MAS and AirAsia Shares Swap

[KK Lee 5]

Without addressing the bloated overhead, terminating unprofitable route and increase ticket price on profitable route will not address MH problem. MH may charge for high yield fare but will suffer on load and likely to turn a profitable route to loss making if there is a formidable competitor on the route.

[flee 5]

Dia cakap apa aku tak faham.

I think he means Q3 loss is lower than the RM 526m loss in Q2.

[Mohd Azizul Ramli 2]

Analyst reports are flowing in. Some interesting quotes:

 

The worst is yet to come - ECM Libra

MAS reported another disappointing quarter with adjusted net losses of RM477.6m in 3QFY11. The main culprit was the 37% y-o-y increase in fuel cost and an unrealized foreign exchange loss of RM195.1m. We maintain a SELL recommendation while we are keeping our eyes open for the upcoming plans and initiatives to be released.

 

Still Not Out of the Woods - TA Securities

We believe the weak results were dampened by higher fuel costs and staff costs. This led to a 20% YoY increase in the group’s operating cost. Besides, the staff issue could be another stumbling block as 90% of MAS’ staff are unionised. Thus, any transformation or changes will not be easy to implement as it would take time to materialise. All these will remain critical hurdles for the restructuring of MAS business.

For its crude oil hedging position, the group has hedged up to 24% at USD124/barrel (jet fuel).

We expect the group to still be in the red in 4QFY11. Overall, we expected FY12 to be another gloomy year for full service airlines such as MAS as we believe MAS may not able to turn profitable at least until 2014.

 

In deep turbulence - MIDF Research

Way below expectations. MAS’ 9MFY11 results did not meet either our or the consensus’ anticipation as it continues to register bigger than expected losses.

Fuel cost escalation was a massive +37.1%yoy in 3Q11.

 

Lower loss on quarter - Kenanga Research

Management is seen to be slowly shifting its focus to the international segment, which has a higher margin as compared to the domestic segment. We still expect MAS to record another core net loss of RM200m in 4Q11.

The loss was actually cushioned by a 6% lower fuel cost and an increase in the international segment revenue by 10%. On the domestic segment, there was a drop of 12% in the RPK, which is in line with the management focus to expand into more lucrative routes and front cabin segment. On the cost side, management also managed to reduce the cost by 7% in the quarter.

Management is expected to reveal its BTP (Business Transformation Plan) in December 2012. We reckon there may be a necessary cut in MAS operation to keep the bottom line afloat. We laud the management’s move to focus on the FSC segment while cutting and realigning the loss making routes, which we think will eventually push yield further.

 

Remains In The Red, Guiding Weaker 4Q - RHB Research

We believe the key variance against our forecast came from MAS’ inability to contain the escalation in fuel and non-fuel costs. MAS spoke about chopping

unprofitable routes (déjà vu!), expanding higher-yielding Asian routes and accelerating the return of ageing aircraft to improve fuel burn. It will be announcing a comprehensive business plan next month.

Given the extent of the problem in MAS as evidenced in the worse-than-expected 3QFY12/11 results coupled with an unfavourable guidance on 4QFY12/11 performance, it becomes increasingly clear that the restructuring of MAS’ operation will be a daunting task, despite a revamped top management as well as the entrance

of a new shareholder, Tune Air.

[flee 5]

it becomes increasingly clear that the restructuring of MAS’ operation will be a daunting task, despite a revamped top management as well as the entrance of a new shareholder, Tune Air.

This we already know. MH is a hot potato.

 

Everyone in this country wants to have their say in it as they believe that MH is their national pride. However, we have to stop heaping those expectations and be less emotional. It is dangerous to run a business entirely on emotion.

 

Lets hope that the people managing and working in MH realise that their mission is the same, to restore the airline to the Top 10 position in the world airlines chart. We should stop all the wastage and leakages from the organisation.

 

We will have to wait for the announcement before we can say for sure if the rescue plan is workable or is just full of political compromises that will send the airline into oblivion.

[flee 5]

There is rumour going round that FY's MD, Eddy Leong has resigned.

 

Now searching for some confirmation of that...

[flee 5]

MAS Can Record Better Results In Q4, Says HwangDBS Vickers

 

KUALA LUMPUR, Nov 22 (Bernama) -- MAS is expected to record better fourth quarter financial year results as the national carrier is seasonally stronger due to the year-end holidays, says HwangDBS Vickers Research.

 

It said the profit is expected to increase as the management continues its network rationalisation exercise and stabilising jet fuel prices also support the bottom line.

 

"There are signs of operational improvements in MAS this quarter, as the third quarter results are better compared with the second quarter, despite a seasonally weaker quarter due to the Hari Raya holidays, it said in a statement.

 

The research firm maintains its "buy" call with RM1.85 target price.

 

In a separate note, OSK Research said MAS' quarter-on-quarter losses narrowed in the third quarter on the back of a smaller jet fuel bill and yield improvements.

 

"However, this is still wider than expected as its nine-month financial year core loss of RM962 million already accounted for 102-104 per cent of our prediction and consensus full-year forecasts, respectively," it said.

 

OSK said the bigger-than-expected loss was due to higher jet fuel expenses, up 37 per cent year-on-year.

 

"Although its non-fuel-related expenses are lower by two per cent year-on-year, we feel the airline's cost-cutting measures are not aggressive enough.

 

"We also reaffirm our "sell" call on the stock, with an unchanged fair value of RM1.15," it added.

 

MAS yesterday announced RM478 million net loss for the third quarter of this year ended Sept 30.

 

It attributed the loss to higher fuel costs and unrealised foreign exchange losses from outstanding US dollar borrowings. The cumulative year-to-date net loss for the group stood at RM1.247 billion.

[S M Tang 0]

There is rumour going round that FY's MD, Eddy Leong has resigned.

 

Now searching for some confirmation of that...

 

Just got news from someone from the 'inside' that this is indeed true. Not sure if he resigned or got sacked but he's gone. <_>

[Nik H. 3]

Script being played out nicely eh ?!

 

" Lu jual Rolls Royce bikin 1 juta, Gua jual Toyota, Honda, Nissan, etc bikin 1,000 juta "

 

And what's wrong with that. We will still have a prestigious National Carrier that does not bleed but makes modest profit.

And the rakyat can still travel cheap ie " Now Everyone Can Fly; Everywhere "

 

So what if Tony gets rich along the way.......he deserves it, for having one eye when the rest of us are blind.....

[Izanee 0]

that's fine if Tony makes money, he is a businessman.. but why is it handed to him on a platter like that? its all tax payers money they are experimenting with. plus his unreasonable and constant demands are now being echoed by MAS when it was only AK before.

Edited November 22, 2011 by Izanee

[alberttky 0]

that's fine if Tony makes money, he is a businessman.. but why is it handed to him on a platter like that? its all tax payers money they are experimenting with. plus his unreasonable and constant demands are now being echoed by MAS when it was only AK before.

 

It's "handed to him on a platter like that" because our brilliant government ran out of ideas on how to salvage the poor national carrier. What other options are there when a company is bleeding like that?

[Cheng Long 0]

There is rumour going round that FY's MD, Eddy Leong has resigned.

 

Now searching for some confirmation of that...

 

Hmm..another casualty from the share swap..

 

He is quite talented.. He will probably be a good MAS CEO..

[Izanee 0]

But giving it wholesale to Tony and putting him on the board? wow, amazing. Malaysia is the land where anything can happen. I might be very wrong in doubting this deal ---> but at least show us something! I have not seen one useful idea/plan put in place since the share swap. All the hype and talk amounts to nothing. let's hope his 6 hour board meeting comes up with a better plan than just chopping off routes wholesale.

[flee 5]

RHB disappointed by preview of ‘simplistic’ MAS turnaround plan

 

KUALA LUMPUR, Nov 22 – Malaysia Airlines (MAS) lacks a plan for deep structural reforms said RHB Research Institute following a briefing by airline management ahead of the official unveiling of the national carrier’s turnaround strategy.

 

The research house said in a report today that the plan lacked cost cutting measures, revamps to the procurement systems or recapitalisation of its balance sheet.

 

RHB also said that it didn’t detect any evidence that the new collaboration with AirAsia has rejuvenated the airline.

 

“We did not find any significant ‘traces of entrepreneurial spirit’, if this is supposed to come with the entrance of Tune Air (controlled by AirAsia’s Tan Sri Tony Fernandes) as a 20.5 per cent shareholder of MAS,” said the report.

 

The report revealed that in the MAS briefing the management had said that they would cut unprofitable routes, improve fuel burn, negotiate better terms with aircraft manufacturers and redeploy capacity based on yield.

 

“We have to admit that we came out of MAS’ analysts’ tele-conference this morning feeling a little disappointed,” said RHB.

 

“Dubbed a preview to MAS’ grand turnaround plan scheduled to be officially unveiled next month, we did not find indications of any bold and dramatic moves that will turn things around, but just some logical things an airline will do in its normal course of business.”

 

RHB said that MAS’ key structural issues include a mature and saturated full-service segment and its main hub Kuala Lumpur not being a natural market for higher-yielding full-service business travelers unlike Singapore and Hong Kong.

 

It added that it hoped MAS would rope in a leading international airline as equity partner to help strengthening processes, revitalise work culture, broaden market reach and presence, and effect more constructive branding or co-branding exercises.

 

MAS reported a third quarter loss of RM477.6 million today, bringing total losses so far this year to RM962 million.

 

The airlines’ lacklustre financial performance in recent quarters had resulted in the share swap between MAS and AirAsia on August 9.

 

It saw state investment arm Khazanah taking a 10 per cent stake in Asia’s top budget carrier in exchange for a 20.5 per cent stake in the flag carrier.

 

This paved the way for AirAsia boss Tan Sri Tony Fernandes to sit on the MAS board, ostensibly to help turn the ailing airline around.

 

The share swap and accompanying collaboration framework agreement raised public concerns that it would give rise to an industry cartel.

 

Firefly’s budget jet operations were shuttered last month.

 

The Finance Ministry revealed on November 3, however, that the share swap between MAS and AirAsia is being probed by Bursa Malaysia and the Securities Commission (SC) for insider trading.

 

 

Source

[flee 5]

MASWings gets go ahead to become regional airline

 

KUCHING (Nov 22, 2011): The Federal Government has agreed to Sarawak's proposal for MASWings to become a regional airline, operating within the BIMP EAGA region.

 

Sarawak Tourism Minister Datuk Amar Abang Johari Abang Openg announced this while winding up the debate in the Sarawak State Legislative Assembly today.

 

However, he declined to reveal more about the details, saying it involves a lot of technical formalities.

 

Abang Johari said he will be meeting with his counterpart in Sabah to discuss the organisational structure and the routes which is aimed at enhancing commerce, trade and tourism for Sabah and Sarawak, while connecting Kalimantan, Brunei, Philippines and by extension, to Australia in the future.

 

“I had said give me three months to sort out the problems arising from the MAS-AirAsia collaboration and I am pleased to say that I have fulfilled my task – at least by obtaining the federal government's approval to make MASwings as a regional player,” he said.

 

Abang Johari thanked the Federal Government, particularly Prime Minister Datuk Seri Najib Abdul Razak, for agreeing to the state’s proposal..

 

He said that air connectivity will continue to be the biggest challenge in Sarawak's effort to promote itself as a sustainable tourism destination.

 

“All our promotional and marketing efforts will be futile if we are not well connected to the main airline hubs and frequency of flights are constantly interrupted,” he said.

 

He said the recent collaboration exercise and share swap between MAS and Air Asia has already created uncertainty and anxiety among the state’s tourism players.

 

He said travel agents have to plan and sell their packages abroad well in advance therefore any cancellation of flights is detrimental to consumer confidence in the state’s tourism industry.

 

“With the termination of Firefly flights into Kuching (which ran seven time daily) from Kuala Lumpur and Johore (twice daily), accessibility into the state will be adversely affected, bearing in mind the favourable load factor of at least 90% on Firefly flights.

 

“The vacuum left by Firefly will definitely affect the number of visitor arrivals into Sarawak especially for the coming months,” he said.

 

Abang Johari said the State Tourism Ministry had adopted a number of action plans to minimise the impact of the termination of Firefly flights to Kuching.

 

These include the continuation to engage with MAS and Air Asia to ensure that the frequency of flights into Sarawak is not interrupted and to explore the possibility of opening new routes.

 

He said he will lead a special delegation to meet with the relevant federal agencies to express and convey Sarawak’s concern and the need to give priority to air travel and air connectivity into Sarawak in view of the state’s geographical size and lack of a comprehensive road network.

 

“My ministry is also looking into the feasibility and viability of introducing amphibious planes to serve selected remote tourism destinations such as Batang-Ai and Bakun to value add visitors’ experience,” he said.

 

Source

[Mike P 0]

I wonder what are the destinations they are going to offer from Kuching. But for sure it would be first Kuching - Pontianak & Kuching - BWN.

[Cheng Long 0]

I think MASwing should just stick to rural air routes as land transportation is still appalling.. They are subsidized for this purpose.

I will be happy if they resume kota kinabalu-limbang route.

[Izanee 0]

hmmm ... very interesting. as usual, scratching on the surface, massaging the figures a bit and hoping people will forget in 1 years time --> by then, they would be away in a better post somewhere else

[alberttky 0]

MASWings gets go ahead to become regional airline

 

KUCHING (Nov 22, 2011): The Federal Government has agreed to Sarawak's proposal for MASWings to become a regional airline, operating within the BIMP EAGA region.

 

Sarawak Tourism Minister Datuk Amar Abang Johari Abang Openg announced this while winding up the debate in the Sarawak State Legislative Assembly today.

 

However, he declined to reveal more about the details, saying it involves a lot of technical formalities.

 

Abang Johari said he will be meeting with his counterpart in Sabah to discuss the organisational structure and the routes which is aimed at enhancing commerce, trade and tourism for Sabah and Sarawak, while connecting Kalimantan, Brunei, Philippines and by extension, to Australia in the future.

 

“I had said give me three months to sort out the problems arising from the MAS-AirAsia collaboration and I am pleased to say that I have fulfilled my task – at least by obtaining the federal government's approval to make MASwings as a regional player,” he said.

 

Abang Johari thanked the Federal Government, particularly Prime Minister Datuk Seri Najib Abdul Razak, for agreeing to the state’s proposal..

 

He said that air connectivity will continue to be the biggest challenge in Sarawak's effort to promote itself as a sustainable tourism destination.

 

“All our promotional and marketing efforts will be futile if we are not well connected to the main airline hubs and frequency of flights are constantly interrupted,” he said.

 

He said the recent collaboration exercise and share swap between MAS and Air Asia has already created uncertainty and anxiety among the state’s tourism players.

 

He said travel agents have to plan and sell their packages abroad well in advance therefore any cancellation of flights is detrimental to consumer confidence in the state’s tourism industry.

 

“With the termination of Firefly flights into Kuching (which ran seven time daily) from Kuala Lumpur and Johore (twice daily), accessibility into the state will be adversely affected, bearing in mind the favourable load factor of at least 90% on Firefly flights.

 

“The vacuum left by Firefly will definitely affect the number of visitor arrivals into Sarawak especially for the coming months,” he said.

 

Abang Johari said the State Tourism Ministry had adopted a number of action plans to minimise the impact of the termination of Firefly flights to Kuching.

 

These include the continuation to engage with MAS and Air Asia to ensure that the frequency of flights into Sarawak is not interrupted and to explore the possibility of opening new routes.

 

He said he will lead a special delegation to meet with the relevant federal agencies to express and convey Sarawak’s concern and the need to give priority to air travel and air connectivity into Sarawak in view of the state’s geographical size and lack of a comprehensive road network.

 

“My ministry is also looking into the feasibility and viability of introducing amphibious planes to serve selected remote tourism destinations such as Batang-Ai and Bakun to value add visitors’ experience,” he said.

 

Source

 

So are we going to see KUL - KCH vv on ATR?

 

Just got news from someone from the 'inside' that this is indeed true. Not sure if he resigned or got sacked but he's gone. <_>

 

Firefly CEO calls it a day after nine years with MAS

 

PETALING JAYA: Datuk Eddy Leong (pic) has called it a day at Malaysia Airlines (MAS).

 

Sources said he submitted his resignation letter to the new management of the airline yesterday.

 

Leong is believed to be negotiating on the date he could leave because there needed to be a transition period for the handover of duties.

 

He was chief executive officer of Firefly and chief operating officer of MAS’ short-haul operations.

 

Leong had been given the task to help the new team drive Firefly’s turboprop operations and at the same time operationally lead the new short-haul operations of the national carrier.

 

The reasons for his resignation after nine years with the airline are unclear but it is learnt that he had another offer.

 

He is the fourth top executive of MAS to resign within five months.

 

In July, senior general manger of marketing Datuk Bernard Francis announced his resignation after six years with the airline.

 

On the day the share swap with AirAsia was announced, then managing director Tengku Datuk Azmil Zahruddin resigned.

 

Early this month, chief financial officer Mohd Azha Abdul Jalil threw in the towel after 4½ years with the airline. His last day is the end of next month.

 

http://biz.thestar.com.my/news/story.asp?file=/2011/11/23/business/9958731&sec=business

[BC Tam 2]

So are we going to see KUL - KCH vv on ATR?

You have already discounted MASWings Jet ?

[Nik H. 3]

MAS is like a one night stand for many : They come, They tell sweet stories, get a good screw, then leave a trail of crap behind, and for some, take shelter in Khazanah, or move on to bigger things, and watch MAS crumble in their wake....most never stay for more than 10 years, some less than 5.

 

What a shame.....

[flee 5]

MAS is like a one night stand for many : They come, They tell sweet stories, get a good screw, then leave a trail of crap behind, and for some, take shelter in Khazanah, or move on to bigger things, and watch MAS crumble in their wake....most never stay for more than 10 years, some less than 5.

 

What a shame.....

I guess it is the same at other GLCs too...

[flee 5]

Leong checks out of Firefly, may check in at Khazanah

 

Fly Firefly Sdn Bhd managing director Eddy Leong confirmed that he had submitted his resignation but did not disclose details.

 

 

George Town: Fly Firefly Sdn Bhd managing director Eddy Leong has quit from the community carrier owned by Malaysia Airlines (MAS).

 

Business Times has learnt that Leong, 39, had tendered his resignation yesterday and is likely to join Khazanah Nasional Bhd.

 

Leong confirmed that he had submitted his resignation but did not disclose details.

 

“Yes (I have resigned),” Leong said in a one-worded SMS reply yesterday.

 

Sources said he is set to leave Firefly sometime in December.

 

Prior to joining MAS in 2003, Leong was in the audit and business advisory and business and risk consulting units in Arthur Andersen (which merged with Ernst and Young in 2002).

 

He held various key positions within MAS including as project director of MAS Hotels and Boutiques Sdn Bhd and assistant general manager for the national carrier’s turnaround management

office until 2007 when he was handpicked by then-MAS managing director Datuk Seri Idris Jala to run Firefly.

 

“I chose him because he is a single-minded person and not because he knows everything about running an airline,” Idris had said when questioned on his choice of Leong to helm Firefly.

 

“His strength is his focus on a specific project and I am playing up to his strength.

 

“He is very lethal. I don’t want an all-round fellow. I wanted someone who will cut down the costs and I have seen him in action when the Four Seasons Hotel was being constructed in Langkawi,” said Idris, adding that there were many who questioned his choice.

 

At Firefly, Leong was instrumental in the success of the turbo-propeller operations of the award-winning airline, which raked in profits in less than a year after starting its jet services.

 

Source

[BC Tam 2]

At Firefly, Leong was instrumental in the success of the turbo-propeller operations of the award-winning airline, which raked in profits in less than a year after starting its jet services.

Huh ?!

That is like so contrary to everything we have been told so far

[alberttky 0]

MAS downgraded, stock at 6-week low

 

Malaysian Airline System Bhd, the national carrier, fell to a six-week low in Kuala Lumpur trading as HwangDBS Vickers Research Sdn Bhd downgraded the stock to “hold” after the company reported a RM477.6 million quarterly loss.

 

The shares dropped 2.2 per cent to RM1.33 at 9:42 a.m. local time, set for their lowest close since Oct. 10. -- Bloomberg

 

Read more: MAS downgraded, stock at 6-week low http://www.btimes.com.my/Current_News/BTIMES/articles/20111123094934/Article/index_html#ixzz1eV1tB0qe

 

 

Time to shut down the airline and restart.

[Nik H. 3]

Huh ?!

That is like so contrary to everything we have been told so far

 

BC, depends on how you report profits.

 

When you set up an airline that rides on big brother's sunken costs, or pay resources only when you use avoiding setup and holding costs, an airline can make money with anyone heading it.

 

Time to shut down the airline and restart.

 

This is indeed possible with AK in the picture. Shutting down MAS for a week will only inconvenience Malaysia's air travel for a while as AK can probably cover 50% of MH needs.

Then restart MAS 'Baru' and reemploy ex-staff on new employment terms. Clean slate. Not easy, but more importantly, not impossible.