2001/2003 MAS FLIGHT PLAN
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SHARE SWAP BETWEEN MAS AND AIR-ASIA AND ITS
IMPLICATIONS
By former MAS Managing Director
5 April 2012
Recently MAS and Air-Asia entered into an arrangement to swap shares. In consequence Air-Asia has two representatives on the Board of MAS. Many quarters questioned the move to swap shares in view of the fact that the arrangement would cause adverse implications to MAS.
Some of the implications are as follows:-
(i) The most critical problem facing MAS is the shortage of
funds to finance the purchase of Airbus 380 and B737-800 aircraft. It is alleged that the total amount required
is RM12 billions.
The Government as the major
shareholder has to play a leading role in the process of fund raising. The
current management is proposing to raise funds through the sales of movable
assets in engineering, cargo, training and ground handling. These departments will be under separate
joint-venture companies and MAS will not be in complete control of those
companies. It means that MAS will have to outsource those services. The quality of the total MAS services will be
adversely affected. Employees’ reactions
to the move will affect the operations adversely and it will take a long time
to come back to normal. The image of the
airline, will also be adversely affected in the process.
(ii) MAS has over the years
developed its Engineering capabilities to a very high level. The facilities and equipment are comparable to
any of the best outfits in the world.
The expertise is also comparable to any other similar organization in
the world.
The current management’s move to sell some of the engineering
assets and to change the management structure is a negative step and should not
be proceeded with. MAS should be allowed to
continue with its objective of making its engineering capabilities to be of
world class and recognized by the aviation industry world-wide and in the
process engineering will become a major income earner from third party
customers contributing to the profitability of the airline.
(iii) The share swap between AirAsia and MAS does not give any
advantage to MAS. The modes of
operations of both airlines are different as they are on different business
models. In fact the arrangement is
suicidal to MAS as it has to compete against Air-Asia on the same routes with a
disadvantaged business model. Under the
arrangement, AirAsia operates low fare while MAS operates premier
services. This arrangement is suicidal
for MAS in view of the fact that the markets they are competing in, are low
fare price sensitive markets.
The solution is for MAS to
provide both premier and low fare services.
This can be done so that MAS can compete against AirAsia fairly. It is a matter of making some adjustments to
the terms and conditions of carriage and making some changes to the operating
procedure. MAS should be able to prevail
in the competition.
iv) The share swap between
Air-Asia and MAS resulting in the appointments of representatives of Air-Asia
on the Board of MAS was a serious mistake and should be revoked. Air-Asia and MAS are still in competition on
almost all the MAS routes and it is
highly irregular to have the airline’s opponents making strategic decisions for
the company’s own operations. Air-Asia
has under the arrangement agreed to maintain their aircraft at MAS facilities
in consequence of the share swap. This
arrangement is in fact for mutual benefit as Air-Asia is given favourable
rates. Even if there was no share swap,
it would be in the interest of Air-Asia to maintain their aircraft with MAS as
otherwise AirAsia will have to maintain their aircraft with SIA whose rates are
no better than MAS. Without the share
swap the two airlines can still cooperate for mutual benefit.
(v) The current management has taken steps to move staff from
Area A at Subang Airport to KLIA. The
staff concerned (a fairly large number) are very unhappy as it means that they
have to overhaul everything, moving house to Sepang and this will cause severe
hardship to them.
It is proposed that such a move
should be stopped. Instead since the
land in Area A is to be used for some purposes, the staff there should instead
be moved to Area B and not to KLIA.
CONCLUSION:
1. In consequence of the move to swap shares between MAS and
Air-Asia, the airlines have to face changes which are affecting MAS adversely
in many aspects. It is recommended that
the arrangement be revoked.
2. Currently the staff
morale is very low and action should be taken to improve the situation
quickly. The membership of the Board and
the senior management must be examined and reconstituted. People with high integrity, the right
knowledge, experience and with the national interest at heart, should provide
the leadership of the organization as soon as possible.
3. There are many critical issues that need to be solved on an
urgent basis. The most pressing issue is
the financial aspect. The Chairman of
the company said that the company was very sick and needed urgent treatment,
while the Managing Director also said that unless the financial situation was
fixed fast, the company would be bankrupt soon.
It is therefore a serious situation and the government must now be
involved in resolving the problem.
4. The traffic rights available to the national carrier should
be examined. It appears that some carriers
especially those from the Middle East are enjoying traffic rights at our
expense. They are practising the illegal carriage of 6th Freedom traffic at our
expense. This is a very serious
intrusion into the company’s business opportunity. This issue should be examined fast with the
assistance of the government. In the context of the current competitive
environment, action must be taken fast to conclude effective strategic
alliances with other carriers where relevant.
5. It should be noted
that the current management is now actively engaged in negotiating the sale of
assets in engineering, training etc. It
is important that the activities be suspended immediately otherwise it will be
too late to take remedial measures. The
proposed formation of joint-venture companies relating to engineering, training
etc. should also be suspended before it is too late.
END.
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Well said, friends. About time the experts especially former MDs speak up, but only one MD has the brain and gumption to speak up. Very sad, how to be a developed nation.
ReplyDeleteThese past few years has been a real sh*t hole for MAS. We have management come in and constantly tell us that we are bleeding, we are sick, we are in ICU! Even when other airlines are doing well, we seem to be the unfortunate one that lost money. This new management is no different. They go further to make sure we declare the worst loss in history! They say we are sick but do otherwise; no 2 guy says financing is not a problem, he made us sponsor QPR (QPR what?! For heaven's sake!).
ReplyDeleteNow we're having JVs with Air Asia at whose cost??? Who 'really' benefits? OMG! This is got to be a real SICK COMPANY period!!!!!
Another ENRON perhaps.
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