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Malaysian Air Rules Out Bankruptcy as Overhaul Review Gains Pace

 

 

Malaysian Airline System Bhd. (MAS), the carrier reeling from the disappearance of Flight 370 more than two months ago, won’t seek bankruptcy and will instead accelerate an overhaul to help it break even next year.
“I don’t see that as an option at this stage,” Hugh Dunleavy, the airline’s director of commercial operations, said in an interview with Bloomberg Television’s Haslinda Amin yesterday, when asked about a possible insolvency. A review of all operations may take about three months, with implementation of changes maybe requiring another six to nine months, he said.
Malaysian Air shares plunged the most since 1998 this month amid investor concern the government may let the company fail. The carrier has said the jet’s disappearance put additional stress on operations, forcing it to review its business plan after reporting the biggest loss since 2011.
“Now is the time to take a close, hard look at all aspects of our business model and find out those that are core to us, let’s enhance those, make them as efficient as possible,” Dunleavy said in the interview at the airline’s training academy near Kuala Lumpur. “Those that are less core, or where we think another group can do it more efficiently, we should start looking at it.”
China Bookings
The carrier will review all routes, Dunleavy said. Bookings from China dropped 50 percent to 60 percent after MH370, carrying mostly Chinese passengers, vanished March 8, he said. To date, no single piece of debris from the Boeing wide-body airliner has been retrieved.
The airline gained 2.9 percent to 17.5 sen in Kuala Lumpur trading yesterday, trimming the drop this year to 44 percent. The stock is the worst performer on the 63-member BI Global Airlines - Principal business index in the period. All but one analyst tracked by Bloomberg say investors should sell the stock.
The Subang Jaya, Malaysia-based company last reported an annual profit 2010. The flag carrier missed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out revenue gains.
“Obviously, MH370 has put a rather significant hurdle to that objective,” Dunleavy said of a plan to return to profit. “I don’t believe we will achieve that for this year, but I believe what we will be doing, what we are doing is looking at our current business plans, revamping those, looking at all opportunities to escalate the rate of the changes we are putting in so that 2015 will be the break even year.”
Longest Search
The company lost a total 4.57 billion ringgit ($1.4 billion) since the start of 2011. Analysts project losses through 2016 for the airline, according to data compiled by Bloomberg.
The airline pointed to unfavorable foreign exchange rates as an additional challenge. Winning back customers and a “relentless cost focus” will be part of the recovery, it said earlier this month.
Flight 370 with 239 passengers and crew vanished from civilian radars on March 8 while headed north over the Gulf of Thailand. It then doubled back over Peninsular Malaysia and flew south into some of the world’s most remote waters. The hunt for the aircraft has become the longest in modern aviation history.
The incident has put the carrier under global scrutiny, jeopardizing its reputation and prompting boycotts by travel agents in China. It has also hurt the country as a travel destination, with Chinese tourists canceling their visits to the Southeast Asian nation, according to Malaysia’s tourism promotion agency.
The disappearance triggered a “major short-term reaction in consumer behavior,” with the airline observing high cancellation of existing bookings and a reduction in long-haul bookings in favor of short-haul ones, the company said May 15.
Listing Malaysian Air’s profitable divisions and selling stakes in two aviation businesses could raise 4.15 billion ringgit, Malayan Banking Bhd. analyst Mohshin Aziz said in an April 16 report. Government investment company Khazanah Nasional Bhd. owns a 69.4 percent stake in the airline, according to data compiled by Bloomberg.

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Malaysian Air Rules Out Bankruptcy as Overhaul Review Gains Pace

 

Old wine in new bottle, life goes on, business as usual. Same scribe for next episode?

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i found out this report the points pointed out were very relevant to salvage MAS.

 

http://malaysiagazette.com/nasional/nobody-wants-hear-mas-voice-please-dont-do-abdul-aziz#axzz32spKGiOg

 

While some of his points are valid (the whole FY/MH Domestic-International split seems like a viable idea), other points smacks of old fashion business sense. E.g holding on to MRO - unless the MRO team actively solicit business from other airlines instead of doing dribs and drabs depending on whenever the hangar is free from handling MH, it'll only be another cost centre. Right now from what I can see, MH maintenance work monopolizes the space, hence missed opportunities for new clients.

 

As for the A380 - equip it well and it'll be a crowd puller. It doesn't have to be fancy but it should be more functional & offers a high level of comfort. It can make money if done properly.

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RESTRUCTURING PLAN: MAS to cancel some old contracts and trim workforce by 10pc, say officials
Company officials said MAS is targeting May 28 for the major restructuring.

 

I am expecting a surprise major announcement tomorrow. Hopefully I won't be disappointed.

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I have tried to make some sense of the article as quoted by K.a.H. see above. I read it twice but it is very incomprehensive. And i had great difficulty in getting the message if there was any. I am absolutely for the institution of unions but, if the MAS union was behind this article, i like to suggest politely that the writer,(s) of this article go back to English classes and get at least someone proof read their proza. It would do wonders.

 

And I quote here, " A special message for MAS board of director; in the afternoon of 28th May 2014 or early; the clueless CEO will endorse officially and handle over MAS MRO to Tony Fernandez’s proxy as the buyer!"

 

That is an enormous statement. Can they back this up or is it just Verbal Diarrhea?

If you want to be taken seriously, not only in aviation but in any industry, get at least your facts right, prove them and if communicating in the English languaze, use spelling and grammar software.

 

The intended message now is just a shot in the dark.

 

Cheers

A.

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I read it twice but it is very incomprehensive

In the morning of 28th May 2012 as is in scheduled; the paid clueless CEO of MAS will propose to MAS board of directors to sell off its main core Engineering division .....

A special message for MAS board of director; in the afternoon of 28th May 2014 or early; the clueless CEO will endorse .....

Cannot be a trivial matter for the BOD to have taken two years to reach a decision :)

Edited by BC Tam

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I have tried to make some sense of the article as quoted by K.a.H. see above. I read it twice but it is very incomprehensive. And i had great difficulty in getting the message if there was any. I am absolutely for the institution of unions but, if the MAS union was behind this article, i like to suggest politely that the writer,(s) of this article go back to English classes and get at least someone proof read their proza. It would do wonders.

 

And I quote here, " A special message for MAS board of director; in the afternoon of 28th May 2014 or early; the clueless CEO will endorse officially and handle over MAS MRO to Tony Fernandez’s proxy as the buyer!"

 

That is an enormous statement. Can they back this up or is it just Verbal Diarrhea?

If you want to be taken seriously, not only in aviation but in any industry, get at least your facts right, prove them and if communicating in the English languaze, use spelling and grammar software.

 

The intended message now is just a shot in the dark.

 

Cheers

A.

Arthur, this website is just a front for exposing MAS' so called inadequacies. It is full of "insider" stories. The have an agenda because they have vested interests. Its a good place to look for sordid stories and it is full of hate.

 

However, if what they have posted all this while is true and can stand up in legal tests, why have they not taken their cases to court?

 

To me, they are just a bunch of losers with grouses or scores to settle. MAS is in deep trouble now and if they love MAS so much, they should seriously contribute to its recovery and not create more trouble.

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I concur. Their English literacy alone speak volume of what type of employees they are. It is 29 May today, has the so called retructuring been postponed?

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Punish the management, but save the airline, ex-MAS chief tells Putrajaya

 

Pouring scorn on calls to declare Malaysia Airlines (MAS) bankrupt, former chief executive officer Tan Sri Abdul Aziz Abdul Rahman said the loss-making flag carrier should not be punished for mismanagement by government-appointed teams, but instead, Putrajaya should bail it out once again.
Abdul Aziz said MAS was in a deplorable state now as those who manage it are "not doing their jobs very well" and have not been able to adapt to the competitive airline industry.
"The problem started in 1994 when the government decided to give up its shares and sold it to a private group. It all went downhill from there," he told The Malaysian Insider.
"By 1998, the government had to step in and redo the whole thing to salvage it. Since then, the government has bailed out and changed its management teams many times but until today, the problem has not been fixed."
In 1994, Tan Sri Tajudin Ramli bought a 32% equity in MAS and was the airline's chief executive officer from then until 2001, after which he sold back the shares to the government at RM8 a unit, when the market price was only half of that.

 

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Punish the management, but save the airline, ex-MAS chief tells Putrajaya

 

Pouring scorn on calls to declare Malaysia Airlines (MAS) bankrupt, former chief executive officer Tan Sri Abdul Aziz Abdul Rahman said the loss-making flag carrier should not be punished for mismanagement by government-appointed teams, but instead, Putrajaya should bail it out once again.

 

Abdul Aziz said MAS was in a deplorable state now as those who manage it are "not doing their jobs very well" and have not been able to adapt to the competitive airline industry.

 

"The problem started in 1994 when the government decided to give up its shares and sold it to a private group. It all went downhill from there," he told The Malaysian Insider.

 

 

"By 1998, the government had to step in and redo the whole thing to salvage it. Since then, the government has bailed out and changed its management teams many times but until today, the problem has not been fixed."

 

In 1994, Tan Sri Tajudin Ramli bought a 32% equity in MAS and was the airline's chief executive officer from then until 2001, after which he sold back the shares to the government at RM8 a unit, when the market price was only half of that.

 

More here: http://www.themalaysianinsider.com/malaysia/article/punish-the-management-but-save-the-airline-ex-mas-chief-tells-putrajaya

 

 

Only the management should be punished?

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Only the management should be punished?

 

Of course not. But there are sweeping generalisations always made. SOME in Management need to go. and SOME below need to go.

 

Unfortunately, in every single organisation i've worked with - EVERYONE (including me at stages, i'll admit) thinks "i'm the best thing since sliced bread - he/she should go instead"

 

If people were a bit more introspective and honest with themselves - i would IMMEDIATELY go into the mirror supplying business. But it's not human nature.

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Of course not. But there are sweeping generalisations always made. SOME in Management need to go. and SOME below need to go.

 

Unfortunately, in every single organisation i've worked with - EVERYONE (including me at stages, i'll admit) thinks "i'm the best thing since sliced bread - he/she should go instead"

 

If people were a bit more introspective and honest with themselves - i would IMMEDIATELY go into the mirror supplying business. But it's not human nature.

 

Well said about our realities :)

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One thing the former MAS chief is right about though - that MAS has not solved any of its problems. So, the current management will either have to really dig into those problems or a new management should be appointed to specifically tackle them.

Edited by flee

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I have read the Insider article.

 

Amongst other statements, Tansri Aziz said,

 

"And maybe, you catch hold of those who made these blunders and hang them. Maybe the people would like to see that. It will give confidence to the people that you are serious about solving the problem."

 

Quite a proposition I would say. I met him once some time ago and I think he is still a very sharp cookie. (Age 80 now).

I do not think that the PM reads this forum and I am also not sure if he reads the Malaysian Insider, but if it was pointed out to him?

 

Could the PM not send for Tansri and say, “ok Tansri, here is what we do, I give you one year, bring your own team and reboot the airline top to bottom, we, the government will not interfere”. “And you do this as National Service, of course.” “If we agree, we give you the budget”

 

My questions, 1. Would the government be in for such a deal? 2. Would Tansri be in for such a deal? 3. Would the unions buy it? 4. Would the public buy it?

Or, would I need one of Suzanne G. mirrors to look into and conclude, nah, stop fantasizing.

 

Cheers

Art

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The question is: will Khazanah Nasional Malaysia willingly to let go their 100% shares in Penerbangan Malaysia Berhad and 69.37% in Malaysia Airlines? And who are the people representing Khazanah Nasional Malaysia in Malaysia Airlines? Until a good strategic exit and take over plans is in place and revealed then the situation will never changed.

 

http://www.khazanah.com.my/docs/30Apr2014_investment_structure.pdf

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Malaysia Airlines seeks more cost-cutting to survive crisis

 

Malaysia Airlines is stepping up efforts to cut costs to survive, following the mysterious disappearance of its flight MH370 which has resulted in the biggest crisis in its 40-year history, a senior executive said on Monday.
The Boeing 777-200, carrying 239 passengers and crew, vanished from radar screens on March 8 shortly after taking off from Kuala Lumpur bound for Beijing.
Before the disaster management had hoped to break even in 2014 after three years of losses but last month it posted a record quarterly loss of 443.4 million ringgit ($138 million) for the three months ended March 31.
The second quarter this year is “a challenge” but the management wants to implement measures that, if successful, could enable the airline to break even in 2015, Hugh Dunleavy, the carrier's director of commercial operations, told Reuters on the sidelines of the annual meeting of the International Air Transport Association (IATA) in Doha, Qatar.
“I don’t think there will be any sacred cows,” said Dunleavy. “Every part of the airline will have to be looked at very carefully.”
Dunleavy declined to comment on suggestions that MAS could be taken private or that it might sell off its engineering business, but he added that there were other things that the airline could do. These included cutting “legacy costs” that have been in place for “the last 10 to 20 years”, he said.
“The world has changed since those costs were implemented. In those days, the Middle Eastern carriers and low-cost carriers were non-existent. MH370 has given us the impetus to be far more vigorous in going after those costs,” he said.
The airline will retire the last of its older Boeing 737-400 aircraft by 15 June, replacing them with 737-800s that have higher fuel efficiency and lower maintenance costs.
The 737-800s are also being worked harder, their average utilization increasing from nine hours a day to around 12 hours, said Dunleavy.
Other operating costs are also being tackled, but Dunleavy declined to provide more details as these are being finalised.
Media reports in Malaysia have also suggested that the airline could re-negotiate its catering and ground-handling contracts.
Industry sources said that MAS could also cut jobs and freeze wages and bonus payments.
The cargo unit's business model is also being re-assessed, with the airline possibly selling some freighters if it can find a buyer.
MAS had planned to order new passenger aircraft, including Airbus A330s and A350s, before MH370 went missing. That plan has been put on hold, although the airline could acquire some A330s on lease to replace ageing Boeing 777-200s, the sources said.
The airline could also reconfigure the cabin to add more business class seats to increase revenue yields.
Revenues were hit after the MH370 disaster in part because the airline stopped all promotional and marketing activity. This resumed in the first week of May, and forward bookings have returned to pre-MH370 levels in most markets, said Dunleavy.
Average fare yields, however, remain under pressure due to competition from other full-service airlines in Asia and the Middle East, as well as low-cost carriers AirAsia and AirAsia X in Malaysia.
The airline continues to burn cash but Dunleavy said he remained confident that management can turn the business round.
"We have to look at the business model that will allow us to be sustainable over the next 40 years," he said.

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"We have to look at the business model that will allow us to be sustainable over the next 40 years," he said.

 

Next 40 days or 40 months maybe...

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40 weeks.

Oops my mind wasn't working well this morning, although I knew there was something missing there :)

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The airline could also reconfigure the cabin to add more business class seats to increase revenue yields.

 

I suppose this means we can forget about them ever having a hard-product that's actually competitive.

 

Squeezing in more subpar J seats won't necessarily increase yields. The other kids in the neighborhood such as CX, SQ, TG and even GA are moving towards 1-2-1 lie flat seating for their long haul flights while MH is still stuck in the 6 or 7-abreast era.

 

Then again, investing in new products means spending money (which they hardly have) so I won't be holding my breath.

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I suppose this means we can forget about them ever having a hard-product that's actually competitive.

 

Squeezing in more subpar J seats won't necessarily increase yields. The other kids in the neighborhood such as CX, SQ, TG and even GA are moving towards 1-2-1 lie flat seating for their long haul flights while MH is still stuck in the 6 or 7-abreast era.

 

Then again, investing in new products means spending money (which they hardly have) so I won't be holding my breath.

 

All aisle access all that will inevitably cost money. I care less about all aisle access than $$ out of my purse.

 

Which is why i opine that MH is actually unbeatable in the price/offering stakes - and punters know it - hence why loads are great.

 

To go against the grain of all of MW: I hope they DON'T change it (if changing it means higher prices) I'll take subpar J seats ANY day with those prices.

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