MAS and AirAsia Shares Swap

[KK Lee 5]

If past Transformation, WUA, BTPs couldn’t arrest MH over bloated overhead, headcounts, procurement, etc, what make current BP or management can address these issues?

 

If MH dinosaurs don’t mean to survive, no one can stop extinction and evolution to take place.

[J Chong 0]

In fact this was clearly alluded by Danny & AJ during the townhall meeting. They've repeatedly stressed that they do not want a repeat of that.

 

Whether it will be so remains to be seen.

 

Hmm.. if they are admitting to that, are they going to do anything about it or do they intend to let it continue to suck MH dry?

 

 

“Last year, we lost more than 40 percent of KL-based passengers flying a ‘full service’

competitor airline to a city served by Malaysia Airlines.” Pg17

 

However, MH still keep balance 60% of die hard and GLC pax, and not yet become the airline of last choice. MH survived without these picky pax, MH don't need them and they can pay premium fare if wish to travel on MH.

 

Perhaps the 60% already considers MAS as the airline of last choice (i.e. they have to take) due to

1) GLC - no choice

2) Timing more convenient

3) Company policy

4) Less transit stops (flying ex. SIA usually introduces an additional transit stop)

 

The 40% just have that luxury of choosing.

[flee 5]

RHB doubts viability of MAS’s ‘painless restructuring’

 

KUALA LUMPUR, Dec 8 — Malaysia Airlines’ (MAS) attempt at a “painless restructuring” may fail to deliver the desired outcome, such as a return to profitability by 2013, said RHB Research Institute in a report today.

 

The research house also noted that there are concerns the new super premium regional airline proposed by MAS yesterday could turn out to be a waste of time or a mere gimmick.

 

“We remain negative on MAS given the extent of its structural and operational problems that are not adequately addressed with a restructuring plan that we find shallow,” said RHB. “As the saying goes, ‘no pain, no gain’, and as such we doubt if the ‘painless restructuring’ could produce the results it desires.”

 

RHB said turnaround measures such as cutting unprofitable routes and redeployment of capacity from low-yielding long-haul sectors to higher-yielding short- and medium-haul zones and improving fuel burn were just logical business decisions, and noting the airline was not addressing operational and structural issues.

 

The report noted that during the briefing given to analysts yesterday, MAS said it was fully aware of its “productivity gap” against its peers but had no immediate plans to reduce headcount. Instead, it is banking on expansion in its non-core businesses such as maintenance and repair to help absorb some of the excess workforce.

 

It added that MAS had “struggled” to explain the concept of the new super premium airline during the briefing, before deducing that the still unnamed airline will consist of new and fuel-efficient Boeing 737-800 aircraft and have a separate management team that will allow a the carrier to have a fresh start with staff paid according to productivity.

 

MAS said yesterday that it is attempting to produce a RM1.2-1.5 billion swing in performance from its cost-saving and productivity measures, and return to profit by 2013.

 

RHB said in its report that its earlier forecasts were premised upon a much deeper restructuring vis-à-vis what was announced by MAS, and that it now projects a RM126.1 million net loss in financial year 2012, from a RM57.9 million net profit previously, and a RM108.7 million net loss in financial year 2013, down from a RM115.2 million net profit previously.

 

Source

[leon t 0]

if the govt is serious abt mak8ing MAS viable and minus all the politics - just sack all the management and let SQ or CX run the airline. As long as MH is allowed to be continued to run with mere few changes at the top will not help and MH will continue to bleed and loose millions for years to come. Its not abt just aircrafts but its the people who run it.

[alberttky 0]

if the govt is serious abt mak8ing MAS viable and minus all the politics - just sack all the management and let SQ or CX run the airline. As long as MH is allowed to be continued to run with mere few changes at the top will not help and MH will continue to bleed and loose millions for years to come. Its not abt just aircrafts but its the people who run it.

 

Neither SQ nor CX wanna inherit this trash.

[BC Tam 2]

if the govt is serious abt mak8ing MAS viable and minus all the politics .....

[Nik H. 3]

Neither SQ nor CX wanna inherit this trash.

 

Bro Albert, cakap baik baik sikit..... MAS is our treasure, its not trash. Despite its trials and tribulations and being done in by the dishonest and the incompetent, operationally its great. The Flight crew has done an amazing job keeping a safety record that even those down South envies. Our Cabin crew, despite being shafted by the Union on one side, the Management on the other, are still the best around. Technical Engineering is great, and so are many other support staff.

 

When you shoot, please aim your bullets properly, take care not to cause collateral damage. There are more good people than bad people in there.

 

Its not that difficult to turn MH around. And there are many right people who can do it.

[flee 5]

OSK worried over risk of ballooning MAS debt

 

KUALA LUMPUR, Dec 8 — Malaysia Airlines’ (MAS) net gearing could soar to 461 per cent from 231 per cent currently to fund as much as RM4billion in 2012 capital expenditure said OSK Research today.

 

The research house also noted in a report today that the airline has yet to secure funding for its planned purchase of some RM6 billion worth of aircraft next year and said that it is emerging as a “nagging issue”.

 

“Its massive leverage will be a double-edged sword should MAS’ turnaround plan crumble,” said the report. “We still think there is a high chance of another round of cash call to tap into cheaper funds.”

 

OSK noted that MAS management had assured analysts that as long as the airline achieved a net profit by the first half of next year, raising the funds would not be an issue and that the profit target should be achievable if the airline executes its strategy well.

 

MAS revealed its turnaround strategy yesterday where it said it hopes to achieve a swing of RM1.2-1.5 billion through productivity and cost cutting measures and return to profit in 2013.

 

“We are still skeptical as MAS faces tough challenges amid growing competition,” said OSK.

 

OSK said that it now expects MAS to rack up a core net loss of RM250.3 million for the 2012 financial year, which is revised from a projected loss of RM220.7 million it made earlier in view of higher depreciation and financing charges.

 

It added that the aim of becoming profitable by 2013 is achievable if the strategy is executed well but the profits would not be meaningful.

 

Source

[alberttky 0]

Bro Albert, cakap baik baik sikit..... MAS is our treasure, its not trash. Despite its trials and tribulations and being done in by the dishonest and the incompetent, operationally its great. The Flight crew has done an amazing job keeping a safety record that even those down South envies. Our Cabin crew, despite being shafted by the Union on one side, the Management on the other, are still the best around. Technical Engineering is great, and so are many other support staff.

 

When you shoot, please aim your bullets properly, take care not to cause collateral damage. There are more good people than bad people in there.

 

Its not that difficult to turn MH around. And there are many right people who can do it.

 

Sad to see how "our treasure" is being treated all these while. You see them as treasure. Unfortunately those people who manage the company either don't, or are trash themselves. My words are hard. It may cause collateral damage, but hey, that's the reality of the corporate world. When management does things right, it's expected. When they don't, the reputation goes down with them.

 

I don't doubt the abilities of my fellow crew members. Keep up the good work. Will I still take MH? Yes I will. Simply because of what you said about the flight, cabin, and engineering crew.

 

I look forward to that day of the turnaround.

[KC Sim 2]

KC, I was just thinking of your comment on this aircraft.

 

With MH's B772 routes already bleeding red ink, wouldn't it bleed more if a bigger aircraft was used? With the A380 replacing the B744, and with the CPT, JNB and EZE routes axed, would MH need this aircraft anymore?

 

What MAS could do is sell their almost built A380s to an airline that needs it now - such as British Airways (or even Asiana Airlines) - and instead lease (but not purchase) B77Ws to replace the B744s. That way, the growth in capacity is more manageable, the capital outlay on a new fleet isn't as high and the introduction of a new type not as demanding. And there are two engines less to feed.

 

It is hard to reconcile the conflicting impact of a huge increase in capacity, a worsening European and world economy and expectation of an increase in yield. I recall that when the Hibiscus B744 was launched, the then CEO when interview by the media said he expected yield to grow 25 percent - and I recall the journalists looking at one another in disbelief.

 

MAS is inherently a good airline but it needs strong leadership, a strong will and the guts to make the necessary changes and cuts, some strong and clear strategic thinking, new and hopefully consistent marketing directions and most challenging of all - hands off by politicians.

 

KC Sim

[V Wong 0]

My heart sank when going through the BP. Suspects that the power point brigade spin doctors are at work again. .. but that is only my hunch. (coz I needed to spin sometimes during my presentations and could detect the usual spin techniques in the BP)

[Kee Hooi Yen 0]

Perhaps MH & AK can think out of the box and together develop a new hybrid business model.

 

On some trunk routes (eg. LHR, SYD, MEL, CDG, NRT), aircrafts can be configured to premium & LCC style seats. MH selling the frond ends (premium style) while AK sellig the back ends (LCC style, no frills). This may help MH to fill up its seats (eg A380) while AK gets additional seats / frequencies / routes. The aircrafts can be painted with a hydrid livery too.

 

 

I can see the two airlines have the opportunities to utilitise and rationalise their upcoming fleets with this model too (MH gets access to AK's A350 and AK gets access to MH's A380 !)

 

 

There may be a lot of other issues that need to be resolved eg. ground handling, ticket pricing, crews etc... but I believe it worths a consideration and try ....

Edited December 8, 2011 by Kee Hooi Yen

[Mike P 0]

Perhaps MH & AK can think out of the box and together develop a new hybrid business model.

 

On some trunk routes (eg. LHR, SYD, MEL, CDG, NRT), aircrafts can be configured to premium & LCC style seats. MH selling the frond ends (premium style) while AK sellig the back ends (LCC style, no frills). This may help MH to fill up its seats (eg A380) while AK gets additional seats / frequencies / routes. The aircrafts can be painted with a hydrid livery too.

 

 

I can see the two airlines have the opportunities to utilitise and rationalise their upcoming fleets with this model too (MH gets access to AK's A350 and AK gets access to MH's A380 !)

 

 

There may be a lot of other issues that need to be resolved eg. ground handling, ticket pricing, crews etc... but I believe it worths a consideration and try ....

 

I think this idea has already been posted. However, I don't think this is viable. MH & AK may have the share swap deal, but still two different airlines with different marketing, one premium and one no frill. I can't even imagine you can book on low cost fare without luggage and meal on MH website... like half of the aircraft served by attendees in Kebaya while the other half served by Red? Awkward!

[BC Tam 2]

The loading/unloading of proposed collaborative MH/AK/D7 dugongs at KUL will be quite a chore and spectacle then

Imagine boarding the budget travellers at LCCT, then towing plane to MTB/Satellite for the premium pax (who get to use aerobridges) before flying off. Then process in reverse upon arrival. Twenty minute turnaround time out the window for sure !

But wait a minute, runway at KLIA2 is dugong capable .......

[Waiping 12]

The loading/unloading of proposed collaborative MH/AK/D7 dugongs at KUL will be quite a chore and spectacle then

Imagine boarding the budget travellers at LCCT, then towing plane to MTB/Satellite for the premium pax (who get to use aerobridges) before flying off. Then process in reverse upon arrival. Twenty minute turnaround time out the window for sure !

But wait a minute, runway at KLIA2 is dugong capable .......

 

Imagine walking all the way from LCCT to MTB/satellite!

[Kee Hooi Yen 0]

Both MH & AK/D7 can run business as usual, the only thing difference is using the same aircrafts (similar to codesharing, but instead having customed seat configurations for the two different entities respectively).

 

AK/D7 pax can board the plane at MTB or another option for AK/D7 pax is to be bused to the aircrafts and board via rear door using staircase (albeit it is a long disctance from LCCT to MTB). The tricky part is to get the baggage sorted properly.... (however, i belive this arrangement only happens mainly in KLIA where there is separate terminal for MH and AK/D7)

 

This model may be worked for both MH and AK/D7, who knows...

Edited December 9, 2011 by Kee Hooi Yen

[flee 5]

Perhaps MH & AK can think out of the box and together develop a new hybrid business model.

 

On some trunk routes (eg. LHR, SYD, MEL, CDG, NRT), aircrafts can be configured to premium & LCC style seats. MH selling the frond ends (premium style) while AK sellig the back ends (LCC style, no frills). This may help MH to fill up its seats (eg A380) while AK gets additional seats / frequencies / routes. The aircrafts can be painted with a hydrid livery too.

 

I can see the two airlines have the opportunities to utilitise and rationalise their upcoming fleets with this model too (MH gets access to AK's A350 and AK gets access to MH's A380 !)

 

There may be a lot of other issues that need to be resolved eg. ground handling, ticket pricing, crews etc... but I believe it worths a consideration and try ....

I think that currently, the CCF only covers the cost aspects of their operations with some connectivity on flights to destinations that either airline does not operate to. So I am not sure what kind of scope this covers.

 

As for the dugong, the most logical way is for MH to sell the upper deck and D7 to sell the lower deck. Lower deck can be configured for dense LCC seating while upper deck will have first and business class seats. As for boarding, all boarding can be done at the MTB. For D7, pax can now have a choice as to whether they arrive at LHR or LGW.

 

Still I don't think that this kind of arrangement will be thought of unless MH really cannot fill its dugongs.

[flee 5]

Analysts: MAS plan lacks critical details

 

PETALING JAYA: While analysts are generally positive about what Malaysia Airlines (MAS) aspired to achieve in its turnaround plan, they also voiced concern over the lack of critical detail on execution of the plan in the midst of challenging market environment.

 

Maybank Investment Bank (IB) said the business plan document was a fairly good “academic” paper but it lacked details on execution.

 

“We feel that this is the key factor that investors want to hear in order to be convinced about the business turnaround story,” it said in a report.

 

Maybank IB was also concerned about the risk of MAS starting a new airline for regional services.

 

“MAS will start a new regional airline focused on the premium segment by second half of 2012 and it will gradually dissipate to become a long-haul airline only as its regional services are taken over by the new airline.

 

“Although the management asserts that the new airline would have significantly better quality and services, we see a risk as MAS has a strong brand name with proven quality and service.

 

“For an airline that aims to turnaround and stem losses, this is not a suitable time to take start-up risk, in our view,” it said.

 

Nevertheless, Maybank IB applauded the move that MAS would cut capacity or available seat per km (ASK) by 12% in 2012, on loss making routes such as Buenos Aires, Dubai, Cape Town and Johannesburg. “The move was overdue for decades as these routes have no chance to make money. This move is also a confidence booster because it shows that the management is bold and clear minded in its cost cutting approach,” said Maybank IB.

 

On Wednesday, troubled the airline unveiled its third edition of business turnaround plan that entailed cuting unprofitable routes, spining off its ancillary units, exploring joint ventures with other airlines and launching a regional carrier in a bid to return to profitability by 2013.

 

The airline, which would focus on offering premium air services, targeted a net loss of RM165mil for 2012. However, by 2016 it hoped to report a net profit of RM900mil.

 

Meanwhile, OSK Research said the plan shed some light on the strategies lined up to turn the national carrier around by cutting capacity, wooing back its customers, enhancing costs, and focusing in its core business.

 

However, they were still skeptical as MAS faced tough challenges amid growing competition.

 

“There are also concerns about potential funding for its RM6bil capex, which could burden the flagship carrier with a gearing of four times by end of 2012.

 

“But, management reassures that as long it is able to achieve positive Ebitda (earnings before interest, tax, depreciation and amortisation) in first half of 2012, this would not be an issue. We believe this is achievable as long the airline executes its strategies well,” it said.

 

AmResearch said while it was positive on MAS' business plan from a structural perspective, it believed it was too early to be bullish on the stock given the muted earnings visibility as a weak global economy in 2012 would not support air travel where loads and pricing power were negatively affected, particularly for premium travel.

 

“There is also the risk of a cash call to support fleet renewal, which is central to MAS' business plan, if profitability and cash flows do not improve as much as expected,” it said.

 

Both AmResearch and Maybank IB maintained a “hold” call on the stock while OSK Research retained its “sell” call.

 

Source

[Johan Z 0]

23 aircraft next year?

To break it down

6 dugongs A380

10? A330

7? 738

[flee 5]

According to previous disclosures, MAS expects the following aircraft next year:

 

A380 - 5

A330-300 - 3

A330-200F - 2

B737-800 - 7

 

That is a total of 17 aircraft. I guess the remaining 6 aircraft will be the leased B737-800 that were originally ordered for MH/FY.

 

Assuming all these new B738s will go to the new premium airline, it should end up with 13 aircraft at the end of 2012. 12 more will arrive in 2013 and the final 9 in 2014. Not bad, eh?

Edited December 9, 2011 by flee

[Nik H. 3]

RM900 million profit with 12 aircraft operation? OR RM900 million profit with 12 aircraft and the 40 belonging to the new airline? Quite magical.

[BC Tam 2]

The tricky part is to get the baggage sorted properly.... (however, i belive this arrangement only happens mainly in KLIA where there is separate terminal for MH and AK/D7)

It gets even more nightmarish in London - MH at LHR, D7 at LGW

[Johan Z 0]

According to previous disclosures, MAS expects the following aircraft next year:

 

A380 - 5

A330-300 - 3

A330-200F - 2

B737-800 - 7

 

That is a total of 17 aircraft. I guess the remaining 6 aircraft will be the leased B737-800 that were originally ordered for MH/FY.

 

Assuming all these new B738s will go to the new premium airline, it should end up with 13 aircraft at the end of 2012. 12 more will arrive in 2013 and the final 9 in 2014. Not bad, eh?

 

Thanks. I thought they would receive more A330 next year.

Not bad for narrow bodies, but their 777 still has no replacement, especially for long haul. But, they will probably downsize their long haul operations to reduce operating cost.

[flee 5]

Thanks. I thought they would receive more A330 next year.

Not bad for narrow bodies, but their 777 still has no replacement, especially for long haul. But, they will probably downsize their long haul operations to reduce operating cost.

They already have 5 A333's and have not yet retired any of their old ones.

 

I think that by next year, all their Asian routes will operated on A333s with the exception of the KUL-TPE-LAX run, where the range of the B772 is needed.

 

They will have very few European routes left and both LHR and AMS will be served by A380s. As such, even on European routes, only a few B772s are needed. If MH is not able to return the B772s to PMB, they may just store them to minimise MRO costs. These can be used if business improves and new long haul routes are launched.

 

As I have said earlier, MH should really think about ordering the B787 to supplement the A380s on their long haul operations. When the B787s finally arrive, the B772s can then finally be retired.

[flee 5]

What MAS could do is sell their almost built A380s to an airline that needs it now - such as British Airways (or even Asiana Airlines) - and instead lease (but not purchase) B77Ws to replace the B744s. That way, the growth in capacity is more manageable, the capital outlay on a new fleet isn't as high and the introduction of a new type not as demanding. And there are two engines less to feed

Sadly, I do not think that is going to happen.

 

It is Malaysia's national weakness - showing off - that will ensure that MAS will indeed operate the A380. A longer term transition plan may be to move from B772/A333 to the B787 or A350 family of aircraft. That way MH international will be only operating two aircraft types.

 

The new premium airline will have to continue on their now brand new B738s until such time when they can decide if they wish to transition to the A320 NEO or the B737 Max families.

 

There was never any doubts about MH's operational qualities. It is weak management that is unable to stand up and articulate their business case to the govt. that has caused MH so much pain. You are right, strong management is needed at MH now.

 

Not only that, MH (more than ever) needs professional management too. We don't need bankers and accountants to run the airline. We need aviation professionals like the people who run SQ, CX, EK, QR, etc. But national weakness has meant that AK's TF is called upon as they cannot bring themselves to hire competent foreigners. This has caused unease amongst the rank and file of MH. Only time will tell if this whole thing will work. If it does not, it is best to shut down MH for good...

Edited December 9, 2011 by flee