MAS Privatisation

[Eugene Koh 4]

What do you all think?

Shut down or sell off national carrier'

Malaysia Airlines Bhd’s (MAS) planes on the tarmac at the Kuala Lumpur International Airport. - NSTP/EIZAIRI SHAMSUDIN

By BILQIS BAHARI - March 7, 2019 @ 8:14am

KUALA LUMPUR: Malaysia Airlines Bhd’s (MAS) days as a national carrier may be numbered as it has failed to meet its three-year target to be profitable, but is instead bleeding since it was taken private in 2014, say aviation analysts.

They said that the best deal for the airline is to completely shut down its operations or sell it to interested parties or spin off its business divisions.

Shukor Yusof, the founder of Malaysian-based aviation consultancy firm Endau Analytics, said there would be no capacity issue if MAS were to close shop as its void would be filled by other airlines.

“MAS ought to shut down. There is no economic or financial rationale in maintaining it in its current condition. A loss-making business can’t continue indefinitely,” he told the New Straits Times.

If the national airline was shut down, its assets, such as aircraft and properties, could be used to repay debts while some of its workers could be redirected to other airlines, such as Malindo Airways or AirAsia.

“What’s more important, in my view, is to take to task the people who have been responsible for ruining MAS. There must be accountability.”

Shukor said the question that remains to be answered is does MAS really bring a multiplier effect to Malaysia’s economy via tourism revenue.

In a recent interview, Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan said MAS brings a multiplier effect of eight to 10 times from tourists for each dollar that the airline brings to Malaysia.

Khazanah is the sole shareholder of MAS after taking the airline private in 2014. The sovereign wealth fund injected RM6 billion into the airline to keep it afloat.

Maybank Investment Bank Bhd aviation analyst Mohshin Aziz agreed that the best way was for MAS to discontinue operations given that its turnaround plans over the years have failed.

“Should Malaysia have a national airline? That argument is becoming weaker because we have been bailing it out many times.

“Nowadays, the attachment and sentiment to the national airline is not as strong as before.

“Previously, there was a sense of pride attached to the brand. But today, the emotional attachment is not as strong, particularly among the younger generation.”

However, Mohshin said, MAS could be sold to an interested party or enter into a joint venture with other airlines, or its parent company Malaysia Aviation Group Bhd could sell off one of its subsidiaries, such as MAB Engineering.

The volume for MAS’ maintenance, repair and overhaul (MRO) was low, he said, and it was facing intense competition from other MRO service providers in the region, such as Singapore, Thailand, Indonesia and the Philippines.

“I think they should test the market to sell their MRO. It makes financial sense because it’s too expensive to maintain that business. The saving grace is to sell the MRO to a world-recognised MRO facility.

“MAS’ idea for an MRO unit in the past was because they had many aircraft, so they might as well maintain the planes themselves and with the spare capacity, offer third-party service to other airlines,” he said, adding that MAS’ current fleet size was smaller.

MAG’s other subsidiaries include Firefly, MASwings, MAB Kargo, AeroDarat Services, MAB Leasing, MAB Pesawat and MAB Academy.

From its delisting from Bursa Malaysia from 2015 to 2017, MAS had registered a loss of RM2.3 billion due to the ringgit’s weakness and higher jet fuel costs.

Khazanah on Tuesday announced that half of its total impairment cost of RM7.3 billion in 2018 was due to the carrier.

The sovereign wealth fund has asked MAB to produce a new strategic plan.

[Suzanne Goh 0]

Therein lies their problem - they can't sell enough of cattle class seats and they can't get good yields from elite class seats. Squeezed at both ends!

 

No disagreement there....

 

It's a problem, and ultimately. it's a problem for taxpayers collectively.

 

Individually? Think about it this way - the strategy is to fly enough on MH cheap fares that it essentially means the non-flying taxpayer subsidizes you.

 

So why shut it down or even have a business plan to turn it around? If you look at MH as a quasi-socialist construct with benefits available for all, but only some partaking of it, it takes on a far different complexion.

 

I'm not an aviation nut. I'm a pragmatic traveller, and the airline that gets me to where i want to go at the correct price/quality proposition gets my money. Currently, the king of that price/quality equation is MH - i.e it's Cheap and the quality is so-so.

 

Long Live MH in it's current state! Daulat MH!

[Chris Tan 0]

Note that I said low cost (CASK) but not low fare (RASK). That means yields will be higher.

Again, I can't think of an airline that doesn't want to minimise its CASK and maximise its yield - LCC or otherwise.

 

It is important that FY should not be regarded as an LCC - it shoul be more like a Cathay Dragon or Silkair. With the airline focussed on feeding the MH international network, it should be easier to optimise. With MH focussed on an international network, it should also expand it to offer more international destinations for FY.

CX, with 130 widebodies that fly nonstop to 5 continents from a base with a huge market, is big enough to justify a regional brand. Take away MH's narrowbody fleet and what are you left with?

 

And if the MI/SQ model was so successful why would they merge the two under the SQ brand?

 

No disagreement there....

 

It's a problem, and ultimately. it's a problem for taxpayers collectively.

 

Individually? Think about it this way - the strategy is to fly enough on MH cheap fares that it essentially means the non-flying taxpayer subsidizes you.

 

So why shut it down or even have a business plan to turn it around? If you look at MH as a quasi-socialist construct with benefits available for all, but only some partaking of it, it takes on a far different complexion.

 

I'm not an aviation nut. I'm a pragmatic traveller, and the airline that gets me to where i want to go at the correct price/quality proposition gets my money. Currently, the king of that price/quality equation is MH - i.e it's Cheap and the quality is so-so.

 

Long Live MH in it's current state! Daulat MH!

If MH were to become another SQ, I could brag about my national carrier to the world. But then I'd be speaking from hours of reading trip reports and travel blogs rather than firsthand experience.

[flee 5]

So I guess what MAB should be depends on your perspective - whether you think the taxpayer is more important than the subsidised traveller.

 

If that is the case, why don't we let MAB become fully privatised - sell it, like how DRB disposed of Airasia and its debts. Let it fight in the market and see if it can be turned around. If it does, the taxpayer will no longer need to subsidise and the govt. will collect taxes on the profits. If it does not survive, the taxpayer will no longer need to bail it out.

 

But then, what are the indirect benefits of having MAB around? It is an employer - provides lots of jobs and contracts to businesses. It helps to carry execs of GLCs around on their business trips. It brings in tourists from foreign countries. Does that justify taxpayers subsidising the airline as there are some benefits to be derived?

[KK Lee 5]

 

That's a good thing for Consumers no?

 

The concern about bailouts as a collective notion is valid. As an individual, work out the per capita cost of all these bailouts, and then make an educated guess of how much MH can't charge because of it.

 

My portion of the bailouts (as a malaysian taxpayer) is miniscule compared to the money I've saved buying J cheapies. Yes, there'll be some people whose travel patterns and routes will show MH as consistently more expensive, but I'm talking about the RM4000 CMB-KUL-CDGs, RM4400 KUL-SYD, RM5000 TPE-KUL-MEL amongst others. Really I've lost count of how many great fares there have been over the years, all because MH can't charge the premium it'd dearly love.

 

It's pointless having all the trimmings, limo service, private suites and what not to fight with SQ or whoever, only for them to charge an arm and a leg and then for me to look in from the outside drooling because I can't afford it.

 

Like they say - even in a Bear market you can make money.

 

The caveat of course is if you don't fly MH at all, in which case, then the point is valid about your money going down the drain.

Few people could take advantage like you. Those benefited from existing arrangements prefer status quo.

[Suzanne Goh 0]

Few people could take advantage like you. Those benefited from existing arrangements prefer status quo.

 

If we were to put a number on it - for argument's sake - Let's call it RM21 billion so far cumulatively. Off a population of 32 million that works out to RM 656 for every man, woman and child since MH started requiring bailouts. You don't need to buy very many cheap tickets to come out ahead of your relative contribution to the bailout. Adjust the numbers if somewhat inaccurate, but the the crux of the matter is the fact that there are far more projects and bailouts from which you cannot actively and voluntarily gain from than this.

[BC Tam 2]

 

If we were to put a number on it - for argument's sake - Let's call it RM21 billion so far cumulatively. Off a population of 32 million that works out to RM 656 for every man, woman and child since MH started requiring bailouts

Thing is in 'My Land Water' only a small fraction of those 32 million heads are tax liable

Ok, you add on the 'business entities' that are also taxable - of course less mitigating measures made viable by tax consultants. Consequently, as I understand it, the Malaysian tax base is quite small

So your quoted RM656 per head would seem rather conservative indeed, if you enquire of those who actually cough up towards LHDNs coffers

[Mohd Suhaimi Fariz 2]

Thing is in 'My Land Water' only a small fraction of those 32 million heads are tax liable

Ok, you add on the 'business entities' that are also taxable - of course less mitigating measures made viable by tax consultants. Consequently, as I understand it, the Malaysian tax base is quite small

So your quoted RM656 per head would seem rather conservative indeed, if you enquire of those who actually cough up towards LHDNs coffers

 

Just because you don't pay income tax doesn't mean you're not taxed!

 

Sales tax, excise tax, import tax etc etc etc...

[BC Tam 2]

Point taken, everyone 'kena' if taken to that level

Don't forget road tax, house assessment rates, quit rent, stamp duty, .......

 

But I'm pretty sure I have had, as an individual, contributed more than RM656 in 'taxes' (substantially more in fact) "since MH started requiring bailouts"

(Goodness knows when that 'start date' started ticking though, possibly from day 1 ?)

 

So please pardon me for feeling shortchanged somewhat, particularly as I have had no reason to travel too very often and certainly not in position to take advantage of MH "J cheapies"

[tktoh 0]

I think those MH bailout monies are similar to those fuel subsidies to keep fuel price low. An expenditure item by the government.

[Suzanne Goh 0]

Point taken, everyone 'kena' if taken to that level

Don't forget road tax, house assessment rates, quit rent, stamp duty, .......

 

But I'm pretty sure I have had, as an individual, contributed more than RM656 in 'taxes' (substantially more in fact) "

since MH started requiring bailouts"

(Goodness knows when that 'start date' started ticking though, possibly from day 1 ?)

 

So please pardon me for feeling shortchanged somewhat, particularly as I have had no reason to travel too very often and certainly not in position to take advantage of MH

"

J cheapies"

Fair enough. I am only saying you CAN avail of it if you so choose.

 

From where Im siting the alternative is that the money disappears down some rabbit hole or some other opaque scheme of which neither you nor I can partake of.

 

If its not this, its that. And I prefer this over that. Lets not be naive in thinking it wil go back into some hospital or school or road or some altruistic endeavor for the good of all Malaysians.

[David.W 0]

PETALING JAYA: Malaysia Airlines Bhds (MAB) Group CEO Captain Izham Ismail today defended the airline against the negative reports surrounding the national carrier, citing its past and recent achievements and insisting the brand is still relevant.

 

In an internal circular addressed to all employees, Izham acknowledged that despite a very challenging 2018, MAB managed to score substantial wins across the board.

 

This included an increase in its customer satisfaction index and achieving solid operational stability last year.

 

Izham also pointed out that a recent audit by the International Air Transport Association (IATA) Operational Safety Audit recorded only four findings this year, compared with 110 in 2017. This, he said, was a remarkable turnaround which the airline should be very proud of.

 

The national carrier, he added, was given the Best Airline in Asia Award by the International Council of Pacific Area Travel Writers Association (Patwa), reputed to be one of the most coveted awards in the travel industry.

 

Who are the outsiders to say that we have not done any good for the country? the circular, which is making its rounds on WhatsApp, read.

 

FMT has since confirmed the authenticity of the circular.

 

Recently, the New Straits Times quoted an aviation analyst as saying MABs days may be numbered and said the carrier ought to be shut down as there was no economic or financial rationale in maintaining it in its current condition.

 

Izham went on to remind MAB employees that they have embarked on a plan in September to remodel the business.

 

He also said that he had briefed Prime Minister and Khazanah chairman Dr Mahathir Mohamad on the situation and that the latter acknowledged the challenges faced by the airline.

 

Mahathir, he claimed, stated that Malaysia Airlines is an instrument of policy and that the country needs this national airline.

 

Izham also said that the Malaysia Airlines brand is still very relevant despite what others may say and that the company had data to back its claim.

 

Yes, there are people out there who dont believe that we will pull it off.

 

All I can say is, more than ever, this is the time we need to be united and work towards one goal, giving your best to Malaysia Airlines. - FMT

I do hope MAB considers adding pillows back for the MH 126 Perth flight. It's small things like this that can improve customer experience. Maybe it will be added when the 332 is used.

Edited March 10, 2019 by David.W

[KK Lee 5]

PETALING JAYA: Malaysia Airlines Bhds (MAB) Group CEO Captain Izham Ismail today defended the airline against the negative reports surrounding the national carrier, citing its past and recent achievements and insisting the brand is still relevant.

 

In an internal circular addressed to all employees, Izham acknowledged that despite a very challenging 2018, MAB managed to score substantial wins across the board.

 

This included an increase in its customer satisfaction index and achieving solid operational stability last year.

 

Izham also pointed out that a recent audit by the International Air Transport Association (IATA) Operational Safety Audit recorded only four findings this year, compared with 110 in 2017. This, he said, was a remarkable turnaround which the airline should be very proud of.

 

The national carrier, he added, was given the Best Airline in Asia Award by the International Council of Pacific Area Travel Writers Association (Patwa), reputed to be one of the most coveted awards in the travel industry.

 

Who are the outsiders to say that we have not done any good for the country? the circular, which is making its rounds on WhatsApp, read.

 

FMT has since confirmed the authenticity of the circular.

 

Recently, the New Straits Times quoted an aviation analyst as saying MABs days may be numbered and said the carrier ought to be shut down as there was no economic or financial rationale in maintaining it in its current condition.

 

Izham went on to remind MAB employees that they have embarked on a plan in September to remodel the business.

 

He also said that he had briefed Prime Minister and Khazanah chairman Dr Mahathir Mohamad on the situation and that the latter acknowledged the challenges faced by the airline.

 

Mahathir, he claimed, stated that Malaysia Airlines is an instrument of policy and that the country needs this national airline.

 

Izham also said that the Malaysia Airlines brand is still very relevant despite what others may say and that the company had data to back its claim.

 

Yes, there are people out there who dont believe that we will pull it off.

 

All I can say is, more than ever, this is the time we need to be united and work towards one goal, giving your best to Malaysia Airlines. - FMT

I do hope MAB considers adding pillows back for the MH 126 Perth flight. It's small things like this that can improve customer experience. Maybe it will be added when the 332 is used.

License to loss taxpayers money. Don't expect mab to get out of their comfort zone anytime soon. Edited March 11, 2019 by KK Lee

[flee 5]

Mahathir weighing shutdown or sale of Malaysia Airlines

 

Read more at https://www.thestar.com.my/business/business-news/2019/03/12/mahathir-weighing-shutdown-or-sale-of-malaysia-airlines/#fuwXOjOPXGEERxAc.99

[David.W 0]

Sell MAB? Which airline would be up to take them surely not ETHIAD.

[Craig 0]

Sell MAB? Which airline would be up to take them surely not ETHIAD.

QR seems to be taking up a minority ownership in a few OW carriers. I wouldn't mind QR service at MH prices

[Mohd Suhaimi Fariz 2]

Sell MAB? Which airline would be up to take them surely not ETHIAD.

 

Why ETIHAD, when across the runway FROM MAB HQ there's one guy with a red hat just itching to get rid of a competitor...

 

You could say that buying MAB would be his "national service", to atone for his "sins" of supporting the other side prior to May 8.

[jani 0]

I'd buy Malaysia Airlines if I had the opportunity

[Craig 0]

 

You could say that buying MAB would be his "national service", to atone for his "sins" of supporting the other side prior to May 8.

Well everybody can't fly then if there's only 1 major airline in Malaysia

 

But in all seriousness, as much as it's some people's fantasy to shut down MH and start fresh, it's much much easier said than done. You'd need to reapply for routes/rights/authorities/certifications etc., plus pay creditors, staff, alliance fees etc. And all the corporate contracts that you'll lose as well as connectivity to some business cities (e.g. MEL - only MH serves MEL nonstop).

 

I seriously don't understand why the hatred for MAB when there are bigger fish to fry. As Suzanne mentioned, you can get your tax money's worth and it's a tangible benefit.

Edited March 12, 2019 by Craig

[jani 0]

By the way, strangely, the article has no mention of Mahathir but an ex-Khazanah guy

[David.W 0]

Could they do another "Proton" sale? sell the 49.9%

[flee 5]

I seriously don't understand why the hatred for MAB when there are bigger fish to fry.

The hate is no more than the hate for Airasia. There are plenty of fanboys of both airlines.

Could they do another "Proton" sale? sell the 49.9%

Khazanah really has no idea what to do with MAG. And their 2018 financial reports have indicated that much of the RM 6bn poured into the airline has gone up in smoke!

 

They are asking MAG to come up with another "strategic" plan. I am not sure what kind of timeline they are working on. But it looks like Khazanah does not want to spend much more on MAG as there are other GLCs that are better investments.

Edited March 12, 2019 by flee

[Mohd Suhaimi Fariz 2]

What the new people in Khazanah and the new government failed to realize is that the conditions for the turnaround wasn't exactly ideal. 2015 was the start of the weakening of the emerging markets, including Malaysia. This bump on the road made it a much more challenging to achieve the desired results. Even AirAsia had an up & down financials over the past 4 years, so it's not merely an MAB thing.

 

Honestly this is nothing more than political posturing.

[Eddy Liew 0]

https://www.thestar.com.my/business/business-news/2019/03/12/malaysia-to-decide-fate-of-malaysia-airlines-soon-pm-says/

 

Here is the article quoting our PM on MAS.

[David.W 0]

Ex PM chips in

 

https://youtu.be/kH5NeLpsTWU