‘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

*************

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)  

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25 CommentsLeave a comment

  1. Whatever…..A loss is still a loss.Shows how incompetent the CEO.

    • Well, at least that CEO didn’t cost the tax payers a whole lot more in hidden charges, slithery corporate maneuverings (tie-up remember?), sabotage on KLIA2, not paying airport taxes and blame it on invoices, LYING to Australian customers, ETC.ETC.ETC. Oh, MAS also never had it’s air operability questioned by the DCA right? AirSucks. Now, everybody can lie.

      • Do you mean these so called ‘hidden charge’ is more than 1.2 billion? For MAS maybe we can have a contest to predict how much the loss in 2014?

      • Bloody idiot or blind?

        Cannot read or don’t understand BD’s posting, is it?

        It’s clearly stated there. Almost RM1b of the losses are NON CASH!

        Depreciation and forex.

        Means no money going out. It’s just accounting treatment.

      • Wow! You means those money used to buy the depreciated assets is not really money IN in the first place. Moreover it is probably loan taken years ago and these loan no need money to pay back? A loss means a loss. Eventually MAS will come back to gov to bag another bail out and I don’t think the next bail out will be that easy to be granted. Better to sell it again to tony for another RM1 and he may has ways to resurrect it again.

      • Sell to Tony? He can’t even manage AirSucks properly without inflated HYPE, now want to sell MAS to him some more. Then he also want airports ETC. If the Japanese cannot get along with Tony, you think we want to see MAS get slaughtered for no reasons? Look what happen to FireFly during the ‘tie-up’? Pay the fine first la.

    • What can the CEO do, when he actually don’t have the final say… U must be in MAS or in AA in order to understand what’s going on in these companies… AA is owned by Fernandes and his group… They have the final say… MAS is not owned by AJ.. It’s owned mainly by Khazanah… Politically MAS is controlled too…

      Plus, during the share swap, AA gained lots of things (not interested in telling the details over here) and they literally killed Firefly… AA also had to pay some fine, which they have not paid…
      MAS revenue actually has gone up but the problem are the contracts that has been caused in the past especially during Tajuddin Ramli time… TR has caused all the problems and whats happening in MAS are all the after effect of that time.. At least AJ is trying to make it all ok again…

      • AJ knows nuts about airline management. So good that he puts a former biscuit lady with limited exposure/experience in human resource management to run the Human Capital division and turn it topsy-turvy. There was a saying, “pay peanuts and you get monkeys” but in MAS, they pay “gold but get morons”. The Human Capital division is heavily inflated with many incapable middle and senior management guys.

  2. Anyone can increase sale when you throw prices around. Any standard 6 student also can do that.

  3. To be fair I’d say there are areas of management which the Malays have done quite well.

    With regard to MAS I have no qualms to withhold from saying that it is an epitome of mismanagement of the Malays.

    I pray and hope that Malays themselves bring back MAS to its rightful position and thus redeeming ourselves from the wrongs that we did.

    • Ekran Bhd., Perwaja Steel……….for some reasons these entities’ names and a few others popped-up in my head.

  4. Somebody in MAS should do a rebuttal of what Fernandez had commented. If MAS keeps quiet it means it agrees with what this AA CEO has said. We all know that Air Asia is not as profitable as it is made out to be. Air Asia is just better at fudging explanation compared to MAS.

    • Yes. MAS needs to get a bit more assertive in defending their reputation. Don’t let that Chef whose own son LIED about his CV to bark too much about nasi lemak telanjang. Tell him to bring his own fillet mignon on board la.

  5. I completely agree with your analysis. But can you please explain to me why share price only RM 0.29sen!

  6. Tony only control 26% of Airasis share.EPF have 10% of Airasia.
    Khazanah ,with so much money at their disposal can just do a dawnraid on Airasia and kick Tony out from Airasia.

    • Totally agree with you.

      Khazanah should hv gone after AirAsia when the subprime lending financial fiasco caused by Lehman Bros was at its peak in late 2008.

      AirAsia was less than RM1.00. For RM2b, AirAsia could be taken over.

      That’s how incompetent Amokh and his band of over-paid arm chair analysts were really about. Totally useless!

      • Yes, agree with both of you. Take over AirAsia then re-brand as FireFly. AirSucks name no good meh, they won’t let OKUs and sick babies fly. Now, everyone can lie.

  7. […] to non cash big ticket items such as depreciation and forex. He also would never admit that Malaysia Airlines have better standing in the terms of net assets, cash position and borrowings over shareholders’ equity compared […]

  8. I am no accountant with big fancy words, but this much I understand as a man on the street ” MAS suffered big loses at the tax payers expenses”

    • actually i am one of mas staff…. in here we all actually dont knpw wat really happend… we have done lots of work while all the sits in flight totally full booked but always loss…how can mas earn more with all this thing happen
      .

      • To many boses n manager that the position is not required. The ratio like 10 boses:9worker. Should be 1 leader 10 worker.

  9. After all the blame shut address to govt.. how their allow such a big private airlines operate in Malaysia. We are not talking about open competition in this country but they should realise what is the impacts to MAS. Just want to share with you all guys and the comparison with our neighbour Singapore Airlines, have you see that there were no big private airlines without Singapore airlines interference. Example Silk Air under Singapore Airlines, Tiger Airways under Singapore Airlines and Jet star is Jv company with Singapore Airlines and that’s the way how our govt should think….. by right Air Sucks should be MAS subsidiaries companies then we can see the profitable. . .. Now can you tell me who ruined the MAS business.. ?

    • Good point. It is another evidence of how economically dimwit the govt could be. Typical anguk anguk neoliberals wannabe , without understanding the full implication of its actions on the national carrier.

  10. The truth is that in Business everyone wants to make profit. The Problem with MAS it is GLC thus when Govt do not pay when using their services MAS Suffers. For the sake of National requirements MAS has to Foot the Bill. Air Asia do not have that problem, however their way of maximizing profits is false advertising and compromising safety is quite dangerous. True without Air Asia, MAS will remain as it was without competition. Still MAS is on the road to recovery. Give it a Chance.

    • Ya, give it a chance but please bear in mind that everytime a company is bailed out, you and I will have to pay for it.


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