This article first appeared in Corporate, The Edge Malaysia Weekly, on April 25 - May 1, 2016.

THERE is a feeling of déjà vu at Malaysia Airlines Bhd as the man tasked with turning around the loss-making national carrier has said he is quitting after only one year at the helm.

CEO and managing director Christoph Mueller announced last Tuesday that he is stepping down in September, citing personal circumstances.

While his abrupt exit has left Malaysia Airlines’ future foggy again, those who do not know better would think that the top position at the company is cursed, given that it has had six CEOs in the past 15 years. Tan Sri Tajuddin Ramli holds the record for being the longest-serving top executive, with seven years of service. Since then, his successors have had shorter stints of two to three years.

The CEOs all declared that they would return the airline to its once-dominant position in the Asian skies, with the best cabin crew in the world. However, each turnaround the company made turned out to be unsustainable.

Mueller came in as CEO last May. Formerly CEO of Aer Lingus Group plc, his strengths were said to be in the areas of transformation and turnarounds in the aviation industry.

His resignation just one year into his three-year term has sparked speculation of a rift between him and Malaysia Airlines’ parent Khazanah Nasional Bhd. After all, the airline’s first non-Malaysian CEO was supposed to be given a free hand to nurse it back to health.

Aviation industry observers say Mueller has done what Khazanah had set out for him to do under the government-linked investment fund’s five-year 12-point MAS Recovery Plan (MRP).

The plan involved cutting a third of its 20,000 staff, pulling back from unprofitable routes, renegotiating about 4,000 supply contracts, terminating some existing code-share agreements and putting in place a new management team.

“It looks like he has completed Part 1 of the plan. Now comes Part 2, which is to make sure the plan delivers sustainable profitability and this is not going to be easy,” one industry observer tells The Edge.

Endau Analytics founder Shukor Yusof says Mueller has done all the things a CEO would do to turn around a company in financial distress.

“There is nothing unique about his strategy. He is just doing what anyone would do. I believe the profit the airline recorded in February was largely because of the cuts and slashes done.

“Former CEO Datuk Seri Idris Jala (2005-2009) also successfully turned around Malaysia Airlines from losses through job cuts, route cuts and the selling of assets like the MAS headquarters.”

Going into the second phase of the plan, Shukor believes Khazanah’s 12-point plan does not address the deep-rooted problems in Malaysia Airlines such as its borrowings, which amounted to RM10.09 billion as at Sept 30, 2014, and its aircraft lease rates with operating lessors.

“As at end-2014, the airline was paying in excess of RM1.3 billion for around 30 aircraft, well above the market rate,” Shukor points out. “The plan also does not detail how Malaysia Airlines will address its finance charges, which stood at RM436.61 million for the financial year ended Dec 31, 2013.”

Another concern is the losses the company is incurring while being stuck with six unproductive Airbus A380s, says Shukor.

Nevertheless, he believes Malaysia Airlines’ restructuring will continue as planned given that Khazanah has clearly and categorically outlined its targets under the MRP.

So, who is likely to be the next CEO?

“Whoever replaces Mueller will continue with the mission, irrespective of whether the mission has merits.

“He or she will simply have to execute the rebuilding of the airline according to how Khazanah sees fit, that is, implement the measures in the recovery plan. I wouldn’t be surprised if it is someone from within Khazanah, like Mohd Izani Ashari,” says Shukor.

Izani is currently a director of Malaysia Airlines and was involved in the turning around of the old company, Malaysian Airline System Bhd, in 2005 and 2006. From April 2009 to March 2010, he was director of the transformation management office at Khazanah.

Chris Eng Poh Yoon, head of research, products and alternative investments at Etiqa Insurance & Takaful, says the most important thing is for the next CEO to be given enough independence to allow him or her to get the airline running in the direction it should go.

“There should not be external pressure that would deviate the airline from its strategy. And that strategy should be spelled out clearly and repeated every so often so that everyone can remember it,” he says. “For Malaysia Airlines, is the current strategy to be the regional airline of choice?”

In the meantime, Eng expects things to remain somewhat uncertain at the national carrier.

“Incidents such as barring passengers from bringing checked-in luggage to Europe (even if it was swiftly reversed) and complaints about food and beverage show that there may be miscommunication within the airline itself.

“While prices and routes have been rationalised, the product itself can’t fall too far behind its peers’. Otherwise, it will be a number of years before Malaysia Airlines can recapture its premium status, assuming that that is its ultimate strategy,” he says.

An airline executive tells The Edge that the next CEO not only has to be good at cost cutting but also has to have a clear vision of what he or she wants for Malaysia Airlines.

“The person must have a strategy to grow the airline organically and continue to operate profitable routes rather than rely on one code-share partner. He or she must also look to address staffing issues,” she says.

The airline executive cites Garuda Indonesia as a good turnaround story. The state-owned airline had appointed an Indonesian, Emirsyah Satar, as its president and CEO in 2005.

“Formerly a banker, Emirsyah has turned Garuda from problematic to profitable by cutting unprofitable routes, returning old aircraft to leasing companies and, at the same time, adding money-making routes.

“He also cut staff, but retained the good ones by paying them higher salaries,” she says. “Today, Garuda is a symbol of what’s possible in the difficult airline industry. You need a leader with focus.”

Last Friday, a newswire quoted sources as saying that Irishman Peter Bellew, chief operating officer of Malaysia Airlines, is one of the front runners for the CEO position. Formerly with Ryanair, Bellew sits on the Malaysian national carrier’s board.

It said Celcom Axiata Bhd CEO Datuk Seri Mohammed Shazalli Ramly, who joined Malaysia Airlines’ board last year, was also in the running. 

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