Wednesday, 3 September 2014

Former Head of MAS Engineering speaks.


RETRENCHMENT OF 6000 MAS STAFF

It is really heart-breaking that 6000 staff member will have to go under the Khazanah restructuring plan. All in all, about 20,000 or more people, including family members and dependents, will be affected by this move.

The Khazanah announcement with regard to the downsizing of the new MAS workforce to 14,000 lacks substance to enable meaningful comments to be made. In my view if the workforce is reduced to such numbers with the current company structure intact, then new MAS, scope of business will have to be shrunk to what it was in the 1980s. It appears that Khazanah is going for a quick fix. According to some analysts new MAS will save RM715 million by axing 6000 people for the work force.

However, MAS will have to cancel/defer deliveries of new aircraft thereby incurring additional cost in terms of penalty payments to the aircraft manufacturers.

The suggestion to restructure the current MAS by spinning-off Engineering, Airport Operations and MasKargo into 100% subsidiaries will achieve the objective of reducing the workforce of new MAS to 14,000 people or less, at the same time will avoid retrenching 6000 people and creating new businesses which could contribute to new MAS' income.

The transfer of the domestic operations and secondary regional points to FireFly will further reduce new MAS' cost. In addition to the reduction in technical and cabin crew which will be transferred to FireFly, substantial saving would be in the reduction of lease rental for the B737-800 and the maintenance cost of those aircraft that are transferred to Firefly.

Assume the following:

- 25 B737- 800 aircraft has to be transferred to FireFly

- Monthly utilization of 300 Flight hours.

- Lease rental of USD300, 000 per month

- Direct maintenance cost of USD700 per flight hours

Lease Rental for 25 aircraft = USD(300,000 x 12 x 25) = USD90,000,000

Maintenance cost = USD(700 x 300 x 12 x 25) = USD63,000,000

Total savings to new MAS USD153 million or about RM459 million per year.

If we add the cost of the 6000 people, the cost reduction to new MAS is more than RM1billion per year.

The money that Khazanah proposed to compensate the retrenched staff could be gainfully used to set up the new subsidiaries.

Any rebuttals are most welcome. Silence is no longer an option.

THANK YOU

8 comments:

  1. Scroll down to the 6th paragraph of this article. Surely if SQ, which is essentially the same as MAS can be profitable, why can't MAS be profitable? Those 6,000 staff are essentially the difference between the 2 carriers and you don't need to be a McKinsey consultant to realise this.
    http://brandconsultantasia.com/2014/05/28/10-things-to-do-to-save-the-malaysia-airlines-brand/

    ReplyDelete
    Replies
    1. MAS' problems goes deeper than the staffing issues. To say thjat the 6000 staff are the difference between MAS and SIA shows a superficial understanding of the issues involved. The approach taken to carry out a massive retrenchment exercise and shrink MAS' business is an easy way of trying to solve the problem. It surprising that this move is hailed and applauded by so-called industry experts.

      Delete
    2. Actually I think that the 6,000 staff are the difference and retrenchment is the first place any unprofitable firm starts on the journey back to profitability. Of course there are other elements that need to be addressed - the ridiculously one sided sweetheart deals, unprofitable routes, wasted budgets on outdated marketing tactics, inneffective sales and more - but the excess staff is worth anything from RM500 - RM900 million per year, maybe not in the first year due to the cost of the retrenchment exercise but long after that. That's a huge saving and as part of a strategic, integrated restructuring programme is a key success factor.

      As for deferring payment on aircraft, MAS could actually make money on those aircraft if it sells the right to buy at the right time.

      Delete
    3. The conclusion that 6000 staff should be retrenched is the result of a superficially conducted study/analysis. Please refer to the latest posting above.

      Delete
  2. Whylah so many clever people are
    confused between bailout and investment on the RM 6 billions issue...! 
    Remember...When you invest RM 6 billions, it means you enhance the business operation and size...! 
    But when the money is used to clear debts, pay to existing staff as compensation and restructuring an under performing business, in business term you should call it as bailout...! 

    ReplyDelete
    Replies
    1. You are entitled to your opinion and I do not wish to prolong this discussion. Let us agree to disagree.

      Delete
  3. but who is the former engineering head?

    ReplyDelete