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Mohd Suhaimi Fariz

MAS Privatisation

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So staff being retrenched this time offered redundancy compensation (like VSS scheme years ago) or not ?
Or other option as I believe is 'transfer' to other GLC ?

Edited by BC Tam

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MAS is already in more than rm12 BILLION debt and Khanazah too have another few billion in bailing out MAS and for this restructuring will spend another rm3 BILLION to try and turnaround MAS. All in MAS related debts would easily go up to near rm20 Billion!! The govt should have truly allow MAS to be truly and totally privitalised commercially and not by any other govt-linked companies. A brand new airline startup would have even cost the govt much less if the govt still wanted to run an airline through its nominees.

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Khazanah unveils RM6 bil rescue plan for MAS

 

Khazanah Nasional announced a RM6 billion plan to rescue ailing Malaysia Airlines aimed at returning it to profit within three years or by 2017. The 12-point plan will involve the formation of a new company (newco) to take over the assets and business of the old company (oldco) and a 30% or 6,000 jobs cut.

If and when the airline becomes profitable, then the airline may be relisted, which would be within five years of delisting.

The Act is to ensure that decisions cannot be taken to court and is analogous to legislative protection accorded to Japan Airlines and Chapter 11 protection given to US companies which are facing bankruptcy and liquidation.Announcing the plan today, Khazanah managing director Azman Mokhtar said that other key moves involve the passing of a MAS Act to facilitate staff transfer and to terminate or review contracts which are unfair to the airline.

It will also ensure that Malaysia Airlines will get to decide the staff that it wants to keep and let go of other staff through redundancy packages. There will also be new terms and conditions of service.

There are not likely to be haircuts as most of Malaysia Airlines debt is owed to the government while pension fund KWAP’s RM750 million sukuk facility will be converted to equity as part of the rescue plan.

Azman said that going by current trends the airline’s losses for the full year could come up to as high as RM2 billion of which about half can be attributed to the bad effects of the two tragedies involving MH370 in March and MH17 last month.

Malaysia Airlines Rescue Package

If nothing is done, Malaysia Airlines’ cash is expected to reduce to a critical level of RM500 million by the end of the year.

Malaysia-Airlines-Rescue-Package-290814.

Azman also said that an Aviation Commission is to be set up by the government as part of the overall plan. One of the roles of the commission would be to determine compensation for routes that are not commercially viable but which the government may desire Malaysia Airlines to operate.

Malaysia Airlines current CEO Ahmad Jauhari Yahya has agreed to continue as CEO of oldco during the transition period which is expected to be completed by July 1 next year. But in the meantime there will be global search to get a CEO for the newco, Azman said. While there have been discussions, nothing has been finalised, he added.

The plan is dependent on Khazanah getting full control of Malaysia Airlines via its recent takeover offer at 27 sen per MAS share which it does not already own.The newco’s focus will be on regional operations (flights up to eight hours), reaching Australia/New Zealand, Japan and the Middle East which account for some 70% of the airline’s operations anyway. It will use its Oneworld Alliance to provide connectivity for its customers.

He said that Khazanah was instructed by the Cabinet to come up with an independent review of Malaysia Airlines in February this year. The plan arises from that and was approved by the Cabinet two days ago.

http://www.kinibiz.com/story/corporate/105164/khazanah-unveils-rm6-bil-rescue-plan-for-mas.html

MAS Act will give a new legal implication to GLC. A windfall for current oldco suppliers? With compensation on unprofitable route, newco will eventually become old wine in new bottle. Wonder whether AK, D7 and OD are eligible to apply for subsidy on unprofitable route? Wonder what will EU commission for competition, China Anti unfair competition, similar authority in Asean will rule on this route subsidy?

Edited by KK Lee

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I haven't come accross any Act in Malaysia's legislative system that is named after and being passed in order to save a company. What a powerful entity MAS is.

 

Summary of MAS Act 2014:

  • MAS's decisions cannot be taken to court and is analogous to legislative protection accorded to Japan Airlines and Chapter 11 protection given to US companies which are facing bankruptcy and liquidation.
  • Facilitate staff transfer (terminated staff is now guranteed a new job now that there is a law to protect them).
  • To terminate or review contracts which are unfair to the airline.
  • MAS gets to decide the staff that it wants to keep and let go of other staff through redundancy packages (bad news for taxpayers since now that MAS is fully gomen, of course tax money is going to be used here).
  • New terms and conditions of service for staff employment (should mirrors AK's).

My question is, is the Act applies to AK or OD or FY if they are facing similar situation as MAS on any circumstances covered by the scope of the Act?

An Aviation Commission is to be set up by the government as part of the overall plan. One of the roles of the commission would be to determine compensation for routes that are not commercially viable but which the government may desire Malaysia Airlines to operate.

This is a bit complicated with regards to anti competition matters but I think because MAS is now a government unit, it does not applies to such rules? AK and OD could not request for the same treatment because the government does not hold a direct shares of theirs. With regards to the enforcement of the scheme, I hope the new CEO of the newco will really enforce strict terms on this, i.e. separate the routes affected in a sub P&L and ideally net everything off to achieve a 0 profit/loss, which I think is the most fair treatment to both the company and the government.

But in the meantime there will be global search to get a CEO for the newco, Azman said. While there have been discussions, nothing has been finalised, he added.

 

Kudos for hiring on a global stage. Are we going to finally get the first non bumi CEO? There should be plenty of potential talents in Singapore Airlines alone, and I bet 90% of them are Malaysians.

 

 

The newco’s focus will be on regional operations (flights up to eight hours), reaching Australia/New Zealand, Japan and the Middle East which account for some 70% of the airline’s operations anyway. It will use its Oneworld Alliance to provide connectivity for its customers.

 

This is alarming because:

  1. MAS is adopting D7's route strategy (flights of up to 8 hours only. It also mean no need for A380s and B772 at all. A333 will be able to perform this job excellently).
  2. Europe is totally omitted. What will happen to the A380s? Selling all precious slots in Heathrow?
  3. If MAS is going to leave Europe once and for all, who will be the oneworld partner feeder? Qatar and Sri Lankan are top two contenders in my opinion. So a lot of Malaysians will be changing hubs in Doha and/or Colombo soon.
  4. Could LHR be one of the route under compensation scheme? Still there will be excess of A380s.

No mention of PMB at all. As the owner of most of MH's aircraft, this is rather surprising that they are not being roped in.

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Perhaps, the A380 can be deployed to SYD other than LHR, but at the same time cutting less prominent routes such as DRW and BKI-PER. Besides, MAS should focus on product consistency on the SYD-KUL-LHR route.

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LHR will definitely not be touched. I don't see CDG being cut or reduced either. I think AMS will also be safe. I see FRA and IST being cut. I real hope they don't cut the frequency of services to Australia.

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Azman also said that an Aviation Commission is to be set up by the government as part of the overall plan. One of the roles of the commission would be to determine compensation for routes that are not commercially viable but which the government may desire Malaysia Airlines to operate.

 

If route subsidy is exclusively for MH mean the gomen is rewarding failure with unlimited funds. As AK, D7, OD are Malaysian company and paying tax, route subsidy should be open for bidding and award to the most competitive bid.

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More details.

 

http://www.themalaysianinsider.com/malaysia/article/mas-to-cut-30-of-staff-move-hq-to-klia1

 

move its headquarters and principal operations to KLIA

 

Where would their head quarters be? Mezzanine level at MTB? I do not recall any construction ongoing, nor a suitable location for the construction of their new HQ. Or are they converting the deserted LCCT as a HQ?

 

So can we conclude that the land in Subang will be sold for commercial developments?

 

 

http://www.themalaysianinsider.com/malaysia/article/rm6-billion-to-mas-an-investment-not-bailout-says-najib

 

“The money has been injected into MAS and we have decided that the RM6 billion must be regained. It is not a bailout. A bailout is when it cannot be regained. Khazanah will get back every sen from that RM6 billion. This is an investment. Not a bailout" - Najib Razak, 28 August 2014

 

The state fund, which currently has a 69% stake in the carrier, has injected more than RM5 billion into MAS over the last 10 years.

 

Ok so the new RM 6 billion is an investment and will be collected back but the RM 5 billion is not an investment and was a bail out? Can they consider the RM 5 billion as an investment as well, thus they need to collect RM 11 billion from MAS?

 

 

"If there was a need to replace the chief executive officer during this period, opportunities would be given to locals. The person can be a local or a foreigner. If it is foreigner, it will only be temporary. A local will then take over" - Najib Razak, 28 August 2014

 

More details about the new CEO. MAS new CEO is an 'it' (poor fella). No specific about 'local' whether 'it' has to be bumi or include non bumi. I would presume 'it' will be inclusive of non bumi, given MAS's chronic situation.

 

 

"The restructuring plan is only for the betterment of the national flag carrier, and help from Putrajaya was needed to see that being fulfilled. We are outlining a few principles such as turning MAS into a flag carrier Malaysians can be proud of. We want to ensure MAS remains commercial… every decision made by MAS must take that into consideration" - Najib Razak, 28 August 2014

 

Reassuring enough? I think it is reassuring.

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“The money has been injected into MAS and we have decided that the RM6 billion must be regained. It is not a bailout. A bailout is when it cannot be regained. Khazanah will get back every sen from that RM6 billion. This is an investment. Not a bailout" - Najib Razak, 28 August 2014

 

The state fund, which currently has a 69% stake in the carrier, has injected more than RM5 billion into MAS over the last 10 years.

 

2 years down the road & when the dust had settle, nobody including the PM and those in Khazanah will remember about the RM6bil (or is it RM11bil) "INVESTMENT" (read as bailout) into MAS on 28/08/2014. the problem with us M'sian, especially the politicians, is that they tend to forget quite easily what they had said and done on 28/08/2014. in 2 years time, they will say that the RM6bil (or is it RM11bil, again) was actually a financial assistant to revive MAS.

“Give a man a fish; you only fed him for today. Teach a man to fish; and you will feed him for a lifetime" Edited by Victor A.

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A London-based Malaysia Airlines spokesman said: "The London-Kuala Lumpur route is highly successful and will carry on."

 

 

http://travel.aol.co.uk/2014/08/29/malaysia-airlines-free-flights-sale/

 

If MH is to suspend LHR route, it's really as good as dead. So i truly believing this route would be retained. Rather would be surprised some other destinations may be added while others may be dropped.

 

SQ flies more destination than MH and yet they got only 14K staffs per stated in wikipedia and MH got 20K staffs... not logic.

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What we all truly want to know is - what is the breakdown of that 20K?

 

just local stations? plus abroad? which divisions has the highest number?

 

At least they are not selling Mas Engineering. IIRC MRO is one of the few depts that is raking in income.

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its the same old story of Khazanah bailing out MAS than an investment - as this is the same people who bail out MAS a couple of times, the last in 2002 - so don't think Khazanah will be able to pull off this turnaround. The rm6 Billion to be injected into MAS will be more of a bailout than an investment and doubt it will ever be recovered as MAS is already mirred in rm14 Billion debt as it is now.

This rm6Billion will more for paying off the employees and to pay back compensation for contracts that will be cancelled and renegotiated eg the one of the major example is Brahim catering which MAS then for some reasons signed a 25 year Contract! and its worth more than rm15 billion!! And for this job cuts of 6,000 people - the issues of this will be coming soon from its unions and other political parties and it will turn ugly and Khazanah will likely have to reduce the cuts and never able to achieve its aims.

It would have been best to let MAS go into bankrupt and then sold off to non govt private investors - to save the billions poured in now - its like throwing away good money into bad. For rm6 Billion - the govt can easily start a brand new airline!

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If MH is to suspend LHR route, it's really as good as dead. So i truly believing this route would be retained. Rather would be surprised some other destinations may be added while others may be dropped.

 

SQ flies more destination than MH and yet they got only 14K staffs per stated in wikipedia and MH got 20K staffs... not logic.

 

how about after include some domestic routes? so should be Silk Air + S'pore Airline? :pardon:

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how about after include some domestic routes? so should be Silk Air + S'pore Airline? :pardon:

 

I think Silk Air has less than 1.5k employees.

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What we all truly want to know is - what is the breakdown of that 20K?

 

just local stations? plus abroad? which divisions has the highest number?

 

At least they are not selling Mas Engineering. IIRC MRO is one of the few depts that is raking in income.

 

Probably their ground handling services. Perhaps MH should just outsource their ground operations to KLAS instead like SQ using SATS at Changi.

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CX flies to 112 destinations and they got like 30k staffs while EK flies to 142 destinations and they got like 50k staffs.

 

as have been discussed before, MAS employees productivity are only half that of SIA's and CX's.

 

Some people claimed MH employees are paid less than half of SQ and CX, hence bloated number is justified.

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Some people claimed MH employees are paid less than half of SQ and CX, hence bloated number is justified.

 

Cost of living is lower in Malaysia than in HK or Singapore....

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Cost of living is lower in Malaysia than in HK or Singapore....

Pay peanuts, get monkeys.

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believed that productivity measurements does not mean that MAS employees are paid less than half of that of SQ or CX and hence therefore they need more than double the work force. Its a measure of per employee to the yield of the airline.

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