Jump to content
MalaysianWings - Malaysia's Premier Aviation Portal
Mohd Suhaimi Fariz

MAS Privatisation

Recommended Posts

MH is not expected to make money with government intervention. Practically, it's sensible to say that in order for a multinational company to survive and profitable, it requires accountability, good governance and transparency. How do you expect MH to make money when the current government is silent on corruption, power abuse and discrimination?

Share this post


Link to post
Share on other sites

Catering contract needs to go.

Employee numbers need to be reduced.

No government intervention in business policy.

Share this post


Link to post
Share on other sites
web.jpg
PETALING JAYA: Troubled Malaysia Airlines (MAS) will not be given any more financial support by the Government, said Tourism and Culture Minister Datuk Seri Nazri Aziz.
A report out of Dubai quoting Nazri yesterday said the Transport Ministry had been tasked with coming up with an action plan for MAS.
This news, coupled with the bleak outlook given by the MAS management to analysts on Tuesday, now raises questions about the airline’s immediate-term financial performance.
The Gulf News in Dubai on Tuesday had quoted Nazri as saying that the Government does not want to put “any more money” into the airline after the MH370 incident.
“To inject new capital is certainly not an option,” Nazri had said.
The Government, via Khazanah Nasional Bhd, holds 69.4% in MAS. Last year, the airline had undertaken an RM3bil rights issue, whereby Khazanah had pumped in RM2.7bil for its portion of the rights issue.
Its cash balance was RM3.87bil and total assets were RM21.86bil as at the end of last year.
But the MH370 flight incident has been an expensive search. Although the search has been funded mainly by insurers, comprising a consortium led by Lloyds, how that is going to translate into MAS’ accounts is not clear.
Yesterday, TA Securities in its report said “we are worried about the hidden risks that might be associated with the missing flight, as well as the substantial cost involved in the search operations”.
It added that the biggest risk at this juncture was how long the search operations would take and how costly it would become.
MAS has also had to cancel flights after the missing flight MH370 incident and ticket sales have been slow in China, a route that accounts for 10% of MAS’ total revenue.
TA Securities believes the possible loss of income could be a major threat to future earnings growth.
It has been two months since MH370 went missing and MAS has set up a separate management crisis unit to deal with the incident so that the airline can refocus on its operations.
The airline plans to redirect more resources to defend its market share and revitalise its corporate image and branding.
TA Securities said MAS would restart its marketing and promotional activities and that ticket prices might be kept low to regain consumer confidence.
Alliance Research in a separate report after meeting the MAS management on Tuesday said the airline might spin off its maintenance, repair and overhaul (MRO) division.
This news is not entirely new but MAS has often denied it was going to sell it, although it was part of one of its turnaround plans crafted several years ago.
“There will be a review of the network, which could reduce the frequency of unprofitable routes or see them being dropped altogether. But management will continue to implement cost-cutting initiatives with a focus on labour and maintenance expenses. They may also spin-off non-core businesses such as the MRO division,’’ Alliance Research said.
But the airline would continue to face headwinds and its yields and load factors were likely to deteriorate following the MH370 incident, with the negative impact potentially manifesting in the second and third quarters, it added.
“The MAS management could face strong opposition from labour unions in implementing labour productivity initiatives,’’ the house added.
MAS’ share price has remained depressed for sometime now, but even at such depressed levels, there are no “buy’’ calls for the stock as analysts do not see a clear future for the airline.
Out of the 14 research houses tracking the stock, 85% had a “sell” call and the rest a “hold’’ call.
TA Securities has a “sell” call on the stock at 13 sen, while Alliance believes the stock is fully valued at 16 sen. MAS’ share price closed at 22.5 sen yesterday.
MAS is expected to announce its first-quarter results by the end of the month and analysts expect it to remain very much in the red. For the full year, they are projecting another RM1bil in net losses. MAS had reported a net loss of RM1.17bil at the end of its last financial year.
Source: The Star Business

 

Share this post


Link to post
Share on other sites

I won't hold my breath on this yet. Anyone has any spare cash lying around their couch? 23cents per share now. Khazanah Nasional has 60% majority.

 

LELONG!! LELONG!

Share this post


Link to post
Share on other sites

that's what thhe tourism minister can say - but the fact is the govt will no doubt have to bail MAS out again soon and again as it doesn't want to sell or truly privatized the company to a non-govt interest company. MAS have already incurred rm1.2 billion losses even before MH 370 went missing - and after this incident it is for sure MAS will lose even much more.

If the govt and Khazanah do not bail out MAS again and again - then who else in their logical mind would.

Already bank Negara have to set up a special purpose vehicle to buy the planes that MAS needs.

Share this post


Link to post
Share on other sites

Frankly, I find it hard to accept any bailout if this was not accompanied by restructuring. MAS is being throttled by those long life crony contracts. So I think that any bailout will have to mean setting up a new company and transferring only the profitable sections of MAS to the new company. I cannot see MAS continuing as it is today.

Share this post


Link to post
Share on other sites

Why would the Tourism Minister rocks the boat?

 

There are two possibilities, one, he voiced his own opinion, and on returning to KL was called to see his boss for a slap on the wrist.

Or, He was told to let up this balloon as a "writing on the wall", for all to see.

 

And this, "the Transport Ministry had been tasked with coming up with an action plan for MAS".

That would be the same as letting the manufacturers of Good Maid to advise Malaysians which washing machine soap to use.

 

I agree with flee in a sense that you must create a new MAS lean and mean and let the old MAS die.

 

Cheers

A.

Share this post


Link to post
Share on other sites

Frankly, I find it hard to accept any bailout if this was not accompanied by restructuring. MAS is being throttled by those long life crony contracts. So I think that any bailout will have to mean setting up a new company and transferring only the profitable sections of MAS to the new company. I cannot see MAS continuing as it is today.

Ai ya, I help you, you help me mah....You happy, I happy, everybody happy!! Milk the cow dry dry...then let it rot.........Our Malaysian way of conducting business.......

Share this post


Link to post
Share on other sites

Frankly, I find it hard to accept any bailout if this was not accompanied by restructuring. MAS is being throttled by those long life crony contracts. So I think that any bailout will have to mean setting up a new company and transferring only the profitable sections of MAS to the new company. I cannot see MAS continuing as it is today.

 

There was an article not too long ago that listed out the breakdown of which MAS entities that are profitable and which are not.

 

Ok found it!

 

Way out for MAS

By BILQIS BAHARI | 17 April 2014| last updated at 01:27AM

http://w1.nst.com.my/polopoly_fs/1.5..._454/image.jpg

 

RETURNING TO THE BLACK: Right time for airline to be taken private, says Maybank IB

 

THERE are not many options left for national carrier Malaysian Airline System Bhd (MAS) to return to profitability besides privatisation or declaring bankruptcy.

 

These options could be the only way out for the airline as it faces high operational cost and low productivity.

 

"There are not many options left for MAS," said an aviation industry source yesterday, adding that MAS is in dire need of a "reset".

 

Meanwhile, Maybank Investment Bank Bhd (Maybank IB) said it is now the right time for the airline to be taken private as it is trading at its cheapest valuation for the past 12 years.

 

The bank-backed research firm opined that the group's business can be divided into two groups - airline and non-airline related to seven units. Five units are profitable while the rest are not, it added.

 

The loss-making units are parent company MAS and cargo unit MASkargo.

 

The units that are churning out profits are FlyFirefly Sdn Bhd (Firefly), MAS Engineering, MAS Airport Terminal Services, Brahim Holdings Bhd and KL Aviation Fuel Services, in which MAS has non-controlling stakes.

 

Based on Maybank IB's analysis, the break-up value of the profitable units is RM4.15 billion, which is some 18 per cent premium of MAS' current market capitalisation. It added that there would be more value if MAS and MASkargo manage to turn around in future.

 

"We assume that Firefly, MAS Engineering and MAS Airport Terminal Services will be listed individually, and MAS' shareholdings in Brahim and KL Aviation Fuel Services will be sold," Maybank IB said in a note yesterday.

 

However, it thinks that the RM4.15 billion value is conservative and there is more upside to it as it did not consider MAS and MASkargo in its sum-of-parts valuations.

 

The research firm also said the potential privatisation of MAS would cost major owner Khazanah Nasional Bhd RM1.18 billion, assuming a 10 per cent premium on its current share price.

 

At the same time, the government investment arm will get RM1.25 billion cash if MAS' profitable businesses are spun off and separately listed, with Khazanah ceding 30 per cent stake.

 

Khazanah declined to comment and a spokesman told Business Times yesterday that "as a matter of policy, Khazanah does not comment on speculative reports".

 

MAS' share price inched 0.05 sen higher to close at 21.5 sen on Bursa Malaysia yesterday with a market capitalisation of RM3.59 billion. The counter saw more buy volume at 291.08 million than sell at 128.98 million.

 

Khazanah is MAS' principal shareholder with a 69.4 per cent stake. Its second-largest shareholder is Employees Provident Fund, with a 1.04 per cent stake.

 

Maybank IB said should MAS be taken private this year, it could perform the necessary restructuring ahead of multiple listings next year.

It cited Singapore Airlines Group which broke up its business units into standalone public-listed companies.

 

It also said all of MAS' turnaround plans since 2002 had not been successful.

 

"A new style of doing things should be explored. If there was ever an inclination to privatise, this is the best time to do so," said Maybank IB, adding that the report is purely a "what if" scenario analysis.

Share this post


Link to post
Share on other sites

 

PETALING JAYA: Troubled Malaysia Airlines (MAS) will not ...
... management will continue to implement cost-cutting initiatives with a focus on labour and maintenance expenses. They may also ...
Source: The Star Business

 

 

 

That point scares me the most!

 

Andreas

Share this post


Link to post
Share on other sites

Published: Saturday May 10, 2014 MYT 12:00:00 AM

Updated: Saturday May 10, 2014 MYT 7:18:31 AM

 

MAS set for reboot?

 

BY B.K. SIDHU

 

AT a recent townhall meeting, the senior management team at Malaysia Airlines (MAS) was told of a plan to reset the airline.

 

...

 

http://www.thestar.com.my/Business/Business-News/2014/05/10/MAS-set-for-reboot-Plans-are-said-to-be-afoot-to-collapse-MAS-and-pave-the-way-for-it-to-start-on-a/

Share this post


Link to post
Share on other sites

After years finally job cut is being highlighted primetime-ly in the new (nth?) business plan. There's no general election around so I think this time it will go ahead.

Share this post


Link to post
Share on other sites

Until MH can cut tie with MAS Engineering, MAS Airport Terminal Services, Brahim Holdings Bhd and KL Aviation Fuel Services, business is as usual.

Share this post


Link to post
Share on other sites

Aah, the elite team has spoken. (very apt name, by the way).

But, all to board and shareholders approval. Hmm.

 

And then the bankers, Restructuring is warranted. But their in house analysts in their infinite wisdom do not agree with each other, their analyses go from big losses to small losses in 2014 and from big losses to small profits in 2015/16. Every bank has its own Bomoh.

 

As for the article research efforts, it comes down to “people in the know have opined” and “industry experts have said”.

But the killer is, “a new team may take over soon”.

What exactly is the Malaysian Government trying to tell us here, in their, ehm, newspaper?

 

Regards

A.

Share this post


Link to post
Share on other sites

Nothing will Change unless something very drastic is done. Drastic meaning not just reboot , but format c: (old DOS junkies will know what this is) and reinstall.

 

Sure , no one likes to hear about job cuts but that's life. I've lost my job before - you just go out an learn new things and try again.

Share this post


Link to post
Share on other sites

This article is the prelude to a massive Q1 2014 loss to be reported at the end of the month. Then, they have the necessary excuse to announce any reboot.

 

However, I will believe it only after it has been implemented and completed. Until then, it is just talk.

Share this post


Link to post
Share on other sites

At Suzanne G. suggestion, wipe the hard disk, I would say, I wish it was that simple. Reformatting means losing everything, also the good things.

 

There are still good things within MAS. And, as I have referred to in a previous reply, there is also talk of “a new team will take over”. Now, as whomever team taking over with the government still in control, has been debated and seen as ill-advised ad nauseam on this board, there seems only one way out.

 

Privatization. The days that every country should have its own government owned airline are long past. The USA has no government owned airline, and for example, Lufthansa is 88.5 percent privately owned and BA was privatized in 1987. And not even talking here about all these independent LCC champions all over the world operating just fine as it is.

 

So now the million dollar question. Would the Malaysian government allow the sale of Khazanah’s 79. 5 percent ownership and, who in his right mind would be taking it? I do not have that answer. What I am inclined to believe though is that privatization is the only viable way out.

Given the fact that he government now has announced, “no more bail outs”, and that massive losses are on the way, (I tend to agree with flee), bankruptcy would be around the corner. Now, that would be a wipe out in true sense.

 

If the government can swallow enough pride by saying, ok, we have tried and failed, lets sell it off, and then there will be different scenarios to think off. One of them is merge with another carrier. And no, I am not talking Air Asia, before you throw that to me. And if you ask me why not, I say, “leave them to what they are doing best, don’t impose a MAS burden on them”.

But if privatization is on the cards and a group of investors is willing and able to step in, and put a firm and qualified upper management team in the pit, who would clean up ruthlessly I would buy shares, at 21 cent now and laugh when they hit three ringgit.

 

There is a lot of hidden talent within MAS, now hindered to prosper because of overlying dead wood. No need for any expats, within MAS there is enough real expertise. Just use them properly. And my advice to a potential investor, threat the unions as assets, not as enemies and they will work with you. No MAS union wants to go down in history as the killer elite. Pun intended.

 

Regards A.

Share this post


Link to post
Share on other sites

Privatization is the way to go. Free of Government interference is the only way forward. Get rid of the cronies and their dodgy contracts.

Share this post


Link to post
Share on other sites

Let's not forget the previous privatisation by Taijuddin Ramli ended up in disaster........Gomen bought back the share five times the then-market value.....

Edited by JuliusWong

Share this post


Link to post
Share on other sites

doubt there will be a serious real change or reboot - its going to be a lot more talk on this but nothing else. If there's a reboot, it would have happened few years ago.

Share this post


Link to post
Share on other sites

Struggling Malaysian Airline taps banks for restructuring: sources

 

(Reuters) - Malaysian Airline System Bhd (MASM.KL) and its key stakeholders are in talks with banks for a strategic overhaul that could include the partial sale of its engineering unit and an upgrade of its ageing fleet, sources involved in the discussions said.

Even before the loss of its flight MH370 from Kuala Lumpur to Beijing on March 8 there was talk that loss-making MAS might need a financial rescue from state investor Khazanah Nasional Bhd, which owns 69 percent of the company.
"They are sending all these feelers to banks to try and test the waters," said a banking source familiar with the situation.
"The most imminent move looks to be on the engineering business, an IPO or trade sale," said the source, who declined to be identified as the talks are private.

Share this post


Link to post
Share on other sites

Let me chip in here one more time.

 

I do not think we have to be afraid of a T.Ramli ghost hovering over future MAS prospects.

The situation is substantially more dramatic than it was during the infamous TR takeover. The takeover was for 32 percent and financed by loans. It took only a few years for the industry to realize what disaster was developing at MAS and when all was set and done and serious capital had changed hands it was too late. MAS never recovered after that.

 

That had a reason, and one of the reasons was that if you dumb down your workforce and bombard them with cronyism and nepotism for many years, your work force, your most valued asset, loses its esprit de corps.

People do not take leadership for granted anymore and whatever management is brought upon them, it will be looked at as, oh well, there we go again. And that has happened. And it will happen again if the government does not let go. Government involvement in Malaysian Airline business did not work in the past and will not work in future. This has nothing to do with the unions, big or small, but with the work force as a whole. Good and knowledgeable people have been neglected and set aside by nominees who were parachuted in. It is no wonder that now the workforce is feeling like a loaf of bread which has been in the oven for far too long.

 

So therefore, this time it should be different. And it can. A takeover candidate has to come with its own money, and with the intention to make a return on their investment. That means, reorganize, reboot, and call it whatever you want, but the bottom line should be that MAS is going to be a prosperous airline again. The difference is now that a takeover means 69.5 percent and for good measure the buyer can leave a minority percentage in the governments hands, as a token and acknowledgement that it is still called MAS. But, no interference, nor golden share or whatever. Step aside.

 

As I said before, a clean sweep across the ranks and re installment of responsibilities for the job you are hired for should be the norm. You do well, you get rewarded. You do badly, you walk. Unions will then have a contributing role to play to keep their members on the ball. Esprit de corps will come back. Everybody knows what and why to work for and the stale bread will become palatable.

 

But of course, could there be such a buyer, would the government indeed let go and step aside. Is it worthwhile to buy MAS and does it have a future? Many questions, but why rule out that there is such buyer who thinks out of the box and sees the hidden jewels. MAS is still an airline, has routes and aircraft. It sure has in house talent. It sure has intrinsic value. But, to have a controlling interest in MAS, the buyer should be a Malaysian company, with the qualifications as set out above. Do not ask me to name one.

 

And, as for a split up and send feelers to commercial banks, (as per flee post above), I would seriously doubt that any bank will put money into it without government guarantees. And them have been denied already. It looks like that at MAS HQ people are going to feel more uneasy by the minute. Like your losing the game and you know it.

 

Disclaimer, the undersigned does not work for MAS, never did, and is not a potential buyer. I just gave my twenty one cent worth of opinion.

 

Regards. A.

Share this post


Link to post
Share on other sites

×
×
  • Create New...