Is MoF Inc taking over MAS?

Bump into a friend at KLCC who told us that Khazanah is waiting for several proposals on MAS.

Our immediate response, "Not the same stupid game! Last time around Khazanah manipulated the share prices up to sell Proton at a premium to Syed Mokhtar."

Khazanah idea of turnaround is to repeatedly fail in all their turnaround effort.

Someone must check all their Sendirian Berhad start-up companies. Bet 90% of all the ventures spearheaded by the textbook understanding of Analyst/Fund Manager Azman failed too.

By right, Securities Commission should investigate Tan Sri Azman Mokhtar for rigging Proton shares then. Obviously not.

On our way back, someone rang us to tell that it is the talk inside MAS that MoF Inc is taking over MAS after Khazanah turned it private.

It makes more sense or perhaps it is what we had hoped for. MAS should be taken out from the jaws of the Khazanah incompetent but devouring sharks.

Business Times today, below:

Will MAS fly again?

MAS fate to be known soon

By BILQIS | Business Times – 22 hours ago

KHAZANAH Nasional Bhd, the majority shareholder of Malaysia Airlines (MAS), is believed to have started discussions with the government on the restructuring of the national carrier, and an announcement may come in a few weeks.

Business Times understands that Khazanah has held several meetings with the government over the last few weeks on the future of the ailing carrier.

“The announcement on MAS will possibly be made next week onwards,” a person familiar with the matter told Business Times yesterday.

It is believed that MAS will opt for a delisting from the Main Market as the first step to revive its fortunes.

Should the plan get the green light from the government, Khazanah will buy back the remaining MAS shares that it does not currently own. The move will enable the government investment arm to privatise the airline.

Khazanah holds 69.4 per cent stake in the national carrier, with the government holding a golden share.

MAS is worth RM4.01 billion yesterday after its share price inched 0.005 sen to close at 24 sen on Bursa Malaysia.

Meanwhile, another source said MAS favours the idea of delisting to make way for privatisation, rather than selling it to a third party or declaring bankruptcy. The source said the worst-case scenario for the airline is to opt for a complete shutdown.

“It is the last resort but it would be difficult.

They can’t just close down a national carrier. The airline has to work this out with the government.”

There has been much speculation on the fate of MAS, from privatisation to the selling of its subsidiaries and declaring bankruptcy.

The airline’s head honcho, Ahmad Jauhari Yahya, announced on June 25 that the only option to ensure the airline’s survival is by making radical changes to its business structure.

MAS has been hit by financial losses over the years.

Last year, the airline reported a wider net loss of RM1.17 billion from a loss of RM432.59 million in 2012 despite revenue growing to RM15.12 billion from RM13.76 billion.

Many are so frustrated that they want the the easy way out to sell or close-up MAS based on a camera snap shot of the situation.

But it is not that easy as expressed in this article below by Sun yesterday:

MAS crews crying at the multifaith prayers for MH17 crews and pasengers

We need to talk about MAS …

Posted on 6 August 2014 - 08:49pm

Natalie Shobana Ambrose

IT is a terribly difficult conversation that we have put off for too long, and one that seems even more difficult given the current situation, but we need to talk about MAS.

For the airline, it has been an incomprehensible year to say the least. Enveloped in unprecedented incidences, there is no guide, no book, no tested marketing strategy that its management can use to help navigate our national carrier though these difficult times. No other airline has ever gone through what MAS is going through now.

As Malaysians, our first reaction is drawn from the feeling of patriotism, and that deep comforting knowledge that says "I'm home" when we hear the words "Kepada warganegara Malaysia, selamat pulang ke tanahair" as the plane lands on Malaysian soil. We fly Malaysia Airlines because of the comfort it brings – it's also a little bit of home that we take with us when we leave. The food tastes familiar, the language during announcements are native, the cabin crew represent our people, our culture, our values.

For many, MAS and Malaysia are intertwined and it is an iconic carrier. There isn't a Malaysian company that touches us on so many levels. And that is the epitome of why national airlines were created – national pride, and they act as country ambassadors.

However, today the modern airline industry is very different and travellers have options. With the onset of budget airlines and multiple modes of transport available for a cheaper price, the case of public interest is unconvincing. It's cheaper to bus the KL-Penang route than it is to fly and with considerations such as airport travel time and security process the time-saving argument is also weak.

Even if one does decide to fly, there are multiple low-fare carriers competing for passengers and this applies to international flights too with better frequencies and a variety of destinations. So how does a national carrier position itself and still report revenue? It's not an easy task but it's also not an impossible task. Other airlines manage to do it so why not MAS?

The harsh reality is that before the tragedies of 2014, MAS was in the red, reporting a RM4.1 billion loss for 2011-2013. That's a lot of money, much of it public money. So we start questioning the priorities of a bail-out. The pot of gold is not bottomless and MAS has had its hand in it too often with numerous government bail-outs. With scrutiny on the allocation of government funds, the growing call for responsibility and the pressing need for accountability, it is extremely difficult to justify another government boost into MAS just for the sake of vanity when there are other pressing issues such as security, defence, healthcare, education, etc.

So does that mean MAS should fold? After all, the first quarter net loss posted was RM443 million with the loss of MH370 taking the bulk of the blame.

It is important to understand that it's not just about MAS going bust and ceasing airline services. The airline is part of a much larger ecosystem which has a multiplier effect. There are the airports, the cargo, the avionics and then there are the people – the MAS workforce alone is about 19,500, that does not include others within the aviation ecosystem. What happens to them? How does all this impact the country's economy for example? It's easy to say let the airline go bust, but it also affects trade, tourism and connectivity.

Basic observation tells me that the airline should not be making a loss. After all, the planes are full and at the 2012 World Airline Awards, MAS cabin staff won the top award. So what's happening?

It's simple, the airline has been bleeding through the sides for years preventing it from being competitive. It's the understanding with certain quarters who pay coach but sit in business, it's the decades of lopsided catering contracts that sticks the airline with a cheque containing too many zeroes, it's the perks of complimentary flights without earning the miles and it's the cutting small cost but dishing out large compensations to the higher ups.

So no matter who heads the airline, and how great their credentials are, they are literally carrying the weight of an ailing airline up a steep mountain of debt with their hands tied. Imagine what this alone has done to staff moral – and then add the weight of the two tragedies.

The question then is how do we turn the airline into a profit-making airline? In order to discuss a turnaround, we first have to acknowledge a few other challenges. While these observations may not reflect the totality, it is worth considering.

» At this point, MAS is not in a place of power to merge with other airlines. If the option is to merge, MAS will not have the upper hand.

» The MAS brand has become somewhat synonymous to tragedy and mismanagement, and that needs to be turned around to win back passengers' confidence. While many Malaysians have pledged their support to fly MAS, it's also about winning back international travellers.

» In doing that, it must be acknowledged that it is extremely difficult to build a hub so close to Singapore's Changi. To do so, it must include investing in infrastructure and creating policies that are conducive to creating the need to fly into Malaysia. There is an unscientific correlation to income per capita and the need for airline services.

While no airline has experienced such timelines as Malaysia has in this past year alone, there have been many national carriers who have had an infusion of government funds which partly contributed to turning around nose-dive bankruptcies such as Garuda Indonesia, Korean Airlines, Japan Airlines to name a few. Tap into those resources for a turn-around plan.

But if a bail-out is prescribed, there need to be cautionary measures to preserve the long-term health of the airline and industry. There has to be a workable time frame to avoid a welfare addiction like we have seen in the past. The government cannot keep throwing good money after bad.

Restructuring must include rebuilding pride in its people. The top guns of the airline have to be able to walk in to any room holding their heads high because they run a truly profitable airline – the national carrier. This means that the brand needs to be protected – it needs to represent the values of the country and the political baggage should be dropped.

While the politics of airspace is complicated to navigate, it's imperative that the government prioritise MAS's needs by allowing the airline to run not just as a business – but a profitable business that has lowered costs without compromising its reputation of service. That means holding true to its beginnings of being an ambassador for the country.

It's a painful road ahead with restructuring, cost cutting measures and other reforms but the airline is in a very difficult position. It's really a dammed if you do, dammed if you don't situation, but the reality is we can't sit in limbo for much longer, and that's why we really need to talk about MAS.

Comments: letters@thesundaily.com

Thus far, MAS is already beginning with such measures to sell-off its MRO business unit in India. Read in The Sun here.

Another part of the words circulating in MAS is that Tourism Minister, Dato Nazri Aziz will be taking charge of MAS. Under what capacity or structure, not much is known yet.

This blog did wrote of combining the National Airline unit with the Malaysia brand and tourism operation here and here. However, we are not claiming credit. It is somebody else's and the person is generous enough to want the idea be shared and made known to benefit the country.

If MAS were to entertain MASEU, NUFAM and all those noisy Unions, can they think of any ideas like this? The answer is an emphatic NO. Yet they talk as if they are concern for the Company's future.