Riong Kali and Tony must explain

The highly successful but controversial, some with sensational stories AirAsia, which was voted the best low cost carrier in Asia is in the limelight again. It has been reported that the listed company is 45%  foreign owned.

This should not come as a surprise. Air Asia CEO Dato’ Seri Tony Fernandes hoped for the liberalisation of many Malaysian strategic industries, amidst the failure of the debt infested American and European financial and capital markets and possible hostile fund managers in search on new and bullish but relatively cheap markets to prey . It is Malaysian entrepreneurs like him who ‘facilitate’ the ‘Western Imperialism and Re-colonialisation’, via economic domination.

The Star published a special aspiration of selected CEO on New Year’s day:

Leading names in corporate Malaysia share their hopes and aspirations for 2010.

Datuk Seri Tony Fernandes
AirAsia Bhd group CEO/team principal of Malaysia Team Lotus F1

I HOPE the airport industry will be deregulated this year to allow the entry of more entrepreneurs and foreign investors as has been done in the power, banking, telecoms, ports and road sectors. This will create a dynamic industry that has lower costs and will make Malaysia even more competitive regionally.

Industries in which government-linked companies and entrepreneurs compete should have fair and effective regulators like Bank Negara.

This year, I also hope that AirAsia really gets to make Malaysia the hub that drives more passengers from all points. There are many routes which we hope to fly to in 2010 and all routes that we have flown to we normally grow the market. There has not been a single route which were entered where the market has not grown. I hope to see all Malaysians get behind F1. It would be great to see a sell-out crowd in Sepang.

I wish that Asean leaders will really move from a political institution to a more economic and cultural institution because Asean is a huge economic force. It has mostly focused on politics but a shift is needed to turn its attention to the business side.

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Amidst all the mumbo-jumbo of fancy marketing and promotional gimmick which is the secret of the very good sales, Air Asia has been reported as highly profitable and good liquidity position. Despite that, AirAsia is doing business without reciprocating the commitment of deriving the income. Air Asia chose not to pay its creditors, namely the Malaysian Airports Holdings Bhd. (MAHB).

Bernama.com has the story:

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January 20, 2010 14:40 PM

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MAHB Hopes AirAsia Pay Airport Tax Promptly

 

SEPANG, Jan 20 (Bernama)– Malaysia Airports Holdings Bhd (MAHB) hoped that low-cost carrier, AirAsia Bhd, pay the airport tax it owed more promptly, said its chairman, Tan Sri Dr Aris Othman.

“They are paying but we will encourage them to be prompt. The trouble is, it is a continuous thing,” he told reporters at the launch of Safety, Health and Environment Campaign here Wednesday.

Aris said this when asked on the progress of the payment.

It was reported that AirAsia has chalked up arrears of RM65 million up to February last year.

On the amount of the latest outstanding arrears, Aris said: “You catch me without the figures.”

He said when AirAsia did not pay, the amount of the new one would definitely go up.

“It affects our cash flow,” he said.

It was earlier reported that MAHB did not take any drastic action to claim the arrears because it would affect the operation of the low-cost carrier terminal.

— BERNAMA

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The use of airports is a fundamental element of their business. They were so adamant in their business philosophy and operations that they refused to use the services in MAHB’s airports that they imposed the Federal Government for a separate and dedicated low cost carrier terminal. PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi summarily approved the RM 108 million ‘temporary’ LCCT in June 2005, to cater for the whims and fancies of Air Asia.

Reputation as a good debtor is never an Air Asia trait. For a plc with that size of sales, profitability, cash position and rate of growth, Air Asia also has been said to have not been paying and servicing their suppliers on time. So much so that Jet A1 fuel is being supplied only at cash terms.

Federal and State Governments have been giving Air Asia so much concessions, which facilitated their ability to grow so rapidly in a very short span of time. Previously they have been given tax incentives, allowables and the marketing programs have been indirectly sponsored by various government’s promotional programs. The concessions even include safety record, which was below the  Malaysian aviation industry practice.

In fact, in 2006 when ‘Airline Rationalisation Plan’ was adopted by the government, Air Asia was allocated most of the domestic routes previously served by Malaysia Airlines. This is not without corporate social responsibility of taking over the Rural Air Service; the backbone of communications and logistics for much of darkest interiors of Sabah and Sarawak. However, the moment Air Asia had strong footing in Sabah and Sarawak and when faced with issues such as investment of capital and equipment, they quickly ‘imposed’ the Federal Government in such a manner that Malaysia Airlines had to take it back. In a few short months, RAS is MAS Wings.

This is not with standing the ‘cocky’-ness of its Tony Fernandes, who was formerly from the entertainment industrty. He has rub so many people on the wrong side, too many times. Few years ago, Malaysia Airlines MD Dato’ Idris Jala decided to revoke the privileges on flying First Class and Golden Club Class for Air Asia’s executives and their immediate families at a faction of the published price based on inter-airline ‘respect’ because Tony was rubbishing Malaysia Airlines in the media as being ‘non co-operative’ to the Air Asia business.

Air Asia drew a lot of flak when they became an active partner as the promoter for the much controversial proposal of a dedicated LCC Airport in Labu, which is a close proximity of the KLIA. This episode demonstrated the arrogance of Air Asia and Fernandes, who has earned his rightful position as a celebrity CEO (much like Sir Richard Branson in the UK).

The most recent controversy that Air Asia attracted the attention is the much hyped Lotus Formula 1 team, “1 Malaysia F1 Team” where Tony is playing the psychological game of imposing the cost of them team to GLCs for the strategic benefit of Air Asia’s PR expansion program. It is strongly believed that Tony needed to have a massive PR campaign for their US West Coast expansion, on top of its commitments to the Oakland Raiders.

Business Times has the story:

Oakland Raiders becomes AirAsia strategy

Published: 2010/01/21

 

On a sultry June night, Kuala Lumpur’s rooftop Luna Bar is throbbing with dance music as an overflow crowd takes in the view of the Malaysian capital’s Petronas Twin Towers. Champagne corks pop as men in suits mingle with women in little black dresses, joined by American football players and cheerleaders.

The scene is a party for AirAsia X Sdn Bhd, the long-haul unit of low-cost carrier AirAsia Bhd, a company that in eight years has grown from a two-plane startup to Southeast Asia’s biggest budget airline, Bloomberg Markets magazine reported in its February issue.

In the midst of the hubbub, AirAsia chief executive officer Tony Fernandes toasts his company’s sponsorship of the Oakland Raiders, three-time National Football League Super Bowl champions. Next to the outdoor pool, Fernandes — dressed in a black Raiders T-shirt and his trademark red AirAsia cap — dances with three Raiderette cheerleaders.

“This is what AirAsia is all about,” Fernandes, 45, says, sipping a glass of rum and Coca-Cola.

AirAsia X doesn’t even fly to Oakland, California, and few Malaysians follow US football. “We always disrupt, innovate and do something that no one ever thought of — and sponsoring an NFL team is all about becoming a global brand,” Fernandes says. He declines to say how much the airline will spend on the multiyear sponsorship.

The British-educated Fernandes is following in the footsteps of Virgin Group Ltd. founder Richard Branson and EasyJet Plc’s Stelios Haji-Ioannou, the UK aviation entrepreneurs who built underdog empires to compete with state- run rivals. AirAsia and its subsidiaries flew more than 24 million passengers in 2009, compared with 20,000 in 2001, mostly to destinations that are within a few hours’ flight time from Kuala Lumpur, such as Singapore, Thailand, Indonesia and Vietnam.

Branson, 59, who founded Virgin Atlantic Airways and once employed Fernandes in the 1980s, holds a 16 per cent stake in AirAsia X and says he’s proud of his protege.

“I am flattered that people should call him the Richard Branson of Asia,” Branson says. “He’s built a great airline that has transformed millions of people’s lives by enabling them to travel affordably.”

In 2007, Fernandes started privately held long-haul carrier AirAsia X, which flies from its Kuala Lumpur hub to Australia, China, the United Arab Emirates and the U.K.

Fernandes says AirAsia X will probably begin flying to Mumbai, New Delhi and Seoul in the second half of 2010, and the company is negotiating with authorities in Los Angeles, New York, San Francisco and Oakland to add services to the US as early as 2011.

AirAsia’s dreams to become a global, no-frills, long-haul brand may be difficult to fulfill.

“What Mr Fernandes has in mind is something for which no precedent exists,” says Douglas McNeill, an airline analyst at Astaire Group Plc in London. “Building a genuinely global brand is something that a lot of airlines talk about, but it’s not something anyone has really managed to do.”

Fernandes uses a mountain bike to get around AirAsia’s headquarters at the Low Cost Carrier Terminal outside of Kuala Lumpur. Pilots and cabin-crew members greet Fernandes with high- fives as he makes his rounds dressed in a white open-necked shirt and jeans. Ground staffers in orange jumpsuits mingle with office workers who wear slacks and T-shirts in the cafeteria.

“It’s the corporate culture,” Fernandes says. “It’s about breaking down invisible walls.”

Fernandes embraces social network sites, such as Facebook (where he had 16,722 fans as of mid-January) and Twitter, to promote his airline and list available jobs. A recent Facebook wall posting: “In nyc. Full day. Lots asking when airasia is flying here.” He also writes the Tony Fernandes CEO Blog, where he posted details of his first trip aboard rival Singapore Airlines’ Airbus A380 jumbo jet.

Fernandes is emulating Branson and Haji-Ioannou’s business plans by expanding the AirAsia brand through travel insurance and prepaid debit cards, and operates a budget hotel and a mobile-phone company under his privately held Tune Group.

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Kalimullah “Riong Kali” Hassan and Tony Fernandes (both of them have direct interest in Air Asia X) have the ethical and moral obligations on the report about Air Asia being owned foreigners, with 45% of the holdings are no longer in the hands of Malaysians. The nation, be it the Federal Government, State Governments and rakyat gave Air Asia so much concessions and facilitated the opportunity for them to grow so fast and huge. Considering that Fernandes took over Air Asia rom DRB Hicom at the measely nomimal sum of RM 1.00 and when it reached this stage, the holdings hae been hived off to foreign hands, the explanation should be nothing short of a full disclosure.

Now that Air Asia no longer could be deemed as a ‘Malaysian’ company (from the percentage of control against the domicile and resident status, from the eyes of Income Tax Act), everyone has the right to know before more commitments are being invested, especially with regards to public interest  into Air Asia’s scheme of ventures. After all, Malaysia in sundry is a direct stake holder of the most successful low cost carrier in Asia.