MAS: TURNING AROUND OR SPINNING?

On Wednesday May 23, 2012, the STAR wrote:

RM9bil fund raising to enable MAS to continue uninterrupted

PETALING JAYA: Malaysia Airlines (MAS) yesterday surprised the market place with a massive RM9bil fund raising proposal that involves the issuance of bonds and taking a loan.

This is the fifth consecutive quarter of loss for the airline and though the amount has narrowed compared to the previous corresponding quarter in 2011 where it reported RM242mil net loss, but when stripped of the non-cash items, the net loss for the first quarter in 2012 was RM347mil.

It is essentially the RM199mil forex gain that narrowed the losses for the first quarter.”

On the contrary, we have gathered that:

MALAYSIA Airlines (MAS) is perhaps the only Malaysian company that has undertaken the most number of restructuring exercises over the past decade to try to get back on its feet. A decade ago its books were severely tainted with red ink and had to be cleaned up via the Widespread Asset Unbundling (WAU) exercise where it became an asset light airline. But 10 years later it is still in dire straits and appears not too far from where it was a decade ago.

The state-owned airline has already had two rights issues since Idris Jala took over, raking in RM1.6 billion in 2007 and RM2.67 billion in 2010 to fund its operations and fleet purchases.

Industry experts said that a further injection of cash will not save MAS as “operational fixes” are required. Most of the past solutions for MAS, either the WAU or Idris Jala’s business transformation plan, were financial in nature to keep the airline in the black. But what is needed are operational fixes.

Its cash and cash equivalent have depleted to RM968.5mil as at Dec 2011 compared with RM5.2bil in Dec 2007, a rapid rate of cash depletion of almost RM4.3bil in four years.

THE 2001 and 2003 ORGANISATIONAL DIAGNOSIS

Since 2001, the WAU Team has not been able to fix "operational issues" in MAS as highlighted by the late Tan Sri Azizan in the Berita MAS dated September 2001 and September 2003 and summarised below:

SEPT 2001

1.         TO RE ENGINEER THIS ENDANGERED COMPANY.

2.         THE ORGANISATION STRUCTURE OF THE COMPANY IS FOUND TO BE NOT

            CONDUCIVE TO AN INTEGRATED APPROACH.

3.        REVIEWING AND IMPROVING THE PROCESSES AND PROCEDURES TO PLUG THE RAMPANT LEAKAGES AND STOP THE HAEMORRHAGE.

4.         BEHOLDEN ON US TO PROTECT IT FROM PREDATORS.

5.         PRESENT FRAGMENTED MAS IS NOT IN THE RIGHT STATE.

6.   MAS CULTURE IS DOMINATED BY A “SILO MENTALITY” RESULTING IN UNINTEGRATED AND UNCOORDINATED ACTIVITIES.

7.         FOSTERED ABUSE, PLUNDER OF THE COMPANY FOR PERSONAL GAINS, HIGH

COST, INEFFICIENCY AND HAS DRIVEN THE COMPANY TO NEAR BANKCRUPTCY.

8.    DEDICATE OURSELVES TO CREATING A NEW CULTURE GROUNDED IN A FEELING OF COMMON RESPONSIBILITY, BASED ON ACCOUNTABILITY.

SEPT 2003

1.         TO ENSURE THAT FACTIONALISM FOSTERED BY THE CLAN CULTURE WOULD NOT BE AN OBSTACLE.

2.         ALWAYS STRIVE TO SUPPRESS ANY TENDENCY TOWARDS FACTIONALISM.

3.         THIS REQUIRES A CHANGE IN MINDSET AND A NEW CULTURE.

4.         WE HAVE TO PREVENT LEAKAGES AND WASTAGES.

5.         GOOD FINANCIAL MANAGEMENT IS ESSENTIAL FOR OUR SURVIVAL.

THE SHORT TERM GAIN, LONG TERM PAIN

This is the fourth in a decade after WAU, Business Turnaround 1 and Business Transformation 2. The same people who crafted WAU are back hammering out a share swap without proper due diligence and based merely on “judgment call” instead.

Had they put in place a long-term plan then, would MAS be in this state?  The new team “has taken a short-term view of MAS when they should have engaged with the experts from within to get to the root of the problem as the 2012 Business Plan does not address that.

MAS' poor showing can be attributed to three factors; lack of good leadership management, people management and cost management in the last 15 years.

An example of poor leadership can be demonstrated in the email below:

Received from EN.XXX 87772344                      06-12-05 13.01

   -> IDRIS.JALA                MD, IDRIS JALA                    MD/OFF

   -> MAS.$$MESA            MAS EXEC STAFF ASSOCIATION

   -> MAS.CHAIRMAN        DATO' DR MOHAMED MUNIR            CHAIRMAN

W'SALAM,

Puan XXX/Bro XXX cpy Saudara Idris/Chairman/$$MESA,

BERANI KERANA BENAR, TAKUT KERANA BERSALAH.

InsyaAllah, together we can help our new MD to turn around this ailing and beloved airline even better than before. We have the ingredients, I can sense the honesty, sincerity and determination in our new MD.

First hurdle is to raise staff morale, another word we need morale booster.

Second hurdle is to remove CANCEROUS ELEMENT. We can't afford to have enemy

within. We have enough enemy outside.

If we can go past these two hurdles, the turnaround will be very smooth.

We have done it before; there is no reason why we cannot do it again and even better.

The "Flying Buffet" if it is true, hopefully not, already created a lot of damage to staff morale. Leadership by example and accountability is very important in our organisation which fly national pride.

Together we can do it.

Rgds/XXXX.

MESA President.