Saturday 9 July 2016

INCOMPETENCE BREEDS INCOMPETENCE




Source: https://mpmsavemab.wordpress.com/2016/07/09/incompetence-breeds-incompetence/

MASTROUBLESHOOTERS are very concerned on the latest development in Malaysia Airlines Berhad (MAB) especially when MAS former Managing Director, Tan Sri Sri Abdul Aziz Abdul Rahman said that “The failure by the board members of Malaysia Airlines Bhd to steer the national carrier in the right direction should ultimately be blamed for the shoddy performance of its staff” (http://www.themalaymailonline.com/malaysia/article/malay-business-group-blames-mas-board-for-workers-poor-performance)
MASTROUBLESHOOTERS have also triggered many alarms as early as 2003 but were not taken seriously or perhaps they do not seem to be doing the right things and quite evidently they do not know the right things to do a.k.a INCOMPETENCE.
Sad things will happen when the responsible and accountable parties are weak and incompetents. (http://www.jaluch.co.uk/incompetence-breeds-incompetence/)
Thus, MASTROUBLESHOOTERS are compelled to share our experiences and knowledge below with MPM to “save MAB” and prevent another cycle of self destruction. As an introduction, allow us to reproduce our previous report dated 5 June 2009 below which again has been ignored or perhaps as quoted many times by Tan Sri Abdul Aziz “There are many very smart people who could not understand simple arithmetics”.
On Friday, June 5, 2009, we wrote an article as summarized below:
  1. MSS – MAS Mutual Separation Scheme
Rather than retrenching the staff that cost the PUBLIC a cool RM 500 million in 2006, MAS could have adopted the following strategy (still relevant now) to resolve MAS problems faced then by:
  1. Spinning off Engineering and Cargo Division (thus reducing the staff numbers by nearly 6000 but with ZERO cost)
  2. LIFO: Last in, First Out (NOT FIFO. First in, first out whereby many employees who were near retirement age were retrenched according to one standard formula instead of another alternative option)
  3. Engaging the much proven local expert to carry out third party audit / surveillance and propose recommendations (NOT the expensive and yet unproven Foreign Consultant)
Based on the FY2007 Financial report, MAS employees strength were reduced from 18,641 (2006) to 17,991 (2007) but staff costs escalated from RM 1.872 billions (2006) to RM 2.001 billions (2007). So where are the cost cutting measures?
After all the over hype BTP (Business Transformation Plan), sure enough they are now facing bigger problems because instead of looking on intrinsic quality and efficiency, they brought it more new personnel (again with zero aviation knowledge), so much so that MAS is now top heavy, sluggish and rather than being the leader, they tend to trail Air Asia business strategies (remember the advertisement colour scheme, ELF (Everyday Low Fares) etc, etc.

  1. Capital injection of RM 3.67 billions in 2007.
With reference to MAS 5 year financial performance ended 2007, there was a huge increase in Cash & Bank balances in 2007 in excess of 3.67 billion as compared to 2006.
Questions:
♦          Where does the huge capital injection of RM 3.67 billion comes from?
♦          Why MAS need to borrow 859 millions when they have sold fixed assets for 594 million and increase the shareholders equity to 3.9 billions in 2007 from 1.8 billion in 2006?
♦          Why do MAS need to hold 5.25 billion in Cash & Bank balances whereas in the past 5 years, their average balances were only around 2 billions?

From the above performance, it clearly illustrated that in FY 2007, profit of RM 852 million was not gained from operations but ‘creatively’ generated by selling her fixed assets and borrowings of RM 859 millions.

  1. Continued purchase of A380 and late decision on B737-800 orders in 2008.
Eventhough A380s were ordered circa 2005, MAS missed a golden opportunity to cancel the order in 2007 because of manufacturing defects faced by Airbus. MAS has been extremely lucky that the A380 were further delayed to 2012. Imagine what would happen if MAS had the aircrafts now especially with the severe global economic downturn, we could have been worst off compared to SIA, Qantas and Emirates.
A former MAS MD who has been keeping a very close eye on MAS had said in June 2006 that “their argument is that SIA, Emirates and Qantas have it, so we too must have it to be (in sync) with the market” demonstrates poor business sense and justification.

  1. Safety Issues
Two very serious incidents caused by MAS in 2008 which involved Saudi Arabia’s B747-300 (wet leased from Air Atlanta) that caught fire in Bangladesh (subsequently written off due damaged beyond repair) and another Saudi Arabia B777’s extremely expensive damages on both engines.
Yet, not many personnel have been informed about the real cause of these expensive and potentially fatal incidents and the preventive measures to be taken to avoid similar incidence.

  1. Fuel Hedging
As at 19 February 2009, the Group has entered into various fuel hedging transactions for periods up to 31 December 2011 in lots totaling 17,350,000 barrels.
Thursday March 5, 2009
PETALING JAYA: Malaysia Airlines (MAS) stands to chalk up close to RM3bil in hedging costs over the next two years while its competitor AirAsia Bhd enjoys the benefits of lower crude oil prices, analysts say.
An analyst estimated that MAS was currently sitting on a collective paper loss of around RM2.8bil for financial year 2009 and 2010 as a result of its hedging activities.

  1. I rest my case!
As at Dec 31, 2007, MAS had RM 5.25 billion in cash and bank balance and as at Dec 31, 2008, MAS had a cashpile of RM3.57bil. Where has the RM 1.68 billion gone to????
Why buy an airline that normally gives a return of 2 – 5% p.a.? The cash will be better spent if MAS buys back GE Engine Services which can easily give a return of 20 – 30 % p.a.?
 The challenges and recommendations.
  1. This incomprehension has to be contained, if not eradicated at all costs or it will lead to a vicious cycle of self-destruction.
  2. We must welcome challenge and conflict as a source of creativity and learning opportunities.
  3. We need above all else, world-class management and work practices. We need to routinely consider the unthinkable and the business we are in, even when things appear to be going well.
  4. Ultimately, we are responsible for what we do and for what we don’t do.

Full details below: