MAS and AirAsia Shares Swap

[flee 5]

MAS needs to push sales

 

THE recent losses reported by Malaysia Airlines (MAS) gives an insight that there could be deeper problems affecting the airline. Sources said the laid back push towards raising sales may mean less revenue in the coming quarters.

 

Sources also cited communication gaps and lack of engagement between management and top executives despite the airline having a large pool of very experienced personnel. To be fair, the CEO has had some townhall and individual meetings with staff as he worked towards getting a business plan in place.

 

Many are curious over the supposedly “flip flop” in decisions over moving its administrative units to the KL International Airport.

 

“They said to move but last Friday they said no. However, there was a change in heart and on Monday they said the move was on again. Can they make up their minds once and for all,” said an industry source.

 

Analysts who listened to their recent conference call were left unimpressed but want to be surprised when the business plan is announced eventually in December.

 

“We found their arguments on how they intend to turn MAS into a premium airline a bit weak and this boils to the management. It was not impressive at all for now,” said an analyst with a foreign brokerage who requested anonymity.

 

Another analyst from RHB Research Institute Sdn Bhd wrote in his report: “We have to admit that we came out of MAS’ analysts’ teleconference this morning feeling a little disappointed.”

 

It added that “the preview was dubbed as MAS’ grand turnaround plan scheduled to be unveiled next month but did not indicate 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.’’

 

Whatever the sentiment, MAS reported a net loss of RM479mil on the back of an 5% rise in revenue to RM3.5bil for three months ended Sept 30, 2011. It partner AirAsia, however, reported a profit, albeit half of what it reported a year earlier. Both airlines blamed the rising oil prices for the downside.

 

Both MAS and AirAsia share prices dipped following their results but have regained some ground now.

 

However, according to Bloomberg data, 10 research houses have placed a “sell” call on MAS after the results announcement while 17 houses put a “buy” call on AirAsia. There is just one buy call and seven hold recommendations for MAS.

 

The average target price for MAS stock is RM1.29 and AirAsia RM4.02 according to the data. In yesterday’s trading MAS remained unchanged at RM1.30 while AirAsia was down 4 sen to RM3.62.

 

MAS financial figures show the airline reported an operating loss of RM156mil which means that it spends more than what it earns.

 

It cited insufficient revenue as a factor but the figures clearly show that the passenger revenue including fuel surcharges were up by 11% to RM2.7bil from RM2.4bil previously. Even after stripping out the fuel surcharges, revenue is higher at RM2.1bil versus RM2bil.

 

However, cargo revenue including fuel surcharges was lower by 15% to RM431mil versus RM485mil. Minus the fuel surcharges, revenue fell sharply from RM361mil to RM281mil and this was despite capacity cuts of 12%.

 

The two units that reported losses were Firefly and cargo operations. A source pointed out that had Firefly imposed fuel surcharges, the loses could have been mitigated.

 

MAS fuel bill for the quarter was RM1.4bil, which is 37% higher than RM1bil recorded in the previous corresponding quarter. However, 45% of that cost has been paid by travellers in the form of fuel surcharges.

 

Observers also felt there was no clarity in the announcement over the RM70mil derivative loss and RM195mil unrealised foreign exchange loss. An industry source said: “The hard push for higher revenues the past four months is not visible ever since the share swap deal was announced. Perhaps, they are too busy with cost cuts and they just began with their promotional activities recently.” “That leaves a vacuum which will allow other airlines to eat into its market share.

 

MAS has guided analysts to a weak fourth quarter but analysts are more worried about next year. The industry expects a softer travel market outlook in view of an economic slowdown and MAS has to contend with the debut of Singapore’s low-cost long haul carrier, Scoot, and more capacity added to the market.

 

“All these factors are going to have an impact on the market. Without a clear business plan that focuses on driving revenues up, it would be tough since MAS has a huge and inflexible cost base, though their yields have improved slightly,” said an analyst.

 

They also cited the need for a commercial director and someone to drive sales.

 

Sales and marketing used to be under the purview of Datuk Bernard Francis who left the airline five months ago and till now the airline has yet to appoint a new head of sales, a vital position since revenue for the airline is mainly driven by ticket sales.

 

Source

[Mohd Suhaimi Fariz 2]

“They said to move but last Friday they said no. However, there was a change in heart and on Monday they said the move was on again. Can they make up their minds once and for all,” said an industry source.

 

I really don't see why they need to move to KLIA - it will be a burden for employees who have planted their roots around the nearer Klang Valley area, and obviously there won't be a raise in salary to account for the increased expenses. Plus the move itself would definitely cost millions.

 

What the hell are those people up there thinking?

[Alif A. F. 0]

I really don't see why they need to move to KLIA - it will be a burden for employees who have planted their roots around the nearer Klang Valley area, and obviously there won't be a raise in salary to account for the increased expenses. Plus the move itself would definitely cost millions.

 

What the hell are those people up there thinking?

 

I think it will cause difficulty for my relative who is now working in MAS Subang HQ. It is just 10 minutes from her house. Before that she worked in Jalan Sultan Ismail HQ (everyone knows the building was sold under Business Turnaround Plan). Now, MH wants to move its HQ to KLIA? Wait for MRT/ERL between Shah Alam and KLIA lah...

[Arthur Van Straten 0]

I like to refer to the above post on MAS sales and turnaround.

So here I quote a few lines from that article which made me raise eyebrows.

 

Quote"

Analysts who listened to their recent conference call were left unimpressed but want to be surprised when the business plan is announced eventually in December.

 

“We found their arguments on how they intend to turn MAS into a premium airline a bit weak and this boils to the management. It was not impressive at all for now,” said an analyst with a foreign brokerage who requested anonymity.

 

Another analyst from RHB Research Institute Sdn Bhd wrote in his report: “We have to admit that we came out of MAS’ analysts’ teleconference this morning feeling a little disappointed.”Unquote.

 

There can be two possible scenarios here.

1. The new management has no clue whatsoever how to tackle the persisting problems. And that would be quite serious.

2. They know very well how to resolve the issues but are not allowed to implement them due to "the bigger picture" which is not known to us.

And that would also be quite serious.

 

I walk with the analysts here and are curious what the plan, when it is presented in December, will unveil.

 

Regards

Art

[jit 0]

I really don't see why they need to move to KLIA - it will be a burden for employees who have planted their roots around the nearer Klang Valley area, and obviously there won't be a raise in salary to account for the increased expenses. Plus the move itself would definitely cost millions.

 

What the hell are those people up there thinking?

 

1) Sell off Subang property to make $$?

2) Reduce head count without VSS $$?

3) Less office space reduce $$

4) New Management = New Office?

[KK Lee 5]

I think MASwings should split up into Air Sarawak and Sabah international airlines (SIA).

 

air sarawak should then get 10 787s mentioned above and start 2 weekly kuching-bintulu-manado-jayapura-port moresby-papeete-lima-mexico city-vancouver. Also will do 1 weekly flight to ALA via KUA and KUL (for Najib).

 

KCH is almost lie directly below great circle route between LHR-MEL, AMS-MEL, BKK-SYD, BKK-MEL, LYS-SYD, GVA-SYD, PER-SGN, PER-HAN, etc. Air Sarawak is strategically located for kangaroo route! If all these routes are explored, Air Sarawak will need more than 10 787

Edited November 26, 2011 by KK Lee

[alberttky 0]

KCH is almost lie directly below great circle route between LHR-MEL, AMS-MEL, BKK-SYD, BKK-MEL, LYS-SYD, GVA-SYD, PER-SGN, PER-HAN, etc. Air Sarawak is strategically located for kangaroo route! If all these routes are explored, Air Sarawak will need more than 10 787

 

And unless it is properly managed (which I doubt it will be), it's just going to be another BI in the making.

[Mohd Azizul Ramli 2]

I really don't see why they need to move to KLIA - it will be a burden for employees who have planted their roots around the nearer Klang Valley area, and obviously there won't be a raise in salary to account for the increased expenses. Plus the move itself would definitely cost millions.

 

What the hell are those people up there thinking?

I think it will cause difficulty for my relative who is now working in MAS Subang HQ. It is just 10 minutes from her house. Before that she worked in Jalan Sultan Ismail HQ (everyone knows the building was sold under Business Turnaround Plan). Now, MH wants to move its HQ to KLIA? Wait for MRT/ERL between Shah Alam and KLIA lah.

I think the underlying is that the management hope many employees will resign for inconvenience/not being able to make it to the new office in Sepang on time everyday.

 

However, most airlines in the entire world have their HQs located within its main hub/airport complex - AK, SQ, CX, GA, TG, EK et al all except MAS.

[BC Tam 2]

And unless it is properly managed (which I doubt it will be), it's just going to be another BI in the making.

I doubt if Sarawak state treasury will be able to sustain proposed Air Sarawak in manner that BI has been suckled all these years

People really must bear in mind that GE13 is fast dawning upon us, and throwing these grandoise proposals around is basically free publicity, very easily digestable for the average joe out in the street Cynical, yes I'll admit

Incidentally, KCH-MKZ is next on the list apparently

[CH Teo 0]

I doubt if Sarawak state treasury will be able to sustain proposed Air Sarawak in manner that BI has been suckled all these years

People really must bear in mind that GE13 is fast dawning upon us, and throwing these grandoise proposals around is basically free publicity, very easily digestable for the average joe out in the street Cynical, yes I'll admit

Incidentally, KCH-MKZ is next on the list apparently

 

Let's just wait and see, whether it is free publicity or for real East Malaysian benefits...seems more and more turmoil being seen with so many "speculation" after the share swap...and yet the CCF had not come out yet...

[alberttky 0]

Let's just wait and see, whether it is free publicity or for real East Malaysian benefits...seems more and more turmoil being seen with so many "speculation" after the share swap...and yet the CCF had not come out yet...

 

Whatever happens, I doubt it will benefit East Malaysia.

[Waiping 12]

It may benefit the selected few.

[Mike P 0]

Well, I must say you guys are too ambitious... What Air Sarawak .. Air Sabah.... B787?? Hmmm...

[alberttky 0]

Well, I must say you guys are too ambitious... What Air Sarawak .. Air Sabah.... B787?? Hmmm...

 

Doesn't harm to daydream right? Even though we know it'll probably never happen.

[Mike P 0]

Doesn't harm to daydream right? Even though we know it'll probably never happen.

 

I won't say it will never happen. But as of now, way too ambitious. Sarawak has roughly 2000++ visitors from UK every month, does it mean there should be a direct flight from London to Kuching? There was a study earlier, after MH has introduced FRA - KUL - KCH. But the plan was dropped after the MH business turnaround plan.

[alberttky 0]

I won't say it will never happen. But as of now, way too ambitious. Sarawak has roughly 2000++ visitors from UK every month, does it mean there should be a direct flight from London to Kuching? There was a study earlier, after MH has introduced FRA - KUL - KCH. But the plan was dropped after the MH business turnaround plan.

 

With the current situation in Europe and the crap tourism offering Sarawak has, they'd be lucky to see 2000++ visitors from UK every month from now onwards.

[Mike P 0]

With the current situation in Europe and the crap tourism offering Sarawak has, they'd be lucky to see 2000++ visitors from UK every month from now onwards.

 

from now onwards? With all due respect, the statistic has been recorded such figure for years!!

[alberttky 0]

from now onwards? With all due respect, the statistic has been recorded such figure for years!!

 

Just go to show how pathetic the situation is in Sarawak.

[Mike P 0]

Just go to show how pathetic the situation is in Sarawak.

 

http://www.minth.sarawak.gov.my/page.php?id=47&menu_id=0&sub_id=120

 

This is the statistic of Sarawak Tourism Arrival. You may want to check, from 2001 till now, the statistic of arrivals from UK visitors recorded some 2000 to 3000, subject to different seasons.

[alberttky 0]

http://www.minth.sarawak.gov.my/page.php?id=47&menu_id=0&sub_id=120

 

This is the statistic of Sarawak Tourism Arrival. You may want to check, from 2001 till now, the statistic of arrivals from UK visitors recorded some 2000 to 3000, subject to different seasons.

 

Thanks for the info... I don't get any indication that the figure will head up anytime soon.

 

BTW, no wonder the visitor arrival numbers are so crap. I can't even find proper information on tourist attractions.

Edited November 26, 2011 by alberttky

[Mike P 0]

Thanks for the info... I don't get any indication that the figure will head up anytime soon.

 

BTW, no wonder the visitor arrival numbers are so crap. I can't even find proper information on tourist attractions.

 

Probably it will if there's any direct flight coming in to KCH. And what you mean by the numbers are so crap? Everything is on the internet and can be searched and found.

 

If you look at the statistic closely again, the number of visitors from Sabah & Penisular visiting Sarawak is lesser than the foreigners'. And that implies foreigners appreciate it more than the locals.

[alberttky 0]

Probably it will if there's any direct flight coming in to KCH. And what you mean by the numbers are so crap? Everything is on the internet and can be searched and found.

 

If you look at the statistic closely again, the number of visitors from Sabah & Penisular visiting Sarawak is lesser than the foreigners'. And that implies foreigners appreciate it more than the locals.

 

Well, we've seen enough examples of direct flights coming into KCH and flopped. FRA, PER, MFM, etc. I think the reason is simple. It's just not an attractive enough place to garner influx of visitors. And yes, Sarawak is not in the list of "must visit" even for fellow Malaysians. There are far better places around with value for money also.

[Mike P 0]

Well, we've seen enough examples of direct flights coming into KCH and flopped. FRA, PER, MFM, etc. I think the reason is simple. It's just not an attractive enough place to garner influx of visitors. And yes, Sarawak is not in the list of "must visit" even for fellow Malaysians. There are far better places around with value for money also.

 

The international flights might have been cut or reduced but statistic remained stable with the visitors arrival. Though I'm not sure why. There is a direct flight from KCH to HKG by MH though visitors arrival from HKG is very poor and it's still sustainable till now, daily! I also don't know why.

 

When we talk about attraction, Sarawak is more to nature by flora and fauna. And only those who appreciate those would step in and visit. But do not get confused and misunderstood that Sarawakians are uncivilised. probably 10 years ago, even people from Peninsular would accuse Sarawakians staying on top of the trees. That was an insult to many Sarawakians. But good that Sarawakians are proud to say they rode lifts to reach on top of the trees.

[alberttky 0]

When we talk about attraction, Sarawak is more to nature by flora and fauna. And only those who appreciate those would step in and visit. But do not get confused and misunderstood that Sarawakians are uncivilised. probably 10 years ago, even people from Peninsular would accuse Sarawakians staying on top of the trees. That was an insult to many Sarawakians. But good that Sarawakians are proud to say they rode lifts to reach on top of the trees.

 

Sadly the Sarawak Government is naive to think that there'd be many flora and fauna fans. Tourists nowadays are sophisticated, better informed, and demand more than just looking at flowers and trees.

[Mike P 0]

Sadly the Sarawak Government is naive to think that there'd be many flora and fauna fans. Tourists nowadays are sophisticated, better informed, and demand more than just looking at flowers and trees.

 

I'm not sure how you get those facts or was it just merely your perception? Earlier there were your posts recommending the international flights connecting to Sarawak which I think it was too ambitious to think that far.

 

You also accused on the Sarawak Tourists Arrivals report was crappy to sustain all those previous international flights in later post. It's very contradicting of what you were saying. <_>

 

Let's be mature and talk something that has facts. Jokes are welcomed but if I do not have evidence, I won't simply accuse and comment. Leave some virtue on the mouth rather than the brain mouth thing...