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MAS and AirAsia Shares Swap

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KUALA LUMPUR, Aug 6 — State-owned Malaysia Airlines (MAS) will swap shares with Asia’s largest budget carrier AirAsia this week in a deal that will see Tan Sri Tony Fernandes help stop the ailing flag carrier from plunging any further into red ink, said industry sources.

 

The Malaysian Insider understands that the share swap that could see Fernandes getting a 20 per cent stake in the national carrier, will allow both Malaysian carriers to rationalise their fleet, frequencies and destinations within the country and abroad while ensuring MAS returns to becoming a premier airline.

 

“The deal is on and it should be signed Monday at the earliest,” a source told The Malaysian Insider.

 

AirAsia’s main shareholders Tune Air Sdn Bhd, owned by Fernandes (picture) and Datuk Kamarudin Meranun, is expected to benefit most from the share swap with MAS as it hold 26.28 per cent of the budget carrier as of July 6, 2011.

 

The budget carrier’s market capitalisation of RM11 billion yesterday is now two times more than MAS which stands at RM5.3 billion, a decade after Tune Air took over the two-plane operation.

 

AirAsia closed at RM3.95 per share when the stock market closed yesterday while MAS was at RM1.60 per share.

 

“This is a deal that has taken such a long time to get done but the current situation benefits Fernandes as MAS is in a bad shape,” another source said, adding that the MAS’s main shareholder Khazanah Nasional Berhad and the AirAsia boss have negotiated five separate times previously.

 

It is learnt that while MAS moves to reclaim itself as a premier airline, AirAsia X will continue to ply as a long-haul budget carrier while domestic operations will be rationalised with MAS’s Firefly focusing on turbo-prop operations out of the Skypark terminal in Subang.

 

Firefly began operations out of KLIA this January for flights to east Malaysia, competing with both MAS and AirAsia flights. It also launched a coach service this week for passengers looking for alternatives to the Express Rail Link.

 

A MAS source also disclosed that the fate of company managing director Tengku Datuk Azmil Zahruddin remains unclear as Fernandes will likely change the management to pull the airline from the brink after its first quarter losses.

 

It is understood that one of Khazanah’s executive director of investments, Mohd Rashdan Mohd Yusof, could be named as chief operating officer after the share swap. Popularly known as Danny, the former investment banker is the Khazanah representative in the MAS board.

 

The flag carrier recorded a first quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago. Azmil took over the reins of the company on August 28, 2009 after the previous chief executive Datuk Seri Idris Jala was made a minister in the Najib administration.

 

Analysts expect the flag airline to make full-year operating losses for its current financial year ending December 31, in line with higher fuel costs and falling yields. Its sales director Datuk Bernard Francis recently resigned within 24 hours despite having a few more months in his contract.

 

MAS recently named former managing director Tan Sri Md Nor Md Yusof as its non-executive chairman from August 1, replacing long-serving chairman Tan Sri Munir Majid.

 

Md Nor managed the airline between 2001 and 2004 where he implemented the widespread asset unbundling (WAU) restructuring of MAS in 2002, involving un-coupling the airline’s massive debts and transferring of the MAS fleet to Penerbangan Malaysia Bhd (PMB).

 

Despite the WAU and Jala’s tenure which saw MAS return to the black, the lack-lustre financial performance over the past few quarters have given rise to questions about the company’s management’s mantra of running

 

The share swap could raise the ire of the MAS unions which have been working with limited pay rises under the airlines’ Five Star Value Carrier or Business Transformation Plan 2 but only to see a new shareholder come in to rescue the company again.

 

Source: http://www.themalaysianinsider.com/business/article/mas-airasia-in-share-swap-to-rescue-ailing-flag-carrier/

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I hesitated to post this news up at first. However, TMI probably have a good source as they were right about the AirAsia Japan story.

 

I am not too elated with this news either. It means less competition and it will not be good for consumers. Lets see how it pans out...

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Holly Molly Lord......didn't see this one coming....

 

Makes me wonder if AirAsia's pockets is REALLY REALLY that deep....AirAsia Group is really stretching thin i.e. the F1 Sponsorship, British Grand Prix Sponsorship, new aircraft order, Tune Hotels...etc....

 

Creating brand awareness is one matter, making sustainable business in long run is another matter....

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If anyone predicted this coming, can they please tell me next weeks lotto numbers too!!

 

Unreal, totally out of left field. I think is a true credit to Tony Fernandes.

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If you followed TF's tweets, he met the Petronas CEO on 4 August. Perhaps Khazanah is asking Petronas to bankroll this - to turn MAS/AirAsia into Asia's mega carrier?

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Ok now everyone knows of the fact that Tengku Azmil will balik kampung tanam jagung, but more importatly, if this news proves true, we will see the demise of Firefly. With Uncle Tony at the helm, there will be conflict of interest that will favour airlines under the AirAsia Group. Why can't MH just pull in other people?

 

The article mentioned it will be a share swap exercise. So AK will owns 20% of MH and vice versa? It does not looks like that from my comprehension. The way I understand it, Khazanah will sell 20% of its shares to Uncle Tony.

 

Current situation kinda shows that MH is doing extremely bad. I am reserving my comment until Q2 result is announced (when will it be? But based on the conditions, MH could possibly posting another net loss of RM 250 million, which cumulatively for 1H 2011 MH recorded a loss of RM 500 million - way off its target of achieving at least RM 300 million profit for FY 2011).

 

If I were a MH pilot, this would be the time to move to the desert once and for all - EY (which pays the highest among the 3 Middle East giants), EK or QR.

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From the MH Rumour Department:

 

On the share swap - Khazanah sells some of its MH shares to Tune in exchange for its AK shares. So in the end Tune will have control of the MH board and Khazanah has better upside with its investment in AK. AK and MH won't be linked except by having common shareholders (i.e. Khazanah and Tune).

 

On the fate of Firefly - Doubt Tony wants to run a direct competitor with his own AK. If this swap happens, FY's plans are as good as dodo. FY's inaugural to LGK on 1 December might not happen after all - if the swap happens, count on an MH flight - or who knows, it may even be AK!

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:blink: :blink: :blink: :blink: :blink:

 

What will happen between now and then??

 

Firefly probably will remain an all turboprop carrier - but the team at its helm may very well become core pillar of strength of a new MAS management team given the success they've enjoyed.

 

MASwings and the rural air-service is the airline that may kena scrapped or be absorbed into Firefly... branding of firefly is better and why operate so many carriers at the end of the day..

 

MAS Premium.. well I think an insider like Tony is the right man for the job.. he's got the contacts and the name to boot - such an affiliation for MAS would likely see a good stock performance on Monday morning alone - plus it opens doors for better fleet renewal options ultimately.

 

I don't think MAS will be canabalised by AirAsia Group - on the contrary - I think this is what was needed as an immune shot to the airline.

 

 

Let's sit and see what happens if all this speculation is true.

 

Furthermore, it's interesting to note that:

 

MAS-Qantas are opening up a relationship.

AirAsia-Jetstar have a silent but potentially lethal partnership.

 

Imagine the powerhouse of a four-way tie up!

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It's quite surprising that MH is doing so badly when CX and SQ seem to be doing fine? MH, please, listen to us. Some of us here can probably run things better!

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Government intervention may have good intention but wrong methodology. Both MH and AK are Malaysia's proud and if some kind of collaboration can be found to fight against other regional airlines such as SQ and TQ, it would be better. Let's see if MH could turnaround after joining OneWorld.

 

AK is no doubt a very independent airlines which can make lots of profits, the biggest and best low cost airlines in the world. Which low cost airlines can beat AK now?

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..... Which low cost airlines can beat AK now?

I hope the AK team never get that thought inside them, cause that will be when they start going downhill :p

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MASwings and the rural air-service is the airline that may kena scrapped or be absorbed into Firefly... branding of firefly is better and why operate so many carriers at the end of the day..

 

 

MASWings will probably be as is. It still receives subsidies for operating the RAS. FY, on the other hand, is a purely commercial entity.

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I am also stunned...how they gonna carry out this if it is true as conflict of interest is always there...:S...

 

The real conflict is FY jet services. Quick, experience them while you can before they get relegated to the annals of M'sia civil aviation.

 

It will actually allow MH to focus on premium services ala SQ instead of fighting the who-has-the-lowest-fare game with AK, and detrimental to its yields. Many here had trouble digesting that "five star value carrier" mantra, whatever it was supposed to be.

D7 will compete with SQ's new long haul LCC.

 

Conspiracy theory - Was Bernard Francis ex AK and recently ex MH a trojan horse for AK?

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The real conflict is FY jet services. Quick, experience them while you can before they get relegated to the annals of M'sia civil aviation.

 

It will actually allow MH to focus on premium services ala SQ instead of fighting the who-has-the-lowest-fare game with AK, and detrimental to its yields. Many here had trouble digesting that "five star value carrier" mantra, whatever it was supposed to be.

D7 will compete with SQ's new long haul LCC.

 

Conspiracy theory - Was Bernard Francis ex AK and recently ex MH a trojan horse for AK?

 

The reason why FY took jets was to get MH away from the Five Star Value Carrier proposition actually. They should have done that instead of tacking "Five Star Value Carrier"

 

Heck, they should have given all domestic flights to FY & focus on international markets!

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C'mon they can't be more serious!! There will definitely be conflict of interest if this happens.

 

A MAS source also disclosed that the fate of company managing director Tengku Datuk Azmil Zahruddin remains unclear as Fernandes will likely change the management to pull the airline from the brink after its first quarter losses.

 

All MH needs to do is to hire someone as good as TF who can really run the show, instead of letting some jokers running it.

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Poor MH. Wish I can say more. BUT, I'll focus on making the kids happy tomorrow and Monday. In the meantime, I am laughing my head off....If anything the positions of MH VPs and above are all Contract Based so they can be terminated very easily.

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