serious departure from ak non-govt interference and just business. Already we see former Trade minister Rafidah being made the Chairperson of AK since almost 2 yrs back. May not augues well with AK since its now join into the govt political bedfellow scene.

[Naim 6]

da boss gonna be busy with football next: http://www.themalaysianinsider.com/litee/malaysia/article/airasia-boss-poised-to-take-over-qpr-today

[flee 5]

What’s Firefly’s role after tie-up?

 

PETALING JAYA (Aug 14, 2011): The unprecedented tie-up between Malaysia Airlines (MAS) and rivals AirAsia and AirAsia X last week has thrust the future of Firefly – the budget carrier of the national airline – into the limelight.

 

Even Firefly’s top executives are in the dark over the role the budget carrier will play in this tie-up although there is talk of the airline exiting the low-cost segment.

 

Senior executives from MAS and AirAsia have so far only said MAS will focus on premium travel, AirAsia on the short-haul low-cost segment and AirAsia X the medium- and long-haul budget segment under the comprehensive collaboration framework (CCF).

 

“Firefly’s resources would be refocused to launch a new regional full service airline operation,” MAS chairman Tan Sri Md Nor Yusof had said at the press conference, but did not elaborate.

 

“What does regional mean? Will it (Firefly) cover countries in Asean, Asia or Asia-Pacific? Will it continue to operate a mix of turboprops and jets or only turboprops? Will it be like Silk Air, the full service regional airline wing of Singapore Airlines?” asked an industry observer.

 

When contacted by SunBiz, Firefly managing director Datuk Eddy Leong said he doesn’t know.

 

“I don’t know yet. Until we are asked to do something else by MAS’s new executive committee (set up to oversee the management of the airline until a new managing director is appointed), our operations must proceed as normal,” he said.

 

Firefly began its operations in 2007, initially operating turboprops from Subang before expanding into jet aircraft operation out of the KL International Airport (KLIA) early this year. It currently operates a fleet of 10 ATR 72-500 turboprops, four Boeing 737-800s and one 737-400.

 

The rise of Firefly has intensified the competition and rivalry between MAS and AirAsia, and has hurt yields for AirAsia, especially on routes from KLIA to Kuching and Kota Kinabalu.

 

Maybank Investment Bank believes that Firefly’s jet operation days are numbered and that its turbo-prop operations will be rebranded as a full service regional service.

 

“There will only be one full service carrier (MAS) and one low-cost carrier (AirAsia) in Malaysia, while AirAsia X will focus on being a medium-to-long haul low-cost carrier,” the research firm said in a report.

 

“There will be a clear demarcation of clientele and the business overlap will be reduced to benign. MAS’s short-haul full service carrier business may be undertaken through a new subsidiary by the name of Sapphire, and MAS has the flexibility to re-designate capacity, assets and resources from Firefly to Sapphire,” it added.

 

Some analysts believe that Firefly will exit the low-cost segment by the first quarter of next year, thereby reducing the overall competitive pricing pressures and be positive for yields.

 

However, Standard & Poor’s aviation analyst Shukor Yusof said it would not make sense for MAS’s new management to hive off its budget business into a new subsidiary.

 

“Why? I can’t think of a reason why you would want to remove a unit that is showing promise and actually making profits. The Firefly brand is doing quite well. I would seriously question the rationale behind completely removing Firefly from the present operations,” he told SunBiz.

 

Shukor believes that Firefly would still do well with its fleet of turboprops, offering premium travel in the Asean region.

 

“After all, it was created in the first place to fly domestically and to Singapore. It should not be a problem,” he said.

 

“There’s still a lot of uncertainties as a result of the (MAS-AirAsia) partnership. There are many questions that have yet to be answered, but in due course they will have to explain how they are going to rationalise not just the fleet and the operations, but the staff,” he added.

 

Source: http://www.thesundaily.my/news/111443

[BC Tam 2]

However, Standard & Poor’s aviation analyst Shukor Yusof said it would not make sense for MAS’s new management to hive off its budget business into a new subsidiary.

 

“Why? I can’t think of a reason why you would want to remove a unit that is showing promise and actually making profits. The Firefly brand is doing quite well. I would seriously question the rationale behind completely removing Firefly from the present operations,” he told SunBiz.

This Shukor chap is still searching for sense, reason and rationale ? Serious ?

[Josh T 0]

Hmmm...did AK really see FY as such a threat? FY could've been the main reason behind what finally pushed TF into this share-swap with MAS!

[Mike P 0]

Hmmm...did AK really see FY as such a threat? FY could've been the main reason behind what finally pushed TF into this share-swap with MAS!

 

FY is definitely not a threat to AK... due to AK's business and financial stability... hehe...

 

I thought there was a report saying that FY would be stripped off with the low cost carrier title? So, it's better to grab their cheap fares fast before they make the official announcement.

[Josh T 0]

It's looking more likely that they want to turn FY into something like MI, serving secondary regional routes as a full-service carrier.

[Ikman Ikreza 0]

Firefly to only run turboprop planes

Posted on 16 August 2011 - 01:23am

KANG SIEW LI

sunbiz@thesundaily.com

 

PETALING JAYA (Aug 16, 2011): Budget carrier Firefly will continue as an independent brand under Malaysia Airlines's (MAS) ownership, but will now offer frills on its flights with its fleet of ATR 72-500 turboprops out of Subang and Penang.

 

However, a new full-service regional airline will be set up and will take over the existing Boeing jets of Firefly.

 

Firefly managing director Datuk Eddy Leong said the new executive committee (exco) of the national carrier has decided to retain Firefly's brand and strengthen its presence in the regional services.

 

"However, Firefly will stop flying the jets (such as its Boeing 737-800s and 737-400).

 

"Our resources will be used to start a new full-service regional airline named Sapphire," he told SunBiz yesterday.

 

"That will start soon. An announcement will be made," Leong said, likening the new airline to Singapore Airlines' Silk Air and Hongkong's Dragonair.

 

"Firefly will also be upgraded into a full-service turboprop operator. It will also be expanded in terms of fleet size and routes," he added.

Leong said his team has been tasked to start Sapphire as well as run Firefly.

 

He said the decision was made following an exco meeting last Friday which included MAS chairman Tan Sri Md Nor Yusof and its newly-appointed director Tan Sri Tony Fernandes, who is also AirAsia group CEO.

 

The tie-up between MAS and rivals AirAsia and AirAsia X last week had cast uncertainty over the future role of Firefly and whether it would cease to operate, which has been offering low-cost travel with its fleet of 10 ATR 72-500s, four 737-800s and one 737-400.

 

However, the rise of Firefly has led to a head-on competition with low-cost carrier AirAsia, and has hurt yields for AirAsia, especially on routes from the KL International Airport to Kuching and Kota Kinabalu.

 

Source : http://www.thesundaily.my/news/112570

[Rob 0]

I wonder why the name 'Sapphire'? Perhaps they want to retain a name that's got '-fire' in it? You know FIREfly, SaPPHIRE

[William Chen 0]

So what is the meaning of Sapphire?

[jackch747 0]

I don't get this plan. I don't think most people will.

[Cheng Long 0]

Don't know how they come out with this name Sapphire.. Not that easy to pronounce. Later you have people pronouncing it as "saphree", "sapi", etc. Might as well just call them Firefly Jet to make life easy. But then again, the sinister plan is to rid off this thorn.

[jackch747 0]

New cabin crew uniform. It's not a bad thing.

 

Sapphire Girls!

Edited August 16, 2011 by jackch747

[T Azahan 1]

pening...

[Sharil Abdul Rahman 0]

Plan one of total domination of the red bus is complete.

 

and they were doing a good job for their KCH/BKI runs too - when i took them recently, a few continous sectors filled to the brim with passengers.