‘Cheating’ passengers and Government should be more shocking

FAX: Sabahans and Sarawakians short changed

AirAsia Supremo took a really low-blow pot shots against Malaysia Airlines, for the unaudited result of the Q4 of 2013 and the aggregated summary of accounts for the national carrier for YE 2013.

Tony Fernandes expresses shock over MAS’s losses, says aviation industry needs a review

BY TRINNA LEONG
FEBRUARY 19, 2014

Putrajaya needs to review aviation policies as it can’t afford to spend taxpayers’ money on loss-making Malaysia Airlines (MAS) which bled RM1.2 billion last financial year, said Tan Sri Tony Fernandes (pic).

The founder of AirAsia added that he was “shocked” at the amount of losses suffered by MAS.

“The whole aviation industry needs a relook,” he told The Malaysian Insider by phone today.

Saying that the industry’s policies and airline management need to shape up, Fernandes said that MAS and Malaysia Airports Holdings Berhad (MAHB) have to start churning profits to avoid burdening taxpayers.

“My point is that if you’re running a private company, could you afford to cut 16% of your costs and still lose RM1 billion?” he asked.

“It’s only because there’s taxpayers’ money that one can afford to do that. And this isn’t solving the issue,” he added.

Yesterday, MAS had reported its fourth straight quarterly loss for 2013 and chalked up RM1.17 billion in losses for the year – three times as much as in 2012.

The state-owned carrier has been implementing cost-cutting measures to cut its expenses such as axing several routes and introducing lower ticket fares to increase its load.

However, the airline is also awaiting government approval to purchase 100 Airbus and Boeing passenger aircraft that would amount to several billion ringgit.

A Reuters report said that the airline’s decision to spend on newer aircraft is to boost profitability and retire its older, less fuel-efficient aircraft.

Fernandes, meanwhile, criticised MAS and MAHB’s continued spending and losses.

“It’s supposed to be profit-making. This just hurts decent players in the business when they’re spending like there’s no tomorrow,” said Fernandes.

According to MAS’s website, the carrier has 88 aircraft in its fleet, including Airbus A330s and A380s, and Boeing 777-200s and 737s.

The airline’s expenditure also went up by 10% last year to RM14.9 billion year-on-year due to high fuel prices.

MAS posted its highest ever loss in history when it recorded RM2.52 billion nett loss in 2011. The company , however, managed to narrow its losses to RM433 million in 2012. – February 19, 2014

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The fact is that, Fernandes is totally unfair in his biased simplistic remark about Malaysia Airlines’ 2013 performance. Had he professionally analysed the figures in the proper perspective, it would give a totally different impression.

When Ahmad Jauhari Yahya took over as CEO and he was relieved from answering to the ‘Executive Committee’ which include Fernandes and his partner Kamaruddin Meranun, the strategy was improving on revenue and lowering cost. Since that is not much room for cost to be lowered mainly due legacy issues, AJ’s leadership managed to improve on revenue.

AJ and some of the proud employees

AJ and some of the proud employees

After two years, the results have shown. Revenue increased by 9.4% where as EBITDA improved by 36%. Another interesting point is that RM817 million from the RM 1.17 billion losses actually derived from non cash expenditure, in the form of depreciation. Forex losses (due to weakening of Ringgit) of RM194 million, is the other big ticket item.

The actual performance is actually impressive. Malaysia Airlines flew 6.42 million passengers on domestic routes and 10.785 million on international routes. Passenger per km of domestic and international routes improved to 77% and 81% respectively. Actually revenue passengers kilometres is at 47,286 million.

Game changer: Malaysia Airlines first A380-800 getting the traditional welcome at  KLIA, as it arrives from Airbus Centre 29 June 2012

Game changer: Malaysia Airlines first A380-800 getting the traditional welcome at KLIA, as it arrives from Airbus Centre 29 June 2012

Cargo business also improved. Malaysia Airlines flew load tonnage kilometres of 1,991.4 million for 2013.

The coffer is healthy. For the 12 months ended 31 December 2013, the Group’s cash balance stood at RM3.87 billion. Total assets were at RM21.86 billion, whilst net gearing remained at 1.9 times at the end of December 2013

The historical value of assets warrants the provisions made for depreciation. The net value of assets stands at RM14.4 billion. Borrowings  stands at RM10.36 billion.

Malaysia Airlines workhorse: B737-800

These are hardly key performance indicators that Fernandes’s low caste carrier could ever dream of, let alone match. The value of total assets and cash position is much lower. Even the published statistics are not as per international practice to measure any carrier operations, which is in passenger kilometres (or miles).

Aggregated net asset of Fernandes’s low caste carriers stand at RM4.8 billion. Cash position is RM2.2 billion. Borrowings is calculated at RM8.3 billion. That is only 19.9% lesser than Malaysia Airlines’ borrowings, compared to the value of net asset where the national carrier is 300% more.

Low Caste Carrier hazzard: Air Asia mishap in Kuching, 2011

Low Caste Carrier hazzard: Air Asia mishap in Kuching, 2011

The fact is that Fernandes as CEO and controlling director of the AirAsia Group should be investigated for all of the deception, false-sales-hood and hyped up business deals, on top all the cock ups and regulations crossed by any of the subsidiaries and reprimanded for. That would be morally sinful.

What was the damnest was when Fernandes took over the Rural Air Service from Malaysia Airlines in 2006, which was part of ‘Level Four Boys’ designed program endorsed by PM ‘Flip-Flop’ Abdullah Ahmad Badawi under the Airline Rationalisation Plan, he did not deliver. In fact the RM250 million subsidy was short of ’embezzled’ (abused and channeled for other purposes) except to serve the consumers of the interior of Sabah and Sarawak.

Wheelers and OKU protesting against AirAsia

Even Wheelers and OKU protesting against AirAsia, for discriminating them

Fernandes should have been made to pay for the RM10 million fine imposed by MyCC failed and reversed ‘Share Swap’ between Malaysia Airlines and AirAsia, since he was instrumental in the systemic attempt to ‘devour and kill’ Malaysia Airlines which was inked in August 2011.

Part of the legacy issues of Malaysia Airlines are due to decisions made by the Federal Government. When Tan Sri Nor Mohamed Yackop endorsed the Wide Asset Unbundling (WAU) where assets where stripped and hived off as the solution, it basically subjected the national carrier to be serving the lessors (which factored profit) instead of financiers (which was just serving borrowings plus interests).

Malaysia Airlines Southern Support Zone Complex, KLIA

A good example is Malaysia Airlines is believed to pay RM75 million in rental for facilities such as the Southern Support Zone Complex and Flight Management Building at the Main Terminal Building, KLIA. Malaysia Airports build its HQ for RM200 million. It means that perpetually, Malaysia Airlines would should actually get a similar HQ complex for every three years of rental they are subjected to pay.

It is obvious that Fernandes never once blamed MD of Khazanah Holdings Bhd. Tan Sri Azman Mokhtar and then his Binafikit partner Mohamed Rashdan “Danny “Yusoff for the problems of Malaysia Airlines today derived from the WAU solution slightly over ten years ago.

A bleak nine months in Malaysia Airlines' 65 years history

A bleak nine months in Malaysia Airlines’ 65 years history

The public must realise continuous perils Fernandes had caused, which include Federal Government investment arm Khazanah Nasional Bhd. Any drama by him is actually to deflect something amiss about what he did or about to do.

The recklessness is also unbearable. The greed to make money should not be compromised with safety. Not too long ago, DCA did not renew AirAsia’s Airline Operating Certificate (AOC) believed to be failure to update and comply of flight operations manual.

Fernandes realise that when Malaysia Airlines is back on its feet as the national carrier’s operations grow bigger, more revenue is earned and the fleet are expanded and regenerated, it would reflect worse against his over-sellling-coupled-with-below-standard deteriorating service. Hence, his ‘attack is the best defense’ strategy, like expected.

Published in: on February 19, 2014 at 23:30  Comments (25)