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 MAS: Complete overhaul or die

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PostSubject: MAS: Complete overhaul or die   Mon May 28, 2012 2:42 pm

Malaysia Airlines chairman Tan Sri Md Nor Yusof is a very humble gentleman. I traveled with him before, seeing him drag his own luggage along and get the procedures done. Nothing like a big boss.

He told me sometimes he had to travel alone, and he would go to the airport by himself, watch closely the check-in and cabin services. He said he would also talk with other passengers and find out what they feel.

Managing an airline company requires attention to every detail. Md Nor is one such responsible guy.

That said, the national airline is too large a burden to everyone. He couldn't take the weight any more; neither could his management team, Khazanah and the Malaysian government.

Earlier this month, the MAS-AirAsia share swap deal was officially off. MAS had hoped to bank on Tony Fernandes' management expertise and AirAsia's market strength to turn the tide around, but the aspiration was killed in the bud thanks to the intervention of union and political interests.

Both airlines are prepared to maintain its 'cooperation" accord, but such cooperation would most likely end up empty talks as the intense market competition will only boost the strong and wipe out the weak.

MAS is back to square one. It has to rely on itself to determine its future destiny.

Obviously, things do not work in its favour. In its latest quarterly results, the national carrier registered a hefty RM170 million (S$69 million) loss, the fifth consecutive quarterly loss. Its net loss stood at RM2.5 billion last year.

Analysts put the airline's estimated daily loss at RM5 million.

No companies can survive well in such a cash-draining situation, even with government input. Of course, the government has also made it clear that it will not mobilise taxpayers' money to resuscitate MAS.
Financial losses aside, MAS's debt portfolio is now in excess of RM5.6 billion, with under a billion ringgit in cash reserves. It still fumbles to get cash to pay for its new orders, including six A380's costing billions of ringgit and about to be delivered.

MAS is looking to raise about RM9 billion to relieve its financial stress while the government is setting up a company to purchase the pre-ordered aircraft and lease them back to the national carrier.

If things go as planned, MAS will most likely be able to keep being airborne.

However, none of MAS' problems have been solved this way. While having to shoulder the heavy interest expenses, it must also address the issue of escalating operational costs and eroding market competitiveness, among other things.

MAS used to have reforms and restructuring, including a successful effort during Idris Jala's time, but then the momentum did not last too long and MAS is back to its old-time lassitude.

For instance, it now proposes its staff to take unpaid leaves to reduce expenses. In the past it used to deploy VSS on two occasions to axe thousands of workers.

Several years later, the number of its employees has climbed again, and now more than before the VSS schemes.

MAS needs a complete overhaul to survive in the face of a global aviation downturn.


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