MAS Privatisation

[flee 5]

Yes, the A380 is not the problem.

 

MH's real problem is that its RASK is less than its CASK. So every ticket sold is making a loss and isn't contributing any profits, whether it is a B737, A333, B772 or A380 ticket.

Edited August 6, 2014 by flee

[Arthur Van Straten 0]

Although i have mentioned my message before, i dont think it causes antagonism when i repeat again.

 

It does not matter anymore if you change the logo of MAS, its tail logo or name.

If you do not address the upcoming open sky policy in 2015, or any year it is going to be enforced, you will surender to the barbarians at the gate.

 

A wise investor has said this when asked about it, his answer was, " dont swim with the sharks if yo are not fast enough and, if you are swimiing naked you will be exposed when the tide goes out. That, my friends it is in a nutshell.

 

When KK Lee says in post 297, that operation cost of a380 is only 2 to 3% higher than 744 and has the lowest cask. i like to ask for a confirmation on that. It would not be make an iota of difference whern the sharks come swimming.

 

And for my friend flee t post 298, if true, you could ground thye entire MH fleet, nes pas? Also not relevant if you are swimming naked.

 

I apologise for being this blunt as it is, but any dollar spend on MAS without adressing the open sky policy is tainted with ignorance is bliss, at the minimum.

 

As always,

A.v.S. with best regards.

Edited August 6, 2014 by Arthur Van Straten

[KK Lee 5]

 

When KK Lee says in post 297, that operation cost of a380 is only 2 to 3% higher than 744 and has the lowest cask. i like to ask for a confirmation on that. It would not be make an iota of difference whern the sharks come swimming.

 

.

 

You need to dig news achieves when SQ introduced A380.

Edited August 6, 2014 by KK Lee

[Johan Z 0]

I don't believe A380 operating cost is only a fraction higher than 744.

[flee 5]

I don't believe A380 operating cost is only a fraction higher than 744.

If I remember correctly, there was a discussion on a.net on this. Singapore Airlines' numbers were quoted. Trip costs were about 4-7% higher than that of the B744. But the CASK was about 19% lower. That was one of the reasons why SQ hurriedly retired their B744s.

Although i have mentioned my message before, i dont think it causes antagonism when i repeat again.

 

It does not matter anymore if you change the logo of MAS, its tail logo or name.

If you do not address the upcoming open sky policy in 2015, or any year it is going to be enforced, you will surender to the barbarians at the gate.

 

A wise investor has said this when asked about it, his answer was, " dont swim with the sharks if yo are not fast enough and, if you are swimiing naked you will be exposed when the tide goes out. That, my friends it is in a nutshell.

 

When KK Lee says in post 297, that operation cost of a380 is only 2 to 3% higher than 744 and has the lowest cask. i like to ask for a confirmation on that. It would not be make an iota of difference whern the sharks come swimming.

 

And for my friend flee t post 298, if true, you could ground thye entire MH fleet, nes pas? Also not relevant if you are swimming naked.

 

I apologise for being this blunt as it is, but any dollar spend on MAS without adressing the open sky policy is tainted with ignorance is bliss, at the minimum.

 

As always,

A.v.S. with best regards.

I believe MH is well aware of the threats that the ASEAN Open Skies policy will bring. That was why they had the share swap with Airasia. Unfortunately, the unions had a narrow minded short term view of this. Once the share swap was unwound, both MH and Airasia went about expanding capacity to crowd competitors out of the market.

 

When Malindo Air was established, competition became irrational and that was why MH made larger than expected losses in 2013 and Airasia's profits became depressed. In 2014, Airasia managed to consolidate its position by restricting its growth so that the massive capacity increases in 2013 can be absorbed by the market. Unfortunately for MH, the twin B777 disasters meant that its future is further clouded. Malindo Air, meanwhile, decided to harvest low hanging fruit at SZB and its operations at KUL are focused more in international routes.

 

Where is the ASEAN Open Skies threat going to come from? It would appear that SQ would be strongest in terms of competition - from Silkair and Tiger. The Lion Group are already in Malaysia through Malindo Air. VietJet may be another potential threat while the Thai carriers are not likely to venture into Malaysia.

 

MH's biggest threats are still internal as it cannot get its costs under proper control. As such, its cost efficiency lags behind that of AirAsia Group's. Its fleet of aircraft is largely efficient enough - only the B772s are older than 10 years old. What it needs is JAL-like political will to put its house in order.

[Johan Z 0]

If I remember correctly, there was a discussion on a.net on this. Singapore Airlines' numbers were quoted. Trip costs were about 4-7% higher than that of the B744. But the CASK was about 19% lower. That was one of the reasons why SQ hurriedly retired their B744s.

 

In reality, many airlines replace their 744 with 77W. Among them are CX, BR, JL and ANA. That's why I wonder if A380 > 747 is only on paper and is part of Airbus sale pitch.

[flee 5]

B77W is a good replacement for those airlines that carry a lot of belly cargo.

[Isaac 0]

That was why they had the share swap with Airasia. Unfortunately, the unions had a narrow minded short term view of this.

The proposed marriage between the two did nothing but more damage to MAS. There were also many questionable deals that have gone unanswered. It also did nothing good to the travelling public.

[KK Lee 5]

I don't believe A380 operating cost is only a fraction higher than 744.

 

 

In reality, many airlines replace their 744 with 77W. Among them are CX, BR, JL and ANA. That's why I wonder if A380 > 747 is only on paper and is part of Airbus sale pitch.

 

The number was from A380 operator SQ.

 

Airlines replace 744 with 77W as they don't need additional capacity of A380. If A380 CASK is higher than 77W, neither SQ or EK will operate A380.

 

The proposed marriage between the two did nothing but more damage to MAS. There were also many questionable deals that have gone unanswered. It also did nothing good to the travelling public.

After the abandoned deal, MAS hasn't been profitable, what is there to damage?

Edited August 7, 2014 by KK Lee

[flee 5]

The proposed marriage between the two did nothing but more damage to MAS. There were also many questionable deals that have gone unanswered. It also did nothing good to the travelling public.

At the time of the swap, a very convenient phrase was used: "this will minimise wasteful competition". As we saw last year, the wasteful competition resulted in MH clocking up massive losses and Airasia's profits tumbled. But the upside is that the consumer got lower fares.

 

Just look at the KUL-LGK RM 99 return fare on MH that is currently promoted - AK's lowest bare fare is RM 180. Is it any wonder why MH is now burning RM 7m a day?

[Johan Z 0]

 

 

The number was from A380 operator SQ.

 

Airlines replace 744 with 77W as they don't need additional capacity of A380. If A380 CASK is higher than 77W, neither SQ or EK will operate A380.

 

The cost operating A380 is the deterrent for an airline to order A380s. This explains why 77W is so popular

[flee 5]

After the abandoned deal, MAS hasn't been profitable, what is there to damage?

Well, this meant that MH's recovery is even further away.

 

But it has also damaged AK - the whole purpose of the share swap was to ensure that both MH and AK can face Open Skies competition in a better shape.

The cost operating A380 is the deterrent for an airline to order A380s. This explains why 77W is so popular

Don't think that cost is an issue.

 

Airline business is complex. The A380 is too much of a niche plane. Used on the right routes (like those operated by EK), it is highly profitable for the operator.

 

The B77W is more of an all rounder - it should work for more airlines, especially those that are smaller and cannot fill an A380.That is why it is popular - it fits with more airlines' business models. But its days are numbered. Airlines are now looking to buy the next generation of B777s. So MH has already missed the boat for the B77W.

 

The A380 will come on its own at slot restricted airports. Airlines will want to carry as many pax as it can for each slot pair at these congested airports. That is why the A380 works so well for SQ/EK/BA. It actually works well in MH too - its A380 load factors are over 90% but MH is still losing money because its cost structure is inefficient. That means that the A380 is only helping to minimise costs, not make profits!

 

Although the A380 may seem to be a monster now, its day will come. The only question is whether Airbus will be able to support it until that time comes.

[Isaac 0]

After the abandoned deal, MAS hasn't been profitable, what is there to damage?

Heavier losses after the abandoned deal ? And quite a few lucrative contracts were taken away from MAS ? Traffic rights that were taken from MAS but never returned after they announced they weren't going ahead with the proposed marriage ? Damage had already been done before the crazy marriage was announced off.

 

 

At the time of the swap, a very convenient phrase was used: "this will minimise wasteful competition". As we saw last year, the wasteful competition resulted in MH clocking up massive losses and Airasia's profits tumbled. But the upside is that the consumer got lower fares.

 

Just look at the KUL-LGK RM 99 return fare on MH that is currently promoted - AK's lowest bare fare is RM 180. Is it any wonder why MH is now burning RM 7m a day?

Even BA offers this type of air fare on its EU flights from time to time. Besides, it's not like MAS is selling all seats for RM99. MAS is burning RM7 million a day because they never get to the bottom of the problems and the two accidents make it all worse.

 

 

That is why the A380 works so well for SQ/EK/BA. It actually works well in MH too -

I'm not sure if the A380 is working well for SQ too... Their profit is under immense pressure and future is looking very bleak. They are also about to pull out all A380 service to/from Australia. By the end of this year, there will only be 1 daily SQ A380 service to Autralia. The A380 has proved it is too big for all 4x daily LHR flights to be operated solely using A380. CX on the other hand, is still doing fine with its large 77W fleet.

Edited August 7, 2014 by Isaac

[Alif A. F. 0]

Heavier losses after the abandoned deal ? And quite a few lucrative contracts were taken away from MAS ? Traffic rights that were taken from MAS but never returned after they announced they weren't going ahead with the proposed marriage ? Damage had already been done before the crazy marriage was announced off.

 

 

Even BA offers this type of air fare on its EU flights from time to time. Besides, it's not like MAS is selling all seats for RM99. MAS is burning RM7 million a day because they never get to the bottom of the problems and the two accidents make it all worse.

 

 

I'm not sure if the A380 is working well for SQ too... Their profit is under immense pressure and future is looking very bleak. They are also about to pull out all A380 service to/from Australia. By the end of this year, there will only be 1 daily SQ A380 service to Autralia. The A380 has proved it is too big for all 4x daily LHR flights to be operated solely using A380. CX on the other hand, is still doing fine with its large 77W fleet.

 

Speaking of which, BA offers around RM2,700 to LHR return ex-BKI via HKG back few month ago!

[Azman MN 1]

 

I'm not sure if the A380 is working well for SQ too... Their profit is under immense pressure and future is looking very bleak. They are also about to pull out all A380 service to/from Australia. By the end of this year, there will only be 1 daily SQ A380 service to Autralia. The A380 has proved it is too big for all 4x daily LHR flights to be operated solely using A380. CX on the other hand, is still doing fine with its large 77W fleet.

 

Noticed on my last SQ flight last week that ZRH is now back to A380 with economy class on upper deck. Maybe they could not fill up the business seats?

[flee 5]

Heavier losses after the abandoned deal ? And quite a few lucrative contracts were taken away from MAS ? Traffic rights that were taken from MAS but never returned after they announced they weren't going ahead with the proposed marriage ? Damage had already been done before the crazy marriage was announced off.

This issue is moot - both MH and D7 have expanded their Australian flights and both are suffering losses due to the irrational competition. If D7 did not stop their LGW and ORY flights, MH may not find it so easy to fill their A380s.

 

To blame it on traffic rights taken/given is rather lame. The govt. would probably have negotiated more rights so that all carriers can operate the flights that they wish (like for Australia). Time is needed for such things to happen.

 

The share swap was cancelled before we saw the full effects of the rationalisation.

 

Isaac, on 07 Aug 2014 - 12:04 PM, said:

I'm not sure if the A380 is working well for SQ too... Their profit is under immense pressure and future is looking very bleak. They are also about to pull out all A380 service to/from Australia. By the end of this year, there will only be 1 daily SQ A380 service to Autralia. The A380 has proved it is too big for all 4x daily LHR flights to be operated solely using A380. CX on the other hand, is still doing fine with its large 77W fleet.

 

I think SQ's profit pressures are acute with their TigerAir operations. Tiger Mandala is on the verge of collapse and they have already sold their Philippine operations.

 

As far as equipment adjustments are concerned, that is a normal thing airlines do to adjust supply and demand according to seasonal patterns. Nothing to be concerned about. EK does the same and that is why both SQ and EK also have other types of aircraft in their fleet.

 

SWOT Analysis on SQ: http://centreforaviation.com/analysis/singapore-airlines-swot-challenges-continue-as-competition-intensifies-as-shown-by-1qfy2015-results-180289

 

MH is missing an aircraft of the size between the A380 and A333. They should really be thinking of ordering the A350-1000 for that role. Meanwhile they should lease some B77Ws to fill the gap.

 

CX is well known for saying that their network needs aircraft that can carry both passengers and lots of belly cargo. I am sure CX can fill the seats of an A380 - just that they also need cargo capacity in their holds.

 

BA, CX, SQ are all profitable because they understand their business model and the threats that they are facing. I am sure the management at MH understands what they have to do too. It is just that political will is lacking. That is why they are in limbo now. The management hasn't got it in them to take on all the threats from competitors, unions, government... Sad!

[leon t 0]

Whatever it is, MH does need now to figure out and order the next aircraft to replace its B772s and possibly its A380s too - as it is running on very short time as its 772s are already over 14 years old and more. Its better for MH to get the new 777X or A350-1000 as it can cover its longer range routes and also if it can help improve yields over its A380s and in perhaps having more flights to say LHR per day than having a single or double A380 service. With just 6 A380s MH expenditure on maintenance for example, and fleet training will be higher than airlines that have a fleet of 20 or more A380s. And even for maintenance, a A380 have 4 engines as opposed to the 777X or A350 with just 2 engines for greater efficiency. Morever a A380 cannot be used to other routes/airports that MH flies to when the loads are down - whereas an aircraft like the 777X can do both ie fly on any MH destinations.

[Arthur Van Straten 0]

@ flee.

 

First, I don’t think that the initiation of the share swap was made with the open sky policy 2015 in mind. In German language we would call such explanation, “hineininterpretieren”

 

Your last sentence make sense in a way. However, as you write that MH management knows what to do but can’t, then they have two options, tell it like it is, go public on it and face possible consequences to be sacked. Or, keep your salary and emoluments, sit tight as the ship sinks. They have contracts. Anybody blame them?

 

@ leon t

 

Yes, make sense too. However, who will pay for that?

 

Cheers

Art

[flee 5]

perhaps having more flights to say LHR per day than having a single or double A380 service.

The only way MH can get more slots at LHR is to buy them from an existing operator, that is, if anyone is willing to sell...

[leon t 0]

as in has been for the last decade or more, the Malaysian govt through its central bank will have itsa special purpose vehicle or its existing VPV to buy the planes and lease it to MAS. Its still uncertain whether the govt will really truly privitalised MH or just create another govt-owned company to run it; but MH do need to order its next aircraft to replace its existing 772s now.

[flee 5]

KHAZANAH Nasional Bhd, the majority shareholder of Malaysia Airlines (MAS), is believed to have started discussions with the government on the restructuring of the national carrier, and an announcement may come in a few weeks.

Business Times understands that Khazanah has held several meetings with the government over the last few weeks on the future of the ailing carrier.

“The announcement on MAS will possibly be made next week onwards,” a person familiar with the matter told Business Times yesterday.

It is believed that MAS will opt for a delisting from the Main Market as the first step to revive its fortunes.

Should the plan get the green light from the government, Khazanah will buy back the remaining MAS shares that it does not currently own. The move will enable the government investment arm to privatise the airline.

Khazanah holds 69.4 per cent stake in the national carrier, with the government holding a golden share.

MAS is worth RM4.01 billion yesterday after its share price inched 0.005 sen to close at 24 sen on Bursa Malaysia.

Meanwhile, another source said MAS favours the idea of delisting to make way for privatisation, rather than selling it to a third party or declaring bankruptcy. The source said the worst-case scenario for the airline is to opt for a complete shutdown.

“It is the last resort but it would be difficult.

They can’t just close down a national carrier. The airline has to work this out with the government.”

There has been much speculation on the fate of MAS, from privatisation to the selling of its subsidiaries and declaring bankruptcy.

The airline’s head honcho, Ahmad Jauhari Yahya, announced on June 25 that the only option to ensure the airline’s survival is by making radical changes to its business structure.

MAS has been hit by financial losses over the years.

Last year, the airline reported a wider net loss of RM1.17 billion from a loss of RM432.59 million in 2012 despite revenue growing to RM15.12 billion from RM13.76 billion.

Source: http://www.nst.com.my/node/20656

[BC Tam 2]

You can just smell another KTM'ish deal brewing up !!
Buy out the minorities, which at current market valuation would not amount to much in grand scheme of things

Clean it up a bit, as best as possible
Then have a (well connected) knight in shining armour wielding the nominal Ringgit to sapu things up lock stock and barrel

 

Hang on, that last bit sounds vaguely similar to rebirth of another Malaysian aviation venture no ?!

[flee 5]

Malaysia Airlines shares to be halted on Friday -sources

 

Aug 7 (Reuters) - Malaysia Airlines (MAS) plans to suspend its shares from trading on Friday, two sources familiar with the situation said, likely paving the way for state investor Khazanah Nasional to take the airline private as a first step in a major restructuring.

 

Full report: http://www.reuters.com/article/2014/08/07/malaysia-airlines-suspension-idUSL4N0QD5OV20140807

[Isaac 0]

Speaking of which, BA offers around RM2,700 to LHR return ex-BKI via HKG back few month ago!

Woah! I was not aware that you can now book a return flight to Europe from BKI on ba.com. A random search for a return ticket in World Traveller Plus from BKI to LHR came back with just a little over RM5,000, that's almost 3k cheaper than KA/CX!!

 

 

Noticed on my last SQ flight last week that ZRH is now back to A380 with economy class on upper deck. Maybe they could not fill up the business seats?

May be it is due to LX also offers a daily nonstop flight between ZRH and SIN ? Both are Star carriers anyway.

 

 

This issue is moot - both MH and D7 have expanded their Australian flights and both are suffering losses due to the irrational competition.

D7 forced itself into SYD and MEL.

 

 

 

To blame it on traffic rights taken/given is rather lame.

I was trying to point out why the MAS-Air Asia JV was a bad idea (still is a bad idea). Tony was quick to transfer not only the landing slot at SYD and MEL but the highly prized HND traffic rights too! Some profitable engineering contracts were also taken away from MAS. How can that be good to MAS ? Besides, those Air Asia people appointed to the MAS board also failed to address the problems at MAS (catering contract and so many more). It's better to sell it to a foreign carrier than a competing Malaysian airline.

Edited August 7, 2014 by Isaac

[Johan Z 0]

http://www.businesstimes.com.sg/premium/top-stories/mas-plans-suspend-its-share-trading-today-20140808