MAS Privatisation

[flee 5]

KK Lee, correct me if I'm wrong as I believe you are not from MAS. You have no idea about MAS Unions or Associations. These Unions and Associations are not strong but the Management is very very weak and lack in leadership. The management is also clueless where to take MAS; FSC or LCC or in between. Increase fare or reduce fare. To increase load factor or yield. But one thing for sure the management keep expanding management post by hiring people externally at high salary.

 

Actually who messed up MAS. Khazanah, since 2001 MAS has lost 8.4 billion ringgit and nobody wanted to do anything?

Either the people who run Khazanah are so stupid or they some some hidden agenda.

Remember they failed on CCF with AK and people blamed the Unions. If the government really wanted it done, it would have been done. When the government ever listen to The trade unions?

Well none of the parties are free from blame - one would be inclined to believe that the union leaders are quite vicious in their attacks on MH management and other people who are in their way. It is without doubt that they also have ambitions, like the cronies who have benefitted from MH contracts. So vested interests are being protected by everyone.

 

It would take a very brave and single minded CEO to sort out MH and I wish that person all the best. This job is not for the faint hearted!

[Cire 0]

The Unions have their rights to voice their displeasure. Their well being is been threaten. They have done their best to perform to their job. And they expect their Mgmt. whose's responsibility is to tenaciously searching to grow the business.

At the moment, the Mgmt.failed to make any positive impact on the airline's lifeline, and is at the moment is perceived as not done enough to avert this disaster. Trimming the workers is the most effective way to trim down on cost, hence we can empathy with the workers there at the moment.

[Waiping 12]

It is a fair assessment regardless of what position one holds that he/she may always think that he/she has done his/her level best. This is true in government, GLC, or even the private sector. The smart management will be those that reward those who perform, and drop those who doesn't.

 

Anyway, Michael Schumacher may be the best F1 driver for Ferrari, but he fell way short of expectation at Mercedes. All the best to Christoph Mueller.

Edited October 10, 2014 by Waiping

[leon t 0]

Imagine if the govt just let MAS goes belly up and have a truly private non-govt linked commercial company to restart MAS, then the govt through Khazanah would have saved rm6 billion now that could better used for its budget to offset some of the subsidies and imagine the already rm12 BILLION losses by MAS - could have used to offset so much subsidies for the people. But then there must be some hidden agenda for the govt to have to keep MAS afloat for whatever the consequences and losses for its purpose.

[Cire 0]

IMHO, the government is not ready to throw MAS into the red ocean. Without protectionism, MAS cannot survive on its own. MAS will still come under the purvey of the government, and the golden question is how much leeway will be given to the new person in-charge to take MAS out of this sticky situation, and how much more the government can assist to accelerate the recovery plan?

What have been loss is not recoverable. What can be done to stop further losses, is there for the execution.

 

At the moment, the management of MAS is playing in the sand box, and obediently waiting for instructions from the government / Khazanah on the next course of actions to take. There is nothing much that they can do except to ready itself for impending operational changes, and human factor challenges such as the Mgmt.-Union talks, and the re-shuffling and replacement of top key management staffs.

[Josh T 0]

I think it's a good that MAS is getting an outsider and one that has a reputation for fixing airline problems. Let's hope it works out without compromising too much on the FSC model.

Anyway, any more news about which routes will be cut next year?

[flee 5]

 

MAS could cut 25% of capacity in 2015

PETALING JAYA: Malaysian Airlines System Bhd is expected to cut as much as 25% of the capacity of its network in 2015, which would spell bad news for Malaysia Airports Holdings Bhd (MAHB) as 2.2 million seats vanish from its airports, all of which are international passengers that provide the highest revenue per passenger.

Maybank Investment Bank Research analyst Moshin Aziz estimates MAS, which had indicated plans to focus on regional routes within the sphere of Asia and Australia, to terminate up to six international routes namely Paris, Amsterdam, Frankfurt, Istanbul, Dubai and Kunming.

He also reckons that MAS to further cut or reduce another routes – Sydney, Melbourne, Darwin, Brisbane, Kochi and Osaka – as part of its restructuring plan.

"We estimate as many as 18-19 aircraft will need to be taken out of the fleet due to these route cuts alone. For MAHB, this is bad news as 2.2 million seats will vanish from its airports, all of which are international passengers that provide the highest revenue per pax," he said in his report last Thursday.

However, he said this could be partially but not completely be off-set by higher frequencies by the other non-Malaysian carriers into KLIA.

Moshin said the routes cut will shift the market equilibrium and support higher load factor and yields. However, industry traffic growth will soften to a low single-digit for the next 12-18 months.

"This is positive for the airlines as profits will grow appreciably. However, this will be negative for MAHB as traffic growth will slow down relative to its historical growth rates," he said.

Moshin pointed out that the aviation industry's international sector capacity are still at historical highs with no noticeable capacity cut.

On the other hand, MAS has already started to cut capacity for the domestic sector after it reversed its growth plans with a 9.7% reduction in July this year compared from a year ago.

"We believe the domestic sector will continue to incur capacity reduction of a similar quantum for the next 6-9 months, based on management statements to the press," he said.

Moshin believes that MAS will undertake the massive capacity cuts after Chinese New Year which falls on Feb 9, 2015.

"The third and fourth quarter and the CNY are peak periods for MAS and it would have sold a significant amount of inventory already. Therefore, it is very punitive to make flight cancellations during this period due to costly rerouting of existing customers and not to mention the reputational damage," he said.

Despite the initial market optimism regarding MAS' restructuring, Moshin does not think that it will bring a significant positive impact on the aviation industry in the second half of 2014 (2H14) as the industry is still saddled with overcapacity on the long-haul sectors.

"We forecast the industry will endure further yield decline in 2H14, albeit at much less compared to 1H14. The exception to this is AirAsia, we forecast 4.4% year-on-year yield growth in 2H14 as it is purely focused on the short-haul sector.

"The reversal of fortunes for the airline industry will likely happen at the end of Q1'15 or Q2'15 at best," he added.

Moshin expect industry yields which declined by 4.2% in 2014, to recover in 2015.

"Going into 2015, yields should recover as MAS will cut significant capacity and filter the excess in the system. Furthermore, demand is expected to remain robust thanks to sustained gross domestic product (GDP) growth of 5%.

He reckoned that MAS will enjoy the highest year-on-year yield growth in the industry next year and assuming the said routes are terminated, this will reduce MAS' average stage length by 13%-15% in 2015.

Moshin said this alone will support yield growth of about 13% as shorter flights have a higher yield.

In addition, he said, the capacity cuts on existing routes will also help to elevate the yields even more. "Overall, we forecast MAS yields will grow by 15-20% in 2015," he said.

Mohshin also forecast's AirAsia's yield to grow between 5%-7% in 2015, driven by higher average fare and growth in ancillary income.

"MAS has cut capacity in the domestic sector since July 2014, and this will swiftly support higher yields for AirAsia whereby domestic sector makes up about 60% of budget airliners business.

For the long haul budget carrier, AirAsia X, he has forecast yield to expand by 10%-13% in 2015, driven by stabilization and maturing routes.

"AirAsia X will be a beneficiary of MAS' restructuring, especially for its Australian and Chinese routes," he noted.

Source: http://www.thesundaily.my/news/1199253

[KK Lee 5]

 

 

 

MAS could cut 25% of capacity in 2015

PETALING JAYA: Malaysian Airlines System Bhd is expected to cut as much as 25% of the capacity of its network in 2015, which would spell bad news for Malaysia Airports Holdings Bhd (MAHB) as 2.2 million seats vanish from its airports, all of which are international passengers that provide the highest revenue per passenger.

Maybank Investment Bank Research analyst Moshin Aziz estimates MAS, which had indicated plans to focus on regional routes within the sphere of Asia and Australia, to terminate up to six international routes namely Paris, Amsterdam, Frankfurt, Istanbul, Dubai and Kunming.

He also reckons that MAS to further cut or reduce another routes – Sydney, Melbourne, Darwin, Brisbane, Kochi and Osaka – as part of its restructuring plan.

Source: http://www.thesundaily.my/news/1199253

 

 

The issue with MH is not over capacity but excessive overhead, loop sided contracts and poor management. Cutting capacity is old wine in new bottle, won't solve structural problems and any tax payers funds poured in will be wasted.

[flee 5]

Cutting capacity is a good way to reduce losses on loss making routes. Airasia does it all the time - terminating routes for "commercial reasons". That stops the bleeding immediately.

 

During this period, ALL measures must be implemented so that restructuring will work. JAL cut their capacity drastically too - the airline became smaller and easier to manage. Now it is expanding again, on a stronger foundation.

[Cheng Long 0]

Cutting routes here and there, in the end, there will be hardly anywhere to fly and poor connectivity. Naturally will be poor choice for customers.

[KK Lee 5]

Cutting capacity is a good way to reduce losses on loss making routes. Airasia does it all the time - terminating routes for "commercial reasons". That stops the bleeding immediately.

 

During this period, ALL measures must be implemented so that restructuring will work. JAL cut their capacity drastically too - the airline became smaller and easier to manage. Now it is expanding again, on a stronger foundation.

 

 

Cutting routes here and there, in the end, there will be hardly anywhere to fly and poor connectivity. Naturally will be poor choice for customers.

 

Except during school holidays, believe over 50% of pax are transit/connecting (e.g. MH17, MH370). A shrinking network will reduce pax number enormously. If MH intend to focus on peak period (e.g. during school holidays and festivals) traffic, may be MH should wet lease most of their aircraft and crews.

[Waiping 12]

25% is quite a big sum. So we might again see aircraft parked on remote bay at KLIA. They really should lease out some of the aircraft/personnel like AK/D7 do.

[Mulyadir Fitri 0]

I wonder how is their load nowadays. I booked them to BKK in Nov coz they are easily the lowest, beating even AK. A friend of mine who went to KBV told me the load was about 30-40%. Good for pax, easy job for the cabin crew. But bad for MH.

[leon t 0]

cutting routes up to 25% and even routes like Paris and Amsterdam and some Australian cities may be axed - then it should have better off let MAS to be bankrupted - and let other commercial entity decide on whether to start a "national carrier". Even for this additional rm6 Billion bail out - its of not much use as easily half of this amount goes to breaking existing contracts and compensation to suppliers n contractors. There's just some other agendas that the govt has to keep MAS as a going concern and not bec of just commercial reasons and let it bleed a couple of billions every year.

[flee 5]

Cutting loss making routes will downsize MAS, making it smaller and easier to restructure. MAS has got to go back to basics before it can become great again. This should be seen as a temporary thing - strategic withdrawal. If those in charge know what they are doing, MAS will come back later, bigger and stronger.

 

I was just thinking - it is so ironic that the WAU exercise that the famous asset stripper CEO embarked upon is coming back to haunt MAS now. Had MAS owned its planes and not need to lease them, they did not need to get rid of those B744s and B772s so quickly as they would be paid up already. So they will not be bleeding cash (monthly lease payments) now. In fact, they will cost less to run than the current leased fleet.

 

Therefore, unless MAS totally revamps its business model, I cannot see it recovering by only exercising some cosmetic facelifts.

Edited October 23, 2014 by flee

[KK Lee 5]

MH is consistently inconsistent. On my recent flight; blankets were given to all ey pax (was limited to 20 on 738) and peanut is again distributed by c.c instead of on meal tray.

[Mike P 0]

MH is consistently inconsistent. On my recent flight; blankets were given to all ey pax (was limited to 20 on 738) and peanut is again distributed by c.c instead of on meal tray.

Are you on domestic or international?

[KK Lee 5]

Are you on domestic or international?

 

Was on 4 hours international and 738.

[Mike P 0]

Blanket is usually given and placed on the seats for international flights, especially for 4 hours.

 

I was on CX and they don't even serve soft drinks, beers or red wine anymore... so much so of flying Airlines of the year.

[KK Lee 5]

Blanket is usually given and placed on the seats for international flights, especially for 4 hours.

 

I was on CX and they don't even serve soft drinks, beers or red wine anymore... so much so of flying Airlines of the year.

Previously, only 20 blankets were uploaded for the same sector.

[Isaac 0]

 

Was on 4 hours international and 738.

 

Blanket is usually given and placed on the seats for international flights, especially for 4 hours.

Hence the conclusion MAS is consistently inconsistent. Actually MAS has been having this problem even before the two unfortunate accidents this year. Not only is MAS having a few variants of livery, MAS is also using at least three types of tray in Y...

 

 

I was on CX and they don't even serve soft drinks, beers or red wine anymore... so much so of flying Airlines of the year.

And this was between which city pair ?

[Radzi 2]

 

I was just thinking - it is so ironic that the WAU exercise that the famous asset stripper CEO embarked upon is coming back to haunt MAS now. Had MAS owned its planes and not need to lease them, they did not need to get rid of those B744s and B772s so quickly as they would be paid up already. So they will not be bleeding cash (monthly lease payments) now. In fact, they will cost less to run than the current leased fleet.

 

 

 

I have no formal study in business or accountancy whatsoever, but when they did the Sale and Leaseback thingy back then, my simple mind knew it was not a very smart thing to do in the long run.

[Mike P 0]

 

And this was between which city pair ?

 

KUL - HKG, just a day ago.

[flee 5]

I have no formal study in business or accountancy whatsoever, but when they did the Sale and Leaseback thingy back then, my simple mind knew it was not a very smart thing to do in the long run.

I have to correct myself, WAU was executed under a previous CEO in the early 2000's but when IJ became CEO in 2005, he sold the remaining assets that MAS still had (e.g. MAS building) so as to report some "profits".

 

While leasing aircraft is in itself not a bad thing, an airline should at least own a "base fleet" of aircraft. Leased aircraft should be used to complement the airline's main fleet for operational and/or financing needs. The airline's management should be responsive to its operating environment and should review its owned-leased fleet ratio from time to time.

[KK Lee 5]

 

I was on CX and they don't even serve soft drinks, beers or red wine anymore... so much so of flying Airlines of the year.

 

KUL - HKG, just a day ago.

Did they serve any meal?