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Malaysia Airlines: Where do we go from here?

Publication Date : 25-07-2014

 

It will be a relatively sombre Eid al-Fitri celebration for the families of Malaysia Airlines (MAS) and the country after the disaster of MH17 and the disappearance of MH370 – in a span of four months – cast a pall over the festivity.

More than 500 lives have been lost in the two tragedies in addition to the MASWings Twin Otter aircraft crash in Kudat, Sabah over the span of almost a year.

While energies are spent on dealing with MH17 and MH370, speculation is swirling as to what listed company’s fate would be after these tragedies.

Loss-making MAS has been in dire straits even before these three incidents. Many have concluded that a turnaround to profitability is almost impossible in the immediate future.

It is now about moving forward for a sustainable business model.

Bankruptcy is an easy route, but contrary to popular belief, doing that will not change MAS’ rights to fly to destinations, as the right of routes lies with the government.

It’s also the prerogative of the government as to who gets these rights.

The tougher job is in dealing with existing contracts, some of which are non-negotiable for several reasons.

The corporate future of MAS seems to be attracting a flurry of speculation and opinions.

The week began with talks of delisting, but by mid-week, there was chatter that a merger with AirAsia X was the best way to save the airline.

But this is not viable, as both are different airlines and AirAsia X is also loss-making. Any merger would only make it worse for MAS.

Major shareholder Khazanah Nasional, which has a 69.4 per cent equity in MAS, had denied any possible merger with the long-haul, low-cost carrier yesterday.

But there are other theories circulating as well – from the possibility of Petroliam Nasional Bhd emerging as a white knight to rescue MAS and a group of young turks being courted to take over the airline to an exco team of former MAS senior executives coming together to help the airline until it is fully restructured.

Amidst all this, the vociferous union – Malaysia Airlines System Employees Union – which claims to represent 13,500 employees, wants the top management of MAS out.

Such a scenario is making many MAS employees jittery. Many fear that they will lose their jobs.

Apparently, the management of MAS has received the green light for a new business plan, which entails some drastic steps to to turn the airline around.

They may involve job cuts of up to 30 per cent of MAS’ current workforce of 19,800 employees and a salary reduction of 30 per cent.

If the plan is approved, who will decide which employee should leave and who should stay?

Currently, the critical areas in MAS are under-staffed and there is a lack of expertise in some areas.

An exercise to trim the workforce in a highly-skilled industry may lead to more problems for the airline than it already has.

If indeed shedding the workforce is the plan to revive MAS, then Khazanah does not need six to 12 months to come up with a plan for the national carrier.

In times of crises, the first thing companies tend to do is trim the workforce. This is a common phenomenon. But in the case of MAS, will job cuts solve its problems?

The airline has many issues besides manpower woes. The critical areas being a change in perception and ramping up sales.

Also, has it done enough to stop the leakages in the supply chain, or is it still paying above-market rates for its contracts? If so, why are these contracts not being renegotiated immediately?

There are some talented and dedicated people in the company. They have stuck with the airline through the good and bad times, to the extent of foregoing their increments and bonuses.

Surely, there must be a better solution to resolve their predicament, rather than implementing measures that would force them to leave the company in big numbers.

After all, they are blameless as far as those untoward incidents as concerned not only now but in the past too.

 

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