AirAsia MAS together after all.
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MAS mulls delaying alliance, A380s as losses mount
By Jahabar Sadiq, The Malaysian Insider
KUALA LUMPUR, Aug 23 — Malaysia Airlines (MAS) is considering delaying its membership with global airline group Oneworld and deliveries of the super airliner Airbus A380 as its new management focuses on cutting losses, which spiked in the second quarter of 2011.
The Malaysian Insider understands that MAS will announce a bigger loss today for this year’s second quarter, traditionally its weakest business period, from the net loss of RM242.3 million in the first quarter ended March 31. It posted a pre-tax loss of RM532.6 million for the second quarter in 2010.
“The exco met last week and are looking at their options of delaying the alliance with Oneworld because it will cost money to provide interlining services and also upgrade the lounges to their standards,” a company source told The Malaysian Insider.
“They are also looking at delaying the A380 deliveries. It’s already delayed since 2008 but the exco is concerned if it can make money for MAS,” he added, referring to the executive committee headed by MAS chairman Tan Sri Mohd Nor Mohd Yusof now managing the airline after managing director Tengku Datuk Azmil Zahruddin resigned effective August 9.
Azmil’s resignation was announced after the airline’s biggest shareholder, state asset manager Khazanah Nasional Berhad, swapped 20.5 per cent of MAS stock for a 10 per cent stake in Asia’s biggest budget carrier AirAsia on August 9. The swap enabled AirAsia bosses Tan Sri Tony Fernandes and his partner Datuk Seri Kamaruddin Meranun to sit on the MAS board and help turn around the loss-making flag carrier.
Another source confirmed the possibility of delays, pointing out that MAS is now just a designated member of Oneworld since June and has to go through a process that could take as long as 18 months before being a full member of the world’s third biggest airline group.
It is understood that a cause of concern is MAS’ sponsor to join oneworld, Qantas, which recently announced it wants to set up two new airlines in Asia with part of its US$9 billion (RM26.81 billion) plane order from Airbus in order to salvage its loss-making international business.
Under the plan, the Australian carrier has decided to set up a Japanese budget airline with Japan Airlines and Mitsubishi Corp and a premium airline based in Southeast Asia, possibly Malaysia.
“MAS is going to be a premium airline and if Qantas goes ahead with its plans, there will be competition. An alliance might not work then, apart from the costs of meeting the alliance’s standards,” the source said.
When MAS announced its entry in Oneworld last June, it said that MAS passengers will gain access to the alliance’s global network which covers almost 950 destinations in 150 countries. MAS Enrich frequent flyer members will be able to earn and redeem rewards on Oneworld’s carriers and vice versa.
This strategy was to work with the April 2012 delivery of the first of six A380s that MAS ordered in 2003. There has been three delays for the world’s biggest passenger jet from Airbus, which were first to be delivered in January 2007 before being delayed to last January and the third delay was to this month before it was confirmed for next year.
READ MORE HERE.
KUALA LUMPUR, Aug 23 — Malaysia Airlines (MAS) is considering delaying its membership with global airline group Oneworld and deliveries of the super airliner Airbus A380 as its new management focuses on cutting losses, which spiked in the second quarter of 2011.
The Malaysian Insider understands that MAS will announce a bigger loss today for this year’s second quarter, traditionally its weakest business period, from the net loss of RM242.3 million in the first quarter ended March 31. It posted a pre-tax loss of RM532.6 million for the second quarter in 2010.
“The exco met last week and are looking at their options of delaying the alliance with Oneworld because it will cost money to provide interlining services and also upgrade the lounges to their standards,” a company source told The Malaysian Insider.
“They are also looking at delaying the A380 deliveries. It’s already delayed since 2008 but the exco is concerned if it can make money for MAS,” he added, referring to the executive committee headed by MAS chairman Tan Sri Mohd Nor Mohd Yusof now managing the airline after managing director Tengku Datuk Azmil Zahruddin resigned effective August 9.
Azmil’s resignation was announced after the airline’s biggest shareholder, state asset manager Khazanah Nasional Berhad, swapped 20.5 per cent of MAS stock for a 10 per cent stake in Asia’s biggest budget carrier AirAsia on August 9. The swap enabled AirAsia bosses Tan Sri Tony Fernandes and his partner Datuk Seri Kamaruddin Meranun to sit on the MAS board and help turn around the loss-making flag carrier.
Another source confirmed the possibility of delays, pointing out that MAS is now just a designated member of Oneworld since June and has to go through a process that could take as long as 18 months before being a full member of the world’s third biggest airline group.
It is understood that a cause of concern is MAS’ sponsor to join oneworld, Qantas, which recently announced it wants to set up two new airlines in Asia with part of its US$9 billion (RM26.81 billion) plane order from Airbus in order to salvage its loss-making international business.
Under the plan, the Australian carrier has decided to set up a Japanese budget airline with Japan Airlines and Mitsubishi Corp and a premium airline based in Southeast Asia, possibly Malaysia.
“MAS is going to be a premium airline and if Qantas goes ahead with its plans, there will be competition. An alliance might not work then, apart from the costs of meeting the alliance’s standards,” the source said.
When MAS announced its entry in Oneworld last June, it said that MAS passengers will gain access to the alliance’s global network which covers almost 950 destinations in 150 countries. MAS Enrich frequent flyer members will be able to earn and redeem rewards on Oneworld’s carriers and vice versa.
This strategy was to work with the April 2012 delivery of the first of six A380s that MAS ordered in 2003. There has been three delays for the world’s biggest passenger jet from Airbus, which were first to be delivered in January 2007 before being delayed to last January and the third delay was to this month before it was confirmed for next year.
READ MORE HERE.
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............. and what next? ........ reduce the fleet size to half, provide feeder service to AAX ......... and strip everyone (MAS) naked .......
Well done Khazanah ....
'Satu lagi projek oleh Kerajaan Barisan Nasional'
VR
Well done Khazanah ....
'Satu lagi projek oleh Kerajaan Barisan Nasional'
VR
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This is the deal
The interim financial results are out. AA profit took a nose dive, down 46 % from same period last year due to Firefly eating into its LCC buisness. MAS lagi teruk. The Firefly operations is bleeding MAS and so the rational thing to do is stop this "unhealthy" competition and allow each to fly a certain market segment. Actually the drop in AA profit is because Firefly has taken appox 3 million pax from AA operation. So QPR boss has done the good deed to make all survive. AA to do low cost operation, Firefly to do only ATR out of Subang and create Saphire to carry all the yuppies and rich umnoputras on the domestic route and MAS to vie for the long haul premium class.
Also heard that a super VSS is along the way to trim MAS down to 12000 and make the employees more productive. Not sure how this is going to happen.
Non core business will be re-assessed and if not generating money it will be axed
Cost management is the mood here today. See lah what happens in the mean time retirement is looming ahead.
Also heard that a super VSS is along the way to trim MAS down to 12000 and make the employees more productive. Not sure how this is going to happen.
Non core business will be re-assessed and if not generating money it will be axed
Cost management is the mood here today. See lah what happens in the mean time retirement is looming ahead.
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Looks like there are lots of umno dominated sheepeople in MAS judging by the deafening silence on this thread. Let's see if we can fire it up :
Malaysia Airlines' short-term outlook bleak despite new alliance with AirAsia
SPECIAL REPORTS
Saturday, 27 August 2011 Combat
By Centre for Asia Pacific Aviation
Malaysia Airlines (MAS) reported a heavy loss in 2Q2011 (three months to 30-Jun-2011) as soaring costs, led by fuel, weighed on the result. The 2Q2011 loss is MAS’ second-consecutive quarterly loss and the carrier expects to remain in the red for the rest of the year.
MAS reported a net loss of MYR525.8 million (USD177.7 million) in the second quarter, seasonally its weakest. Aggressive capacity deployment, under-performance from its revenue management and sales teams and increasing competition from regional and Gulf-based rivals also hurt the 2Q2011 result. The net result was a slight year-on-year improvement, but the airline’s operating loss swelled to MYR412.5 million (USD139 million) from MYR285.6 million (USD95 million) in the same period last year.
The deteriorating operating performance reflects the sharp increase in operating costs, led chiefly by fuel, which surged 41% in the period, and a weaker cargo performance, which pushed the airline deeply into the red. MAS’ operating margin for the quarter was -12.0%.
Various initiatives will be undertaken to reverse MAS’ woes. Most notably, MAS has announced a tie-up with Malaysian LCC powerhouse AirAsia and its long-haul offshoot AirAsia X, the airline grouping largely responsible for MAS’ struggles over the past decade.
MAS said its board “has identified immediate priorities to focus on in the short-term”, aimed at stemming losses. “Working with the new executive committee…recovery initiatives will be implemented to turn the company’s fortunes around and to start rebuilding cash reserves,” which have fallen sharply in 2011. Immediate initiatives will include, among others, more prudent capacity management, implementing new dynamic pricing to improve yields and revenues and a review of products and brand positioning.
Revenue up, but costs neutralise gains
MAS recorded an 8.5% increase in top-line revenue to MYR3,429 million (USD1.17 billion). Revenue gains were, however, neutralised by soaring costs, which increased 11.4% in the period to MYR3,897 million (USD1.31 billion), which pushed the airline deeply into the red for the quarter.
MAS revenue and operating expenses (MYR million) and growth (% change): 2Q2007 to 2Q2011
Source: Centre for Asia Pacific Aviation and MAS
MAS net profit (MYR million): 2Q2007-2Q2011
Source: Centre for Asia Pacific Aviation and MAS
Passenger revenue increased 9.1% to MYR2,086 million (USD698 million) and revenue from fuel and administration surcharges rose 45.2% to MYR495 million (USD166 million).
Cargo revenue however was much weaker in the period, reflecting the lower year-on-year trade volumes seen in the region, which was skewed by the replenishing of global restocking of inventories in early 1H2010 following the global financial crisis. Total cargo revenue fell 16%, led by a 24% fall in belly and freighter revenue. The cargo segment’s fuel surcharge, which increased 6.6% to MYR145 million (USD48.5 million), helped mitigate the sharp fall in cargo revenue.
But spiralling costs significantly outweighed revenue growth. Operating costs increased 11.5% to MYR3,987 million (USD1.31 billion). Fuel, unsurprisingly, led the rise in costs. Fuel costs surged 41% in 2Q to MYR1,550 million (USD519 million), to account for 40% of total operating costs, up from 30% in 2Q2010. The sharp fuel price rise masks what would otherwise have been an impressive cost performance in 2Q2011, with non-fuel operating costs down 2%, reflecting MAS’ aggressive and consistent cost control measures.
ASKs increased 10% and RPKs increased 12%, pushing average loads up 1.5ppts to 75.5%. The stronger load factors and other various yield-supportive measures, such as fare increases and fuel surcharges, saw yields increase 1% to 24.2 sen (USD8.16 cents), with RASK up 3% to 18.2 sen (USD6.14 cents).
Strategic shake-up aimed at ending MAS’ woes
Since the end of 2Q2011, a major strategic development has taken place as MAS forged earlier this month a tie-up with rival AirAsia, which has moved aggressively into MAS’ short-haul, regional, and more recently, its long-haul markets. Khazanah, a national investment vehicle and majority shareholder in MAS, purchased a 10% stake in AirAsia from Tune Air, as part of a cross-equity deal. Khazanah will also purchase a 10% stake in AirAsia X. Tune Air, the largest shareholder in AirAsia and the investment vehicle of CEO Tony Fernandes, acquired a 20% stake in MAS from Khazanah.
See related report: Turning the industry on its head: AirAsia joins Malaysia Airlines
A Joint Collaboration Committee (JCC) was formed on 09-Aug-2011, which will look into key areas for collaboration to realise synergies and cost efforts, MAS says. MAS and AirAsia aim to cooperate in areas such as engineering and ground support, aircraft purchasing, catering and training and cargo services.
The Malaysian government said the agreement would end cut-throat competition between the airline groups, allowing them to grow together and more profitably than would otherwise be the case. Mr Fernandes said the deal allows his airline to focus on growing the business, “as opposed to spending a lot of time on politics and fighting unnecessary battles”. The collaboration should also boost yields for both airlines.
Better market segmentation should also be achieved under the deal, with one partner targeting the low-cost, leisure market and the other, the higher-yielding and premium market. Firefly, MAS’ LCC subsidiary, also recorded heavy losses in 1H2011 and will be re-structured to focus on the short-haul premium travel space using turboprop equipment. MAS said a longer-term solution for Firefly would be developed by the management team to put the airline on course for sustained profitability.
While Firefly will retain its ATR-72s, the carrier's B737 fleet is expected to be transferred to the new regional, full-service airline, Sapphire. But it remains unclear how MAS, which also has a regional carrier unit in east Malaysia with ATR-72 operator MASwings, will juggle so many brands. Of particular interest will be how the Sapphire unit differs from MAS' existing regional narrowbody services.
MAS, in releasing its 2Q2011 earnings, also said its multi-year re-fleeting programme will be accelerated. As of mid-Aug-2011, the airline has taken delivery this year of five new B737-800s and five new A330-300s. Over the next four months, MAS will take delivery of six more aircraft – two B737-800s, two A330-200Fs and two ATR-72s. Excluding these aircraft, MAS’ order book comprises 38 B737-800s, ten A330s, six A380s and two A330-200Fs. The airline said its fleet delivery schedule would be accelerated in the next few years, adding that all required financing activities for 2012 have been completed.
Weak result matched by gloomy outlook
MAS expects a weak second-half due to elevated fuel prices and sovereign debt fears in key markets which will continue to weigh on consumer confidence and economic growth. The airline’s forward bookings indicate challenges in the European, US and Japanese markets, with “normal” trends for other regions. The third quarter will be soft owing to the month of Ramadan, when travel is seasonally slow.
In response to the challenging outlook, MAS will moderate its capacity growth in 2H2011. The airline will also review its route network and adjust capacity accordingly. MAS will retire two B747-200Fs, one B747-400 and three B737-400s by Oct-2011.
The airline will also have a heavier focus on yield management, with new revenue systems to be introduced in 2H2011. MAS aims to enhance its yield performance through front-end business class initiatives, implementation of fuel surcharges and step up its yield/revenue management.
A loss in 2H2011 is still expected, though MAS said it would be less severe than 1H2011, due to these initiatives.
MAS’ most significant turn in fortunes is likely to come from its tie-up with AirAsia, a deal that effectively neutralises a major competitor and a leading cause of losses in recent years. Under the agreement, MAS also gains two successful and experienced aviation executives on its board, in Tony Fernandes and AirAsia deputy CEO Kamarudin Meranun. This expertise at senior management level should help MAS overhaul its network, alliance and fleet strategies and navigate the flag carrier through some more desperate times.
Malaysia Airlines' short-term outlook bleak despite new alliance with AirAsia
SPECIAL REPORTS
Saturday, 27 August 2011 Combat
By Centre for Asia Pacific Aviation
Malaysia Airlines (MAS) reported a heavy loss in 2Q2011 (three months to 30-Jun-2011) as soaring costs, led by fuel, weighed on the result. The 2Q2011 loss is MAS’ second-consecutive quarterly loss and the carrier expects to remain in the red for the rest of the year.
MAS reported a net loss of MYR525.8 million (USD177.7 million) in the second quarter, seasonally its weakest. Aggressive capacity deployment, under-performance from its revenue management and sales teams and increasing competition from regional and Gulf-based rivals also hurt the 2Q2011 result. The net result was a slight year-on-year improvement, but the airline’s operating loss swelled to MYR412.5 million (USD139 million) from MYR285.6 million (USD95 million) in the same period last year.
The deteriorating operating performance reflects the sharp increase in operating costs, led chiefly by fuel, which surged 41% in the period, and a weaker cargo performance, which pushed the airline deeply into the red. MAS’ operating margin for the quarter was -12.0%.
Various initiatives will be undertaken to reverse MAS’ woes. Most notably, MAS has announced a tie-up with Malaysian LCC powerhouse AirAsia and its long-haul offshoot AirAsia X, the airline grouping largely responsible for MAS’ struggles over the past decade.
MAS said its board “has identified immediate priorities to focus on in the short-term”, aimed at stemming losses. “Working with the new executive committee…recovery initiatives will be implemented to turn the company’s fortunes around and to start rebuilding cash reserves,” which have fallen sharply in 2011. Immediate initiatives will include, among others, more prudent capacity management, implementing new dynamic pricing to improve yields and revenues and a review of products and brand positioning.
Revenue up, but costs neutralise gains
MAS recorded an 8.5% increase in top-line revenue to MYR3,429 million (USD1.17 billion). Revenue gains were, however, neutralised by soaring costs, which increased 11.4% in the period to MYR3,897 million (USD1.31 billion), which pushed the airline deeply into the red for the quarter.
MAS revenue and operating expenses (MYR million) and growth (% change): 2Q2007 to 2Q2011
Source: Centre for Asia Pacific Aviation and MAS
MAS net profit (MYR million): 2Q2007-2Q2011
Source: Centre for Asia Pacific Aviation and MAS
Passenger revenue increased 9.1% to MYR2,086 million (USD698 million) and revenue from fuel and administration surcharges rose 45.2% to MYR495 million (USD166 million).
Cargo revenue however was much weaker in the period, reflecting the lower year-on-year trade volumes seen in the region, which was skewed by the replenishing of global restocking of inventories in early 1H2010 following the global financial crisis. Total cargo revenue fell 16%, led by a 24% fall in belly and freighter revenue. The cargo segment’s fuel surcharge, which increased 6.6% to MYR145 million (USD48.5 million), helped mitigate the sharp fall in cargo revenue.
But spiralling costs significantly outweighed revenue growth. Operating costs increased 11.5% to MYR3,987 million (USD1.31 billion). Fuel, unsurprisingly, led the rise in costs. Fuel costs surged 41% in 2Q to MYR1,550 million (USD519 million), to account for 40% of total operating costs, up from 30% in 2Q2010. The sharp fuel price rise masks what would otherwise have been an impressive cost performance in 2Q2011, with non-fuel operating costs down 2%, reflecting MAS’ aggressive and consistent cost control measures.
ASKs increased 10% and RPKs increased 12%, pushing average loads up 1.5ppts to 75.5%. The stronger load factors and other various yield-supportive measures, such as fare increases and fuel surcharges, saw yields increase 1% to 24.2 sen (USD8.16 cents), with RASK up 3% to 18.2 sen (USD6.14 cents).
Strategic shake-up aimed at ending MAS’ woes
Since the end of 2Q2011, a major strategic development has taken place as MAS forged earlier this month a tie-up with rival AirAsia, which has moved aggressively into MAS’ short-haul, regional, and more recently, its long-haul markets. Khazanah, a national investment vehicle and majority shareholder in MAS, purchased a 10% stake in AirAsia from Tune Air, as part of a cross-equity deal. Khazanah will also purchase a 10% stake in AirAsia X. Tune Air, the largest shareholder in AirAsia and the investment vehicle of CEO Tony Fernandes, acquired a 20% stake in MAS from Khazanah.
See related report: Turning the industry on its head: AirAsia joins Malaysia Airlines
A Joint Collaboration Committee (JCC) was formed on 09-Aug-2011, which will look into key areas for collaboration to realise synergies and cost efforts, MAS says. MAS and AirAsia aim to cooperate in areas such as engineering and ground support, aircraft purchasing, catering and training and cargo services.
The Malaysian government said the agreement would end cut-throat competition between the airline groups, allowing them to grow together and more profitably than would otherwise be the case. Mr Fernandes said the deal allows his airline to focus on growing the business, “as opposed to spending a lot of time on politics and fighting unnecessary battles”. The collaboration should also boost yields for both airlines.
Better market segmentation should also be achieved under the deal, with one partner targeting the low-cost, leisure market and the other, the higher-yielding and premium market. Firefly, MAS’ LCC subsidiary, also recorded heavy losses in 1H2011 and will be re-structured to focus on the short-haul premium travel space using turboprop equipment. MAS said a longer-term solution for Firefly would be developed by the management team to put the airline on course for sustained profitability.
While Firefly will retain its ATR-72s, the carrier's B737 fleet is expected to be transferred to the new regional, full-service airline, Sapphire. But it remains unclear how MAS, which also has a regional carrier unit in east Malaysia with ATR-72 operator MASwings, will juggle so many brands. Of particular interest will be how the Sapphire unit differs from MAS' existing regional narrowbody services.
MAS, in releasing its 2Q2011 earnings, also said its multi-year re-fleeting programme will be accelerated. As of mid-Aug-2011, the airline has taken delivery this year of five new B737-800s and five new A330-300s. Over the next four months, MAS will take delivery of six more aircraft – two B737-800s, two A330-200Fs and two ATR-72s. Excluding these aircraft, MAS’ order book comprises 38 B737-800s, ten A330s, six A380s and two A330-200Fs. The airline said its fleet delivery schedule would be accelerated in the next few years, adding that all required financing activities for 2012 have been completed.
Weak result matched by gloomy outlook
MAS expects a weak second-half due to elevated fuel prices and sovereign debt fears in key markets which will continue to weigh on consumer confidence and economic growth. The airline’s forward bookings indicate challenges in the European, US and Japanese markets, with “normal” trends for other regions. The third quarter will be soft owing to the month of Ramadan, when travel is seasonally slow.
In response to the challenging outlook, MAS will moderate its capacity growth in 2H2011. The airline will also review its route network and adjust capacity accordingly. MAS will retire two B747-200Fs, one B747-400 and three B737-400s by Oct-2011.
The airline will also have a heavier focus on yield management, with new revenue systems to be introduced in 2H2011. MAS aims to enhance its yield performance through front-end business class initiatives, implementation of fuel surcharges and step up its yield/revenue management.
A loss in 2H2011 is still expected, though MAS said it would be less severe than 1H2011, due to these initiatives.
MAS’ most significant turn in fortunes is likely to come from its tie-up with AirAsia, a deal that effectively neutralises a major competitor and a leading cause of losses in recent years. Under the agreement, MAS also gains two successful and experienced aviation executives on its board, in Tony Fernandes and AirAsia deputy CEO Kamarudin Meranun. This expertise at senior management level should help MAS overhaul its network, alliance and fleet strategies and navigate the flag carrier through some more desperate times.
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Silence, deafening silence!
With the undignified deafening silence on this thread, let's ponder further on this :
AirAsia-MAS share swap: The barbarians have entered the gates
Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia’s skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS’s control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies.
William Leong, The Malaysian Insider
SEPT 1 — In the 10-year war for control of the Malaysian skies, while a besieged MAS was desperately fighting for survival, someone opened the gates for the barbarians to enter.
Barbarians at the gates
The AirAsia-MAS share swap reminds me of the takeover saga of RJR Nabisco. The company was a merger of RJ Reynolds, the tobacco company selling “Camel”, “Winston” and “Salem” cigarettes and Nabisco, the biscuit company selling “Oreos”, “Ritz Crackers” and snacks.
The financial firm of Kohberg Kravis Roberts & Co (commonly referred to as “KKR”) made a hostile takeover bid for the company. There was a fierce battle for control of the company. The board, in protecting the company’s and shareholders’ interest, drove KKR and the other bidders to increase their bids several times until KKR won with a bid of US$31.1 billion (RM93.3 billion). It was the largest leverage buyout in history and the record stood for 17 years. RJ Reynolds was subsequently spun out of RJR Nabisco due to tobacco legislation. Nabisco is now owned by Kraft Foods. The RJR Nabisco leverage buyout was considered to be the pre-eminent example of corporate and executive greed. The events were chronicled in a book called “Barbarians at the Gate: The Fall of RJR Nabisco”.
The fight for control of the Malaysian skies has been an uneven battle from the beginning. In the end those responsible for MAS’s defence not only did not put up a fight but opened the gates to allow AirAsia into MAS’s management. The share swap has given rise to concerns on the pricing and whether it will benefit the public-funded MAS.
Pricing issues
One of the favourite sayings of corporate raiders and businessmen is “OPM”, that is to operate using “Other People’s Money”. In the case of the AirAsia-MAS share swap, it is the people’s money because MAS is funded by taxpayers.
The pricing of the share swap has raised eyebrows. The parties, in using the August 5 closing market price of both airlines as the basis for the share swap, have raised several concerns.
Datuk Seri Anwar Ibrahim, in his August 10 article “MAS-AirAsia share swap deal raises serious concerns over effective control and governance”, referred, among others, to issues of insider trading and asset stripping.
A look at the price charts of the two companies for the past six months supports Datuk Seri Anwar Ibrahim’s concerns. The MAS share price fell sharply on May 30, 2011 to RM1.34. It continued to be in the doldrums until August 5, the date of the share swap announcement. AirAsia’s share price was on a steep and sharp climb from May. It surged to a height of RM4.20 on August 4, 2011. This is on the eve of the announcement.
There may be good reasons for the share prices of the two counters moving the way they did. However, it seems improbable for this to be coincidental. AirAsia’s price was trading around its highest and MAS among its lowest when the share swap took place. AirAsia’s price fell immediately after the announcement. It could be that those who held AirAsia shares did not like the deal. It could be whoever was playing up the AirAsia shares stopped doing so. There is therefore cause for investigations to be made.
Others have raised concerns with the price. Khazanah exchanged 20 per cent of MAS at RM1.60 per share for 10 per cent of Air Asia at RM3.95 per share. They believe the price should not have been based only on the closing market price of the two counters on August 5. They point out that MAS in fact is worth more than the price traded because it is an asset-backed corporation. It has a paid-up capital of RM3.34 billion represented by fixed asset value at RM8.4 billion, net asset at RM6.92 billion. AirAsia, on the other hand, is a debt-laden company. It has borrowings of RM7.7 billion. MAS’s cash position is RM2.086 billion while AirAsia’s is RM1.7 billion. Those who approved the deal will need to justify the pricing.
One other issue on pricing is the timing of the deal. The share swap was announced on August 9. This was within 30 days before both AirAsia and MAS announced their respective 2nd quarter financial results on August 23. Under the Bursa Malaysia Listing Requirements, this is known as the “closed period”. Those in possession of the financial results during the closed period are not allowed to deal with the shares until the results are announced. This is to prevent insider trading by those with possession of price-sensitive information. Those who trade in the shares with such information will be taking unfair advantage of the public who are unaware of the situation. Paragraph 14.08 of the listing requirements allows principal officers who do not possess the information to deal during the close period by giving the requisite notification. Although the listing requirements allow such dealings, it would have been more prudent not to enter into the share swap during the closed period.
If the share swap was made after the financial results of both airlines were announced, the market price may have given a better reflection of the share price of both airlines. This may be seen from the share price of AirAsia after the results were announced on August 23. Although AirAsia announced it made a profit, it was 48 per cent less than the previous year. The AirAsia share price fell to RM3.57 at 9.04am on August 24, the day after the results were announced. Those involved will have to explain why the share swap was done before the 2nd quarter results were announced.
Opening the gates for the barbarians
Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia’s skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS’s control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies.
Regulation determines airlines’ fortunes
International air transport operates within the framework of the 1944 Chicago Convention for International Air Transport. Governments enter into bilateral agreements setting out the landing rights, restrictions on capacity and pricing. Sectors within a single country are normally denied to foreign airlines. This restriction is called cabotage. It is recognised that cabotage is the prerogative of the domestic carrier. The system of bilateral agreements between two governments has led to the aviation industry to be highly regulated. There has since been a change towards deregulation and liberalisation. Nevertheless, the industry remains one where regulation plays an important role.
Regulation is thus a critical determinant of an airline’s performance. It can determine how competitive the market is as well as constrain an airline in its choice of fares, capacity and frequency. Most governments impose entry controls which are usually applied to particular routes. Most governments usually permit one airline to operate a route. The government therefore plays a critical role in determining the fortunes of an airline by deciding on the routes to be given to the airlines.
Golden service takes a beating
MAS’s finance and operation problems to a significant extent are due to the government’s inconsistent and contradictory air transport policy. Such decisions gave the MAS Golden Service a beating while AirAsia became the Golden Child.
The main asset of any airline is its route networks. The government first allowed AirAsia to compete with MAS and then gave MAS’s domestic routes to AirAsia and had its route networks reduced while AirAsia increased theirs.
READ MORE HERE
AirAsia-MAS share swap: The barbarians have entered the gates
Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia’s skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS’s control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies.
William Leong, The Malaysian Insider
SEPT 1 — In the 10-year war for control of the Malaysian skies, while a besieged MAS was desperately fighting for survival, someone opened the gates for the barbarians to enter.
Barbarians at the gates
The AirAsia-MAS share swap reminds me of the takeover saga of RJR Nabisco. The company was a merger of RJ Reynolds, the tobacco company selling “Camel”, “Winston” and “Salem” cigarettes and Nabisco, the biscuit company selling “Oreos”, “Ritz Crackers” and snacks.
The financial firm of Kohberg Kravis Roberts & Co (commonly referred to as “KKR”) made a hostile takeover bid for the company. There was a fierce battle for control of the company. The board, in protecting the company’s and shareholders’ interest, drove KKR and the other bidders to increase their bids several times until KKR won with a bid of US$31.1 billion (RM93.3 billion). It was the largest leverage buyout in history and the record stood for 17 years. RJ Reynolds was subsequently spun out of RJR Nabisco due to tobacco legislation. Nabisco is now owned by Kraft Foods. The RJR Nabisco leverage buyout was considered to be the pre-eminent example of corporate and executive greed. The events were chronicled in a book called “Barbarians at the Gate: The Fall of RJR Nabisco”.
The fight for control of the Malaysian skies has been an uneven battle from the beginning. In the end those responsible for MAS’s defence not only did not put up a fight but opened the gates to allow AirAsia into MAS’s management. The share swap has given rise to concerns on the pricing and whether it will benefit the public-funded MAS.
Pricing issues
One of the favourite sayings of corporate raiders and businessmen is “OPM”, that is to operate using “Other People’s Money”. In the case of the AirAsia-MAS share swap, it is the people’s money because MAS is funded by taxpayers.
The pricing of the share swap has raised eyebrows. The parties, in using the August 5 closing market price of both airlines as the basis for the share swap, have raised several concerns.
Datuk Seri Anwar Ibrahim, in his August 10 article “MAS-AirAsia share swap deal raises serious concerns over effective control and governance”, referred, among others, to issues of insider trading and asset stripping.
A look at the price charts of the two companies for the past six months supports Datuk Seri Anwar Ibrahim’s concerns. The MAS share price fell sharply on May 30, 2011 to RM1.34. It continued to be in the doldrums until August 5, the date of the share swap announcement. AirAsia’s share price was on a steep and sharp climb from May. It surged to a height of RM4.20 on August 4, 2011. This is on the eve of the announcement.
There may be good reasons for the share prices of the two counters moving the way they did. However, it seems improbable for this to be coincidental. AirAsia’s price was trading around its highest and MAS among its lowest when the share swap took place. AirAsia’s price fell immediately after the announcement. It could be that those who held AirAsia shares did not like the deal. It could be whoever was playing up the AirAsia shares stopped doing so. There is therefore cause for investigations to be made.
Others have raised concerns with the price. Khazanah exchanged 20 per cent of MAS at RM1.60 per share for 10 per cent of Air Asia at RM3.95 per share. They believe the price should not have been based only on the closing market price of the two counters on August 5. They point out that MAS in fact is worth more than the price traded because it is an asset-backed corporation. It has a paid-up capital of RM3.34 billion represented by fixed asset value at RM8.4 billion, net asset at RM6.92 billion. AirAsia, on the other hand, is a debt-laden company. It has borrowings of RM7.7 billion. MAS’s cash position is RM2.086 billion while AirAsia’s is RM1.7 billion. Those who approved the deal will need to justify the pricing.
One other issue on pricing is the timing of the deal. The share swap was announced on August 9. This was within 30 days before both AirAsia and MAS announced their respective 2nd quarter financial results on August 23. Under the Bursa Malaysia Listing Requirements, this is known as the “closed period”. Those in possession of the financial results during the closed period are not allowed to deal with the shares until the results are announced. This is to prevent insider trading by those with possession of price-sensitive information. Those who trade in the shares with such information will be taking unfair advantage of the public who are unaware of the situation. Paragraph 14.08 of the listing requirements allows principal officers who do not possess the information to deal during the close period by giving the requisite notification. Although the listing requirements allow such dealings, it would have been more prudent not to enter into the share swap during the closed period.
If the share swap was made after the financial results of both airlines were announced, the market price may have given a better reflection of the share price of both airlines. This may be seen from the share price of AirAsia after the results were announced on August 23. Although AirAsia announced it made a profit, it was 48 per cent less than the previous year. The AirAsia share price fell to RM3.57 at 9.04am on August 24, the day after the results were announced. Those involved will have to explain why the share swap was done before the 2nd quarter results were announced.
Opening the gates for the barbarians
Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia’s skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS’s control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies.
Regulation determines airlines’ fortunes
International air transport operates within the framework of the 1944 Chicago Convention for International Air Transport. Governments enter into bilateral agreements setting out the landing rights, restrictions on capacity and pricing. Sectors within a single country are normally denied to foreign airlines. This restriction is called cabotage. It is recognised that cabotage is the prerogative of the domestic carrier. The system of bilateral agreements between two governments has led to the aviation industry to be highly regulated. There has since been a change towards deregulation and liberalisation. Nevertheless, the industry remains one where regulation plays an important role.
Regulation is thus a critical determinant of an airline’s performance. It can determine how competitive the market is as well as constrain an airline in its choice of fares, capacity and frequency. Most governments impose entry controls which are usually applied to particular routes. Most governments usually permit one airline to operate a route. The government therefore plays a critical role in determining the fortunes of an airline by deciding on the routes to be given to the airlines.
Golden service takes a beating
MAS’s finance and operation problems to a significant extent are due to the government’s inconsistent and contradictory air transport policy. Such decisions gave the MAS Golden Service a beating while AirAsia became the Golden Child.
The main asset of any airline is its route networks. The government first allowed AirAsia to compete with MAS and then gave MAS’s domestic routes to AirAsia and had its route networks reduced while AirAsia increased theirs.
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Latest MAS financial statements of recent years indicated that the only year of operating profit was in 2007. All the profits from the other years are from asset sales, from subsidiaries and lucky fuel hedges.
This kind of business operation is dodgy and distract the management from operating the airline properly besides fooling shareholders into thinking that the business is doing well.
This kind of business operation is dodgy and distract the management from operating the airline properly besides fooling shareholders into thinking that the business is doing well.
Last edited by taufupok; 9th Sep 2011 at 01:28.
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WHERE IS MAPA?
By Agence France-Presse, Updated: 9/8/2011
Malaysia Airlines workers oppose AirAsia alliance
Thousands of Malaysia Airlines workers Thursday said they oppose a planned merger with AirAsia as the move will only benefit the profit-making budget carrier.
Bernama quoted union representatives saying the deal would not benefit loss-making Malaysia Airlines and was an attempt to weaken the workers collective power.
"We do not agree with the collaboration," Alias said.
Last month fast-growing budget flyer AirAsia agreed to acquire 20.5 percent of Malaysia Airlines under a strategic tie-up aimed at turning around the national carrier.
The deal gives Malaysia-based AirAsia's CEO Tony Fernandes -- who took over the no-frills carrier a decade ago and made it one of the industry's biggest success stories -- a key voice in salvaging his struggling rival's fortunes.
Under the deal, Malaysia's state investment arm Khazanah Nasional, which held nearly 70 percent of the national carrier before the deal, will get a 10 percent stake in Tune Air, AirAsia's parent company.
Since taking office in 2009, Prime Minister Najib Razak has embarked on an ambitious programme to overhaul the economy and public sector, including selling off stakes in troubled state-owned companies like Malaysian Airlines.
Malaysia Airlines workers oppose AirAsia alliance
Thousands of Malaysia Airlines workers Thursday said they oppose a planned merger with AirAsia as the move will only benefit the profit-making budget carrier.
Bernama quoted union representatives saying the deal would not benefit loss-making Malaysia Airlines and was an attempt to weaken the workers collective power.
"We do not agree with the collaboration," Alias said.
Last month fast-growing budget flyer AirAsia agreed to acquire 20.5 percent of Malaysia Airlines under a strategic tie-up aimed at turning around the national carrier.
The deal gives Malaysia-based AirAsia's CEO Tony Fernandes -- who took over the no-frills carrier a decade ago and made it one of the industry's biggest success stories -- a key voice in salvaging his struggling rival's fortunes.
Under the deal, Malaysia's state investment arm Khazanah Nasional, which held nearly 70 percent of the national carrier before the deal, will get a 10 percent stake in Tune Air, AirAsia's parent company.
Since taking office in 2009, Prime Minister Najib Razak has embarked on an ambitious programme to overhaul the economy and public sector, including selling off stakes in troubled state-owned companies like Malaysian Airlines.
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where's mapa?
mapa is management's bedfellow, so cannot oppose the deal one! ainako...go class AO79E, satu mas/mapa ala satu malaysia! tan silly tf can do wonders bah; his big time con game sit well with the ainako trained mapa/mas flt ops chiefs.
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Well MAS's coffer will be raided by the tan silly tf to stuff the pockets of his patrons who think that the present regime is quite shaky, so make hay when the sun still shines. All manners of manoevres are used; one interesting one is the move to acquire QPR and attempts to lure David Beckham to Loftus Road. Soon MAS will be flying all of tf's patrons and their entourage round the six continents for their super deals to stash all their ill gotten gains. MAS will be used to fly the Beckhams and their retinue free as inducement and so on and so forth. MAS pilots get to rub shoulders with such celebs.....huh, not bad, I wanna get into this game too!
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Are you serious, Malaysian entities making forays into the EPL? Wow, either they have really deep pockets or are just plain foolhardy!
When I was in MAS back in the late 80s and early 90s I knew that the Malaysian Central Bank lost billions trying to cream off the pound sterling fiasco and then they lost their pants trying to corner the tin market at the LME. Will you guys ever learn? I agree that the MAS employees should stand up to prevent another kind of such foolishness. I made good friends at MAS and am pretty sad to see the hard work put in by such nice people go down the so called jambun!
When I was in MAS back in the late 80s and early 90s I knew that the Malaysian Central Bank lost billions trying to cream off the pound sterling fiasco and then they lost their pants trying to corner the tin market at the LME. Will you guys ever learn? I agree that the MAS employees should stand up to prevent another kind of such foolishness. I made good friends at MAS and am pretty sad to see the hard work put in by such nice people go down the so called jambun!
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Wow, jdkcruiser must be really into the Malaise-ian thingy during your tenure in MAS...right we lost billions in the attempts foreign currency trading fiasco with George Soros coming up tops. The crazy thing is that the mamak dumbo who lost the nation's fortune is now made top dog at our finance ministry!
The Maminco fiasco at the LME was another kaka kerala kutty project but our MARA trained MAS pilots worship him more than A**** swt!
The Maminco fiasco at the LME was another kaka kerala kutty project but our MARA trained MAS pilots worship him more than A**** swt!
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MAS just sacked its lawyer RD and gave the whole legal work to some umno government dominated legal firm to handle the deal. Apparently RD knew heaps about the TR shenanigans and they feared that he would be a liability in this deal which would be certainly against national interest.
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More, more Mas Mas!
Seems like a lot of bolehland sheeple want to see no evil, hear no evil, speak no evil; so let me be the bad guy to lspread more info on the evils. Read this :
Barisan Nasional Saving MAS or Killing It?
Now we are seeing the true “masterplan” of Tony on how to wipe out MAS totally.
By Mat UMNO
Reported By Forbes.com, “The collaboration won't work. We believe it only benefits AirAsia, which will get (the advantage of) a free hand in the low-cost segment," union secretary-general Abdul Malek Arif told The Associated Press. Abdul Malek said staff were told at a briefing last month that a new premium carrier called Sapphire Air would be set up to handle regional and domestic routes. The fate of Firefly, the current
low-cost unit of Malaysia Airlines, remains unclear, he said.
While details remain vague, he said 80 percent of Malaysia Airlines' staff are expected to be transferred to Sapphire Air - a move he claimed was aimed at busting the union, which will make it easier for the new management to retrench staff. "Why is there a need for a new airline? There is a lot of confusion now over Malaysia Airlines' direction and policy. Everyone here feels their job is at stake," he added.”
Reported By The Star, “MAS is the oldest airline in Malaysia. There is no reason for not making a lasting profit,” Ab Malek said, adding that the Government should revamp the entire management.”
Reported By YB Wee Choo Keong, “Updated 06-09-2011 @ 11:30 pm: It was a known fact that MAS set up Firefly to provide an alternative to AirAsia and AirAsia X Sdn Bhd previously known as Fly Asian Express Sdn Bhd aka as FAX. Remember in 2006/2007 FAX snatched Rural Air Services (RAS) from MAS during Tun Abdullah Badawi’s administration and received about RM65 million from the government as subsidy.
However, in a short span of 8 months or so it dumped seven un-airworthy aircrafts to MAS with a total bill of RM35 million.
On 12-11-2010, Firefly said in The Star that “it would fly commercial jets for domestic routes and begin with crossover routes, e.g. Kota Kinabalu and Kuching, on Jan 15. Asean will be its next stop”. So it was crystal clear from the decisions of the new management of MAS consisting of Tan Sri Tony Fernandes, Datuk Kamarudin Meranun (both of AirAsia and AirAsia X Sdn Bhd/FAX), Tan Sri Md Nor MD Yusof, Datuk Azman
Yahya and En Mohammed Rashdan Yusoff aka Danny to terminate Firefly services from JB to Kuching and JB to Kota Kinabalu via an email dated 25-8-2011 as published below. We have been indoctrinated by Tan Sri Tony Fernandes that competition is healthy and good for the travelers. Are we witnessing the real Tan Sri Tony Fernandes now?
Perhaps we can now see a bit clearer whether MAS needed AirAsia to survive as made out to be the case in a news portal and mainstream media or the other way around.
I have been informed that during the Hari Raya season several full load flights of Firefly have been cancelled at the eleventh hours. The cancellations have caused enormous inconveniences to members of the public, who were on their balik kampung back to see their families. Why cancel full load flights during a festive season? Where is the business sense of MAS current management? Even if you want to help your close friend like Tan Sri Tony Fernandes/AirAsia, please don’t do it at the expense of the public.
This is not the way to kill Firefly, indirectly MAS. Surely with all your top financial qualifications and famous credentials under BinaFikir you should know of better ways to skin a cow! Why are you in such a rush to kill Firefly in such a desperate manner? I am sure that Datuk Omar Ong will advise you against such ill thought out decisions.
Below is the e-mail dated 25th August 2011 from MAS HQ to all its agents.
Dear Valued Agent,
Greetings from Firefly!
We regret to inform you we will no longer operate JB – Kuching V V & JB – Kota Kinabalu V V route from September 15 onwards. We don’t advise a re-routing of flights because we don’t want to inconvenience you further. A re-route through a third destination such as KLIA will double the length of your travel time if not more.
To minimize disruption to your time, we strongly suggest the solution of a refund.
We apologize for the inconvenience caused and wish to offer you a refund in the form of credit shell. Please allow 8 weeks for the refund to be processed. Due to our network rationalizing exercise, and we’re very sorry that this has inconvenienced you.
We at Firefly are more than obliged to work hand in hand with you on other routes and will do our very best to see the production grow for both our parties.
The above is the email sent out by MAS HQ to its agents on 25th August, 2011. The work of the powerful unseen hands. This must be part of the game plans of the so-called “MAS – AirAsia share swap”, which was shrouded in secrecy.
After the signing ceremony of the said share swap between Tan Sri Azman Mokhtar and Tan Sri Tony Fernandes on 8-8-2011, it was immediately announced that Firefly will soon change its business model. Presumably, what the economic genius in Khazanah and Tan Sri Tony Fernandes meant was Firefly will stop competing with other low cost airlines, in particular AirAsia.
Instead of chasing after huge debts owed by Alwafeer Air, which involved non-payment of leasing rentals for three jumbo jets amounting to ten of millions of ringgit, En Mohamed Rashdan Yusof, the Khazanah’s representative in MAS management was more interested in how to disrupt and/or stifle Firefly for the benefit of the competitor of MAS. Guess who?
If the stopping of Firefly’s profitable routes to East Malaysia was part of the said secret share swap exercise by YB Nor Mohamad Yacop, the former Minister of Finance II under Tun Abdullah’s administration now Minister in charge of EPU, Tan Sri Azman Mokhtar and En Mohamed Rashdan Yusof, both of whom are former business partners in BinaFikir Sdn Bhd, then Firefly is as good as dead! The future of MAS is not hard to determine.
The time has come for the rakyat, bloggers and, most of all, the MAS Union to join hands to stop the rot.
Well done YB Wee! Few bloggers and parties had tried to warn the government and people about what will happen when the MAS/AA share swap deal is sealed. You can refer to my older posting on “MAS AA Share Swap” does anyone listen or even think about it?
NOOOOOOOOOO……
Now we are seeing the true “masterplan” of Tony on how to wipe out MAS totally. Don’t believe me? In my previous writing, I’ve already explained the financial benefit and how AA can use MAS as a scapegoat in burdening them with debts and abusing the advantage of MAS capabilities. What slips my mind was the fate of Firefly.
MAS set up Firefly with the intention to compete with AA despite MAS' hands being tied by the government as Ministry of Transport favors AA much more. It is said that the Ministry of Transport has a few bucks going in their pocket from AA. When I said “few bucks going in their pocket from AA”, I don’t mean AA is donating the money directly to the “Ministry of Transport” itself. It is more directly to those high ranking in the ministry
that benefited from it.
AA will skin and poison Firefly and MAS slowly. They already managed to be in MAS so now they have the opportunity to shut down Firefly. But why shut down Firefly and create a new airline such as Sapphire Airline?
Here are a couple of reasons; Firefly is seen as a direct competitor to AA's business locally and internationally. Firefly has already made good ground in giving AA a run for their money as it offers better service, competitive prices and departure convenience. This has been noted a few years back by AA and they needed to do something about it after all, there are more benefits to AA with the closure of Firefly.
Recently, it was announced that Tony had just bought over the Queen Park Ranger football team. I have no issues with his passion for football but when you start sponsoring your own football team with the money from MAS, it becomes totally wrong. First of all, MAS reported a loss recently and AA made profits. So how could a losing company pay for the sponsorship?
The reason MAS and AA decided to sponsor QPR was for better market exposure. Hmm, why sponsor a football club? How much is the sponsorship? Which target market do they target? What is the ROI from the sponsorship?
With the sponsorship of QPR happening without a glitch and without consultation from Khazanah, what will stop AA from sponsoring their F1 racing team? MAS will be again used to pay for Tony’s hobby and the saddest part of it is no one will stop him because he has “political’ strings.
I cannot emphasise how dangerous this man is to MAS. His cunning business ways are only suitable for him and not for others. He is a wolf in sheep's clothing!
The fates of 15,000 MAS staff too, hang in danger with the opening of Sapphire Air. The union cannot do anything without help from the government. Why is it the government willing to lose 15,000 votes in this coming election? These 15,000 vote can quadruple as they have family and friends that will listen to them!
When Sapphire Air emerges, no one can stop AA from permanently destroying MAS! The union will be helpless. I can give you the scenario how AA will systematically kill off MAS:
1. Sapphire Air is born. They will offer the current MAS staff to “migrate” with lower pay and lesser benefits.
2. If Sapphire Air does not have enough staff, this will be better for AA as they can now hire cheaper labour thus cut their operational costs.
3. Those who choose to stay can stay, but sooner or later, MAS downsizing will take effect, which means the company will offer VSS.
4. Khazanah will use the rakyat’s money to pay MAS staff “Voluntary Separation Scheme”. Why Khazanah? Well, Khazanah is still the majority shareholder and with money. AA is just the biggest individual shareholder but they don’t have money.
5. Those who decide to take the VSS can retire, start their own business or have enough money to last them for a few months while searching for a new job with lower pay. When this happens, whatever their current commitment, eg. house loan repayment etc will be jeorpadized!
6. Once they have fully transferred all the local routes to Sapphire Air, where can MAS or Firefly go?
So my question is … what can the current MAS union do to stop this? We are talking about people’s lives and it seems the government doesn’t care.
Prime Minister Najib Tun Razak, please open your eyes and heart regarding this matter. It is a matter of the rakyats' welfare and pride of Malaysia. We can turn MAS around if given a fair chance. Given a free hand to do business as it is supposed to be, without hands being tied behind our backs by Khazanah!
I dare say that BN will lose terribly should you allow this annihilation of MAS by AA!
More to come! ... Mark my words!
Barisan Nasional Saving MAS or Killing It?
Now we are seeing the true “masterplan” of Tony on how to wipe out MAS totally.
By Mat UMNO
Reported By Forbes.com, “The collaboration won't work. We believe it only benefits AirAsia, which will get (the advantage of) a free hand in the low-cost segment," union secretary-general Abdul Malek Arif told The Associated Press. Abdul Malek said staff were told at a briefing last month that a new premium carrier called Sapphire Air would be set up to handle regional and domestic routes. The fate of Firefly, the current
low-cost unit of Malaysia Airlines, remains unclear, he said.
While details remain vague, he said 80 percent of Malaysia Airlines' staff are expected to be transferred to Sapphire Air - a move he claimed was aimed at busting the union, which will make it easier for the new management to retrench staff. "Why is there a need for a new airline? There is a lot of confusion now over Malaysia Airlines' direction and policy. Everyone here feels their job is at stake," he added.”
Reported By The Star, “MAS is the oldest airline in Malaysia. There is no reason for not making a lasting profit,” Ab Malek said, adding that the Government should revamp the entire management.”
Reported By YB Wee Choo Keong, “Updated 06-09-2011 @ 11:30 pm: It was a known fact that MAS set up Firefly to provide an alternative to AirAsia and AirAsia X Sdn Bhd previously known as Fly Asian Express Sdn Bhd aka as FAX. Remember in 2006/2007 FAX snatched Rural Air Services (RAS) from MAS during Tun Abdullah Badawi’s administration and received about RM65 million from the government as subsidy.
However, in a short span of 8 months or so it dumped seven un-airworthy aircrafts to MAS with a total bill of RM35 million.
On 12-11-2010, Firefly said in The Star that “it would fly commercial jets for domestic routes and begin with crossover routes, e.g. Kota Kinabalu and Kuching, on Jan 15. Asean will be its next stop”. So it was crystal clear from the decisions of the new management of MAS consisting of Tan Sri Tony Fernandes, Datuk Kamarudin Meranun (both of AirAsia and AirAsia X Sdn Bhd/FAX), Tan Sri Md Nor MD Yusof, Datuk Azman
Yahya and En Mohammed Rashdan Yusoff aka Danny to terminate Firefly services from JB to Kuching and JB to Kota Kinabalu via an email dated 25-8-2011 as published below. We have been indoctrinated by Tan Sri Tony Fernandes that competition is healthy and good for the travelers. Are we witnessing the real Tan Sri Tony Fernandes now?
Perhaps we can now see a bit clearer whether MAS needed AirAsia to survive as made out to be the case in a news portal and mainstream media or the other way around.
I have been informed that during the Hari Raya season several full load flights of Firefly have been cancelled at the eleventh hours. The cancellations have caused enormous inconveniences to members of the public, who were on their balik kampung back to see their families. Why cancel full load flights during a festive season? Where is the business sense of MAS current management? Even if you want to help your close friend like Tan Sri Tony Fernandes/AirAsia, please don’t do it at the expense of the public.
This is not the way to kill Firefly, indirectly MAS. Surely with all your top financial qualifications and famous credentials under BinaFikir you should know of better ways to skin a cow! Why are you in such a rush to kill Firefly in such a desperate manner? I am sure that Datuk Omar Ong will advise you against such ill thought out decisions.
Below is the e-mail dated 25th August 2011 from MAS HQ to all its agents.
Dear Valued Agent,
Greetings from Firefly!
We regret to inform you we will no longer operate JB – Kuching V V & JB – Kota Kinabalu V V route from September 15 onwards. We don’t advise a re-routing of flights because we don’t want to inconvenience you further. A re-route through a third destination such as KLIA will double the length of your travel time if not more.
To minimize disruption to your time, we strongly suggest the solution of a refund.
We apologize for the inconvenience caused and wish to offer you a refund in the form of credit shell. Please allow 8 weeks for the refund to be processed. Due to our network rationalizing exercise, and we’re very sorry that this has inconvenienced you.
We at Firefly are more than obliged to work hand in hand with you on other routes and will do our very best to see the production grow for both our parties.
The above is the email sent out by MAS HQ to its agents on 25th August, 2011. The work of the powerful unseen hands. This must be part of the game plans of the so-called “MAS – AirAsia share swap”, which was shrouded in secrecy.
After the signing ceremony of the said share swap between Tan Sri Azman Mokhtar and Tan Sri Tony Fernandes on 8-8-2011, it was immediately announced that Firefly will soon change its business model. Presumably, what the economic genius in Khazanah and Tan Sri Tony Fernandes meant was Firefly will stop competing with other low cost airlines, in particular AirAsia.
Instead of chasing after huge debts owed by Alwafeer Air, which involved non-payment of leasing rentals for three jumbo jets amounting to ten of millions of ringgit, En Mohamed Rashdan Yusof, the Khazanah’s representative in MAS management was more interested in how to disrupt and/or stifle Firefly for the benefit of the competitor of MAS. Guess who?
If the stopping of Firefly’s profitable routes to East Malaysia was part of the said secret share swap exercise by YB Nor Mohamad Yacop, the former Minister of Finance II under Tun Abdullah’s administration now Minister in charge of EPU, Tan Sri Azman Mokhtar and En Mohamed Rashdan Yusof, both of whom are former business partners in BinaFikir Sdn Bhd, then Firefly is as good as dead! The future of MAS is not hard to determine.
The time has come for the rakyat, bloggers and, most of all, the MAS Union to join hands to stop the rot.
Well done YB Wee! Few bloggers and parties had tried to warn the government and people about what will happen when the MAS/AA share swap deal is sealed. You can refer to my older posting on “MAS AA Share Swap” does anyone listen or even think about it?
NOOOOOOOOOO……
Now we are seeing the true “masterplan” of Tony on how to wipe out MAS totally. Don’t believe me? In my previous writing, I’ve already explained the financial benefit and how AA can use MAS as a scapegoat in burdening them with debts and abusing the advantage of MAS capabilities. What slips my mind was the fate of Firefly.
MAS set up Firefly with the intention to compete with AA despite MAS' hands being tied by the government as Ministry of Transport favors AA much more. It is said that the Ministry of Transport has a few bucks going in their pocket from AA. When I said “few bucks going in their pocket from AA”, I don’t mean AA is donating the money directly to the “Ministry of Transport” itself. It is more directly to those high ranking in the ministry
that benefited from it.
AA will skin and poison Firefly and MAS slowly. They already managed to be in MAS so now they have the opportunity to shut down Firefly. But why shut down Firefly and create a new airline such as Sapphire Airline?
Here are a couple of reasons; Firefly is seen as a direct competitor to AA's business locally and internationally. Firefly has already made good ground in giving AA a run for their money as it offers better service, competitive prices and departure convenience. This has been noted a few years back by AA and they needed to do something about it after all, there are more benefits to AA with the closure of Firefly.
Recently, it was announced that Tony had just bought over the Queen Park Ranger football team. I have no issues with his passion for football but when you start sponsoring your own football team with the money from MAS, it becomes totally wrong. First of all, MAS reported a loss recently and AA made profits. So how could a losing company pay for the sponsorship?
The reason MAS and AA decided to sponsor QPR was for better market exposure. Hmm, why sponsor a football club? How much is the sponsorship? Which target market do they target? What is the ROI from the sponsorship?
With the sponsorship of QPR happening without a glitch and without consultation from Khazanah, what will stop AA from sponsoring their F1 racing team? MAS will be again used to pay for Tony’s hobby and the saddest part of it is no one will stop him because he has “political’ strings.
I cannot emphasise how dangerous this man is to MAS. His cunning business ways are only suitable for him and not for others. He is a wolf in sheep's clothing!
The fates of 15,000 MAS staff too, hang in danger with the opening of Sapphire Air. The union cannot do anything without help from the government. Why is it the government willing to lose 15,000 votes in this coming election? These 15,000 vote can quadruple as they have family and friends that will listen to them!
When Sapphire Air emerges, no one can stop AA from permanently destroying MAS! The union will be helpless. I can give you the scenario how AA will systematically kill off MAS:
1. Sapphire Air is born. They will offer the current MAS staff to “migrate” with lower pay and lesser benefits.
2. If Sapphire Air does not have enough staff, this will be better for AA as they can now hire cheaper labour thus cut their operational costs.
3. Those who choose to stay can stay, but sooner or later, MAS downsizing will take effect, which means the company will offer VSS.
4. Khazanah will use the rakyat’s money to pay MAS staff “Voluntary Separation Scheme”. Why Khazanah? Well, Khazanah is still the majority shareholder and with money. AA is just the biggest individual shareholder but they don’t have money.
5. Those who decide to take the VSS can retire, start their own business or have enough money to last them for a few months while searching for a new job with lower pay. When this happens, whatever their current commitment, eg. house loan repayment etc will be jeorpadized!
6. Once they have fully transferred all the local routes to Sapphire Air, where can MAS or Firefly go?
So my question is … what can the current MAS union do to stop this? We are talking about people’s lives and it seems the government doesn’t care.
Prime Minister Najib Tun Razak, please open your eyes and heart regarding this matter. It is a matter of the rakyats' welfare and pride of Malaysia. We can turn MAS around if given a fair chance. Given a free hand to do business as it is supposed to be, without hands being tied behind our backs by Khazanah!
I dare say that BN will lose terribly should you allow this annihilation of MAS by AA!
More to come! ... Mark my words!
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There goes the good money....
This is how the new queens park rangers home jersey will look like now that Malaysia Airlines are the new sponsors.
(The Star) - PETALING JAYA: Malaysia Airlines' (MAS) recently-announced sponsorship for the Queen Park Rangers (QPR) home jersey in the Barclays Premier League will cost the national carrier some RM18mil or 3.7mil, according to a source.
The total sponsorship fee for both MAS and AirAsia for the English professional football club, which involves a term of two years, would cost some RM30mil (6.2mil), the source added.
“MAS will take up a bulk or almost 60% of the total fees while the remaining will be forked out by AirAsia Bhd and its related companies which could also involve AirAsia X.
“Typically, the home jersey sponsorship is more expensive than the away jersey,” the source said.
On Monday, MAS and AirAsia signed a jersey deal for QPR which will see the MAS logo adorn the jersey at home while the AirAsia logo will be used on the team's away games.
“This sponsorship is the first major initiative of our new brand and marketing strategy that would see important advertising money spent on boosting our top line. This is a key component in our drive to regain global market share, profitability,” said MAS executive director Mohammed Rashdan Yusof.
Even so, most analysts are not thrilled. Their main grouse is that MAS should instead be focusing on strengthening its flagging financial status and showing some concrete moves towards this end.
Moreover, the crucial post of a chief executive officer for MAS has still yet to be filled.
The sponsorship deal by the two airlines closely follows a landmark share-swap deal involving the major shareholders of the respective airlines in early August which had turned the rivals into allies.
AirAsia's chief steward and major shareholder Tan Sri Tony Fernandesand his partner, Datuk Kamarudin Meranun, collectively own a 75% stake in Tune QPR Sdn Bhd, which in turn owns 66% of QPR Holdings Ltd. Fernandes, who only recently acquired the stake in the football club, is currently chairman of QPR.
In an earlier announcement to Bursa Malaysia, AirAsia said it would cough up some RM2.4mil or 500,000 as sponsorship fees for the duration of the two-year term.
Only in June this year, Genting UK, the largest casino operator in Britain, sealed a pact to be the main jersey sponsor for Aston Villa for two years. Although the amount was not disclosed, a source said the total sponsorship fees for the two years collectively involved some RM17mil or 3.5mil.
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hassanasli, the way things are going there will come a time when there will be " MAS no mas, MAS no mas, MAS no mas "
The national carrier is used like an ATM for these crooks to use to buy their playthings. I don't ever see QPR to be viable business venture. The big wigs in this MAS-AK thingy will be rewarding themselves with first class travel to LHR every week for those pathetic QPR matches.
The national carrier is used like an ATM for these crooks to use to buy their playthings. I don't ever see QPR to be viable business venture. The big wigs in this MAS-AK thingy will be rewarding themselves with first class travel to LHR every week for those pathetic QPR matches.
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hiccups?
MAS-Air Asia merger flies into turbulent weather
NEWS/COMMENTARIES
Saturday, 17 September 2011
By Patrick Lee, FMT
PETALING JAYA: The downside of the MAS -Air asia metrger is that the MAS workers have been left in the lurch. Opposition leader Anwar Ibrahim says this is because neither the government or the affected airlines have been transparent.
Anwar who claims that he was in contact with MAS employees said no information was given to the MAS staff.
” They must be told that their performance was not up to the mark… what is the problem, and what is their position going to be after the so-called merger or take-over?” Anwar asked during a press conference at PKR’s headquarters here.
“It’s all shrouded in secrecy, that is the trouble with this government.”
He also said that nothing had been said about the possible welfare of MAS staff, adding that the carrier’s workers were left in the dark about their fate.
“But you know, there’s always this management once they take over, they give this option, and people will be persuaded to take another option. These are concerns that must be addressed,” Anwar replied to the possiblity of layoffs.
The Opposition Leader was also concerned with Air Asia’s lack of an in-house union, which may be carried over to MAS once the merger took place.
Anwar then claimed that he had been informed that Air Asia employees who tried to form their own union were subsequently sacked.
MAS and Air Asia announced the merger last month.
However, both Air Asia chief executive officer Tony Fernandes and Khazanah Nasional Bhd -a major shareholder of MAS- managing director Azman Mokhtar denied that it was a merger, preferring to call it a “collaboration”.
They also denied that a monopoly would arise out of this “collaboration”.
READ MORE HERE.
NEWS/COMMENTARIES
Saturday, 17 September 2011
By Patrick Lee, FMT
PETALING JAYA: The downside of the MAS -Air asia metrger is that the MAS workers have been left in the lurch. Opposition leader Anwar Ibrahim says this is because neither the government or the affected airlines have been transparent.
Anwar who claims that he was in contact with MAS employees said no information was given to the MAS staff.
” They must be told that their performance was not up to the mark… what is the problem, and what is their position going to be after the so-called merger or take-over?” Anwar asked during a press conference at PKR’s headquarters here.
“It’s all shrouded in secrecy, that is the trouble with this government.”
He also said that nothing had been said about the possible welfare of MAS staff, adding that the carrier’s workers were left in the dark about their fate.
“But you know, there’s always this management once they take over, they give this option, and people will be persuaded to take another option. These are concerns that must be addressed,” Anwar replied to the possiblity of layoffs.
The Opposition Leader was also concerned with Air Asia’s lack of an in-house union, which may be carried over to MAS once the merger took place.
Anwar then claimed that he had been informed that Air Asia employees who tried to form their own union were subsequently sacked.
MAS and Air Asia announced the merger last month.
However, both Air Asia chief executive officer Tony Fernandes and Khazanah Nasional Bhd -a major shareholder of MAS- managing director Azman Mokhtar denied that it was a merger, preferring to call it a “collaboration”.
They also denied that a monopoly would arise out of this “collaboration”.
READ MORE HERE.
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MAS punya orang...no speeark?
Looks like the state of denial and loss of face prevails amongst our MAS bethren. However let's continue to post sensible arguments regarding this deal and see how it pans out.
This piece from a letter to a well known blog.
7 Reasons Why Khazanah Should NOT Undertake the Share Swap Between MAS and AirAsia
The timing of the share swap could not have happened at a worst time as it will largely benefit AIRASIA shareholders even without their own effort and Khazanah has given away a large portion of their net worth in MAS for free.
By troubleshooters2011
1.MAS MANAGEMENT HAS INITIATED THE RIGHT STRATEGIES AND IMPLEMENTATION TO TURNAROUND THE COMPANY AND THEREFORE DO NOT NEED THE TIE-UP WITH AIRASIA
A quick analysis on the current state of MAS indicates that they are on the right track. The three key cost factors that need attention are fuel, maintenance and manpower cost. With regards to fuel cost, MAS has taken some steps to reduce the unpredictability of the movement of fuel price. With a bit of tweaking they will get it within control as you cannot totally eliminate uncertainties linked to fuel pricing.
On maintenance cost, the fleet renewal program will start to alleviate the impact of maintenance on the operating profits while shifting the cost towards the interest expense while creating a healthier balance sheet. If at all the national carrier is guilty, it is that the fleet renewal program should have been carried out earlier, say 2007 when MAS would have been able to hive off depleting assets at a higher value and not incurred high maintenance costs which would have increased y-o-y that has negative impact on the operating profits.
The reduction of manpower cost or the rightsizing of this cost can be properly planned through natural attrition and redefinition of job scopes that need key union and association buy in for success. This has always been done as a top down approach but in all fairness, engagement at the shop floor needs to be intensified as it is the personnel at this level that will impact the bottom line in terms of efficiency, productivity and effective implementation.
2. BASED ON THE EFFORTS OF PAST MANAGEMENT, MAS SHOULD REAP THE BENEFITS IN AROUND 2013, THE SHARE SWAP AND INPUT OF AIRASIA AT THIS JUNCTURE ARE SEEN TO BE OPPORTUNISTIC WITH A LARGE DOSE OF VESTED INTERESTS AT PLAY.
The timing of the share swap could not have happened at a worst time as it will largely benefit AIRASIA shareholders even without their own effort and Khazanah has given away a large portion of their net worth in MAS for free. This is blatant mismanagement at Khazanah and a thorough investigation should be launched to
see whether there is any personal/vested interest that has come into play on the decision making for a strategic national asset.
3. MAS SHOULD FOREVER REMAIN IN THE CONTROL OF GOVERNMENT’S HANDS AND SHOULD BE PRIVATISED INSTEAD OF BEING FORCED TO CO-EXIST WITH PRIVATE ENTITIES
MAS is a source of pride for the nation. It started getting into trouble when vested interest came into picture and started to encroach on its balance sheet and profitable entities. While the aviation business model has changed dramatically over the decades and previous laurels of achievement may not be replicated due to the changing times, the aviation space is a critical playing field for the nation. Every country assists its aviation companies in one form or another, so we should not be fooled to think that it’s a level playing field out there.
What is required is a dynamic BUSINESS Model for MAS to prosper further. One initiative that could be explored is to privatize it and fix it rather than the share swap that will work on a model of cannibalisation shrouded under the so-called comprehensive collaboration.
4. MAS AND AIRASIA RUN ON COMPLETELY DIFFERENT BUSINESS MODEL
MAS is a Malaysian company with global reach and serves not only a commercial agenda but a national agenda in terms of promoting Malaysia as a tourism destination, to facilitate trade between countries under a G to G environment and also to facilitate outreach to new destination for strategic and commercial
purposes.
AIRASIA is a commercial entrepreneur driven Malaysian Multi National Company (MNC) having partnering arrangements in each of its chosen point to point country of destination and hub.
Both derive their sources of income from different business approaches and with different objectives in mind. The objectives are not aligned and to align them would result in a different shift in strategy that could have a NEGATIVE impact on both companies' performance, more so for MAS than AIRASIA.
5. COLLABORATION FOR COMMON BENEFIT IS POSSIBLE WITHOUT CROSS SHAREHOLDING IN THE TWO COMPANIES
Collaboration between the two companies is definitely a plus but need not be at the expense of each other and encroaching on each other’s brand identity. What is currently prevailing between the two entities is a healthy competition and it keeps each entity on edge to ensure that they remain relevant aviation entities.
But collaboration such as in the oil and gas space between PETRONAS and EXXON for example for the Tapis fields, SHELL and PETRONAS in the Gumusut-Kakap fields, MURPHY and PETRONAS in the Kikeh fields and a more dramatic win-win partnering arrangement between giants SHELL and EXXON in the Brent oil fields in the North Sea of Northern UK demonstrates the joint collaboration between two competing entities can be achieved without sacrificing each entity’s identity and business objectives. SHELL and EXXON compete in other acreages in other countries around the world. What is needed is sincere partnering for common benefit.
6. KHAZANAH SHOULD LOOK AT ITS SHAREHIOLDING IN MAS AS A STRATEGIC NATIONAL INTEREST STAKE WHILE INVESTMENT IN AIRASIA AS PURELY A RETURN ON INVESTMENT STAKE
The move by Khazanah to invest in AIRASIA should be looked at purely as a commercial investment as it is investing in a company that is majority foreign owned if aggregated. Khazanah should look at AIRASIA for returns on investment and not as a strategic stake. AIRASIA is a company purely running on commercial adrenalin with an iconic entrepreneur. Khazanah has little say in AIRASIA and can easily be outvoted in the event parties invested in AIRASIA work in concert.
Its stake in MAS is crucial as it helps control its own skies while operating a free skies environment. Air travel has become commoditized and should the country be outplayed in the aviation space, we could see colonialisation of our airspace and others gaining more benefit flying over Malaysian airspace.
7. RISK PROFILE TO THE AVIATION INDUSTRY HAS INCREASED EXPONENTIALLY AS KHAZANAH HAS BEEN DRAWN IN TO SUPPORT BOTH ENTITIES IN THE EVENT OF ECONOMIC AND AVIATION DOWNTURN
By having cross shareholding, should anything untoward happens to the industry, Khazanah will have to help 2 entities as it would not make sense for AIRASIA to insist on the share swap if it did not provide them financial ‘cloud cover’. If Khazanah had kept AIRASIA shareholding as a ROI stock, the investment could be unlocked on reaching a specific return. As the shareholding in AIRASIA is only 10%, Khazanah is neither here nor there in terms of being able to influence policy; therefore it makes no sense to undertake a share swap where the vendors of AIRASIA have significant say in MAS but not vice versa.
Thank you.
Any rebuttals and cross examination by Khazanah, Tune Air or any interested parties are most welcome.
Our email address: [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it
This piece from a letter to a well known blog.
7 Reasons Why Khazanah Should NOT Undertake the Share Swap Between MAS and AirAsia
The timing of the share swap could not have happened at a worst time as it will largely benefit AIRASIA shareholders even without their own effort and Khazanah has given away a large portion of their net worth in MAS for free.
By troubleshooters2011
1.MAS MANAGEMENT HAS INITIATED THE RIGHT STRATEGIES AND IMPLEMENTATION TO TURNAROUND THE COMPANY AND THEREFORE DO NOT NEED THE TIE-UP WITH AIRASIA
A quick analysis on the current state of MAS indicates that they are on the right track. The three key cost factors that need attention are fuel, maintenance and manpower cost. With regards to fuel cost, MAS has taken some steps to reduce the unpredictability of the movement of fuel price. With a bit of tweaking they will get it within control as you cannot totally eliminate uncertainties linked to fuel pricing.
On maintenance cost, the fleet renewal program will start to alleviate the impact of maintenance on the operating profits while shifting the cost towards the interest expense while creating a healthier balance sheet. If at all the national carrier is guilty, it is that the fleet renewal program should have been carried out earlier, say 2007 when MAS would have been able to hive off depleting assets at a higher value and not incurred high maintenance costs which would have increased y-o-y that has negative impact on the operating profits.
The reduction of manpower cost or the rightsizing of this cost can be properly planned through natural attrition and redefinition of job scopes that need key union and association buy in for success. This has always been done as a top down approach but in all fairness, engagement at the shop floor needs to be intensified as it is the personnel at this level that will impact the bottom line in terms of efficiency, productivity and effective implementation.
2. BASED ON THE EFFORTS OF PAST MANAGEMENT, MAS SHOULD REAP THE BENEFITS IN AROUND 2013, THE SHARE SWAP AND INPUT OF AIRASIA AT THIS JUNCTURE ARE SEEN TO BE OPPORTUNISTIC WITH A LARGE DOSE OF VESTED INTERESTS AT PLAY.
The timing of the share swap could not have happened at a worst time as it will largely benefit AIRASIA shareholders even without their own effort and Khazanah has given away a large portion of their net worth in MAS for free. This is blatant mismanagement at Khazanah and a thorough investigation should be launched to
see whether there is any personal/vested interest that has come into play on the decision making for a strategic national asset.
3. MAS SHOULD FOREVER REMAIN IN THE CONTROL OF GOVERNMENT’S HANDS AND SHOULD BE PRIVATISED INSTEAD OF BEING FORCED TO CO-EXIST WITH PRIVATE ENTITIES
MAS is a source of pride for the nation. It started getting into trouble when vested interest came into picture and started to encroach on its balance sheet and profitable entities. While the aviation business model has changed dramatically over the decades and previous laurels of achievement may not be replicated due to the changing times, the aviation space is a critical playing field for the nation. Every country assists its aviation companies in one form or another, so we should not be fooled to think that it’s a level playing field out there.
What is required is a dynamic BUSINESS Model for MAS to prosper further. One initiative that could be explored is to privatize it and fix it rather than the share swap that will work on a model of cannibalisation shrouded under the so-called comprehensive collaboration.
4. MAS AND AIRASIA RUN ON COMPLETELY DIFFERENT BUSINESS MODEL
MAS is a Malaysian company with global reach and serves not only a commercial agenda but a national agenda in terms of promoting Malaysia as a tourism destination, to facilitate trade between countries under a G to G environment and also to facilitate outreach to new destination for strategic and commercial
purposes.
AIRASIA is a commercial entrepreneur driven Malaysian Multi National Company (MNC) having partnering arrangements in each of its chosen point to point country of destination and hub.
Both derive their sources of income from different business approaches and with different objectives in mind. The objectives are not aligned and to align them would result in a different shift in strategy that could have a NEGATIVE impact on both companies' performance, more so for MAS than AIRASIA.
5. COLLABORATION FOR COMMON BENEFIT IS POSSIBLE WITHOUT CROSS SHAREHOLDING IN THE TWO COMPANIES
Collaboration between the two companies is definitely a plus but need not be at the expense of each other and encroaching on each other’s brand identity. What is currently prevailing between the two entities is a healthy competition and it keeps each entity on edge to ensure that they remain relevant aviation entities.
But collaboration such as in the oil and gas space between PETRONAS and EXXON for example for the Tapis fields, SHELL and PETRONAS in the Gumusut-Kakap fields, MURPHY and PETRONAS in the Kikeh fields and a more dramatic win-win partnering arrangement between giants SHELL and EXXON in the Brent oil fields in the North Sea of Northern UK demonstrates the joint collaboration between two competing entities can be achieved without sacrificing each entity’s identity and business objectives. SHELL and EXXON compete in other acreages in other countries around the world. What is needed is sincere partnering for common benefit.
6. KHAZANAH SHOULD LOOK AT ITS SHAREHIOLDING IN MAS AS A STRATEGIC NATIONAL INTEREST STAKE WHILE INVESTMENT IN AIRASIA AS PURELY A RETURN ON INVESTMENT STAKE
The move by Khazanah to invest in AIRASIA should be looked at purely as a commercial investment as it is investing in a company that is majority foreign owned if aggregated. Khazanah should look at AIRASIA for returns on investment and not as a strategic stake. AIRASIA is a company purely running on commercial adrenalin with an iconic entrepreneur. Khazanah has little say in AIRASIA and can easily be outvoted in the event parties invested in AIRASIA work in concert.
Its stake in MAS is crucial as it helps control its own skies while operating a free skies environment. Air travel has become commoditized and should the country be outplayed in the aviation space, we could see colonialisation of our airspace and others gaining more benefit flying over Malaysian airspace.
7. RISK PROFILE TO THE AVIATION INDUSTRY HAS INCREASED EXPONENTIALLY AS KHAZANAH HAS BEEN DRAWN IN TO SUPPORT BOTH ENTITIES IN THE EVENT OF ECONOMIC AND AVIATION DOWNTURN
By having cross shareholding, should anything untoward happens to the industry, Khazanah will have to help 2 entities as it would not make sense for AIRASIA to insist on the share swap if it did not provide them financial ‘cloud cover’. If Khazanah had kept AIRASIA shareholding as a ROI stock, the investment could be unlocked on reaching a specific return. As the shareholding in AIRASIA is only 10%, Khazanah is neither here nor there in terms of being able to influence policy; therefore it makes no sense to undertake a share swap where the vendors of AIRASIA have significant say in MAS but not vice versa.
Thank you.
Any rebuttals and cross examination by Khazanah, Tune Air or any interested parties are most welcome.
Our email address: [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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Some more opinions on MAS-AK deal.
Well, since we are at it I would like to paste this one from the same blog. Hope we will see some response, eventhough I think MAS boys are too cerebrally challenged to dwell upon anything more than maggi mee, sodomee and nasi kangkang!
SAKMONGKOL AK47
Will the ending of this secretive corporate deal be like this? - Air Asia buys over MAS? No, not even that- its finally give Tony what he has always wanted - own a piece of our national airline. That will make him a Prime Minister in the airline industry. Sometime in the future, the Khazanah people together with CIMB I suppose will lend Tony’s Tune Air a lot of money to mop up the entire shares in Air Asia. Then Air Asia will be injected into a listed vehicle like MAS freeing Tune Air from debt. Tony’s share via Air Asia which will then be injected into MAS will be converted into substantial shareholding in our national carrier. Maybe from 20% to 40 pct.
So let’s go back to retrace our steps. Khazanah and Tony and CIMB takes us through the motion making magic before the public eye. They are allowing Tony and company take up 20% of MAS shares under the pretext that Tony and that accountant Meranun can do their magic for MAS. Stupid MAS’s capitalization is at RM 5 billion while Air Asia stands at RM 11 billion. So how can MAS with a shotgun compete with Air Asia which has a rocket launcher? Air Asia is fully loaded firing live ammunition while MAS fires blanks.
Air Asia made more than RM 1 billion profit in 2010 while MAS incurred nightmarish losses despite Jala being there followed by Dato Tengku Azmil. Air Asia has more planes than MAS and MAS owns or leases boneshakers and call itself the airline with the golden service and touch. What a joke and this joke has been allowed to be uttered for too long by incompetent people at MAS and Khazanah.
Then with so many factors assisting Tony and Kamarudin, Mas does indeed make profit. Some bright people at Khazanah will advise the PM to suggest since Mr. TF is already the single largest shareholder of MAS wand he has made profit why not merge Air Asia with MAS?
How? Assist Tony to make Air Asia private and then allow him to inject the new entity into MAS. Give cheap loan to Tune Air to mop up the entire shares of Air Asia and then allow it to be injected into MAS. Tune Air the original owners of Air Asia will be freed from debt and the entire debt is now absorbed into the merged entity of a new MAS. The MAS owners will be Tony and company and Khazanah. Certainly and naturally, that will create synergies (read profits for some people) and hear this, gets protection from the Malaysian government. It’s a long bull****ting exercise but one necessary to lead astray so many pesky bloggers. Some of them buyable but others are not
I am trying to find the one thing that is repulsive about the MAS-AA deal. Why is this attempt by Khazanah in trying to mend MAS our national pride, appears to be a leaving a bitter after taste? What’s so distasteful about it?
My one reservation about this deal is that it shows Khazanah as trustee to the nation’s wealth and therefore enforcer about how our assets are being managed isn’t trying hard or serious enough to keep it national and strategic. Diluting the nation’s share in MAS can also diminish what potential advantages the country can leverage by having a national airline. Every country has one that it leverages on to give it comparative advantages.
The share swap with Tony Fernandes is effectively paying protection money. Give Tony shares in MAS in return of a pledge by Tony that he will not use Air Asia to compete with MAS. It’s a payout to Tony in return for TF‘s promise not to work hard.
It’s also the old game of carving out the monopoly board among business rivals. Better to cooperate rather than bludgeon each other. So will MAS make profit after this after it secures a promise from Tony to not disturb it? The people at MAS appear to blame some unprofitable costs center (such as Firefly) for its losses. And it believes that removing this will turn MAS profitable plus having Tony and whoever else on board will allow MAS to benefit from their skills.
It’s more like better to keep friends close and enemies closer. I go to a friend’s burial not to pay my respects but to make sure he’s dead. So keep Tony on board to ensure he’s not up to mischief which MAS people and by backward linkage, Khazanah people are incapable of dealing with.
READ MORE HERE
SAKMONGKOL AK47
Will the ending of this secretive corporate deal be like this? - Air Asia buys over MAS? No, not even that- its finally give Tony what he has always wanted - own a piece of our national airline. That will make him a Prime Minister in the airline industry. Sometime in the future, the Khazanah people together with CIMB I suppose will lend Tony’s Tune Air a lot of money to mop up the entire shares in Air Asia. Then Air Asia will be injected into a listed vehicle like MAS freeing Tune Air from debt. Tony’s share via Air Asia which will then be injected into MAS will be converted into substantial shareholding in our national carrier. Maybe from 20% to 40 pct.
So let’s go back to retrace our steps. Khazanah and Tony and CIMB takes us through the motion making magic before the public eye. They are allowing Tony and company take up 20% of MAS shares under the pretext that Tony and that accountant Meranun can do their magic for MAS. Stupid MAS’s capitalization is at RM 5 billion while Air Asia stands at RM 11 billion. So how can MAS with a shotgun compete with Air Asia which has a rocket launcher? Air Asia is fully loaded firing live ammunition while MAS fires blanks.
Air Asia made more than RM 1 billion profit in 2010 while MAS incurred nightmarish losses despite Jala being there followed by Dato Tengku Azmil. Air Asia has more planes than MAS and MAS owns or leases boneshakers and call itself the airline with the golden service and touch. What a joke and this joke has been allowed to be uttered for too long by incompetent people at MAS and Khazanah.
Then with so many factors assisting Tony and Kamarudin, Mas does indeed make profit. Some bright people at Khazanah will advise the PM to suggest since Mr. TF is already the single largest shareholder of MAS wand he has made profit why not merge Air Asia with MAS?
How? Assist Tony to make Air Asia private and then allow him to inject the new entity into MAS. Give cheap loan to Tune Air to mop up the entire shares of Air Asia and then allow it to be injected into MAS. Tune Air the original owners of Air Asia will be freed from debt and the entire debt is now absorbed into the merged entity of a new MAS. The MAS owners will be Tony and company and Khazanah. Certainly and naturally, that will create synergies (read profits for some people) and hear this, gets protection from the Malaysian government. It’s a long bull****ting exercise but one necessary to lead astray so many pesky bloggers. Some of them buyable but others are not
I am trying to find the one thing that is repulsive about the MAS-AA deal. Why is this attempt by Khazanah in trying to mend MAS our national pride, appears to be a leaving a bitter after taste? What’s so distasteful about it?
My one reservation about this deal is that it shows Khazanah as trustee to the nation’s wealth and therefore enforcer about how our assets are being managed isn’t trying hard or serious enough to keep it national and strategic. Diluting the nation’s share in MAS can also diminish what potential advantages the country can leverage by having a national airline. Every country has one that it leverages on to give it comparative advantages.
The share swap with Tony Fernandes is effectively paying protection money. Give Tony shares in MAS in return of a pledge by Tony that he will not use Air Asia to compete with MAS. It’s a payout to Tony in return for TF‘s promise not to work hard.
It’s also the old game of carving out the monopoly board among business rivals. Better to cooperate rather than bludgeon each other. So will MAS make profit after this after it secures a promise from Tony to not disturb it? The people at MAS appear to blame some unprofitable costs center (such as Firefly) for its losses. And it believes that removing this will turn MAS profitable plus having Tony and whoever else on board will allow MAS to benefit from their skills.
It’s more like better to keep friends close and enemies closer. I go to a friend’s burial not to pay my respects but to make sure he’s dead. So keep Tony on board to ensure he’s not up to mischief which MAS people and by backward linkage, Khazanah people are incapable of dealing with.
READ MORE HERE