KUALA LUMPUR: Shares in Malaysian Airline System Bhd (MAS) will be delisted from the local bourse today as part of the RM6 billion MAS Recovery Plan (MRP) aimed at restoring the national carrier’s profitability within three years.
The five-year 12-point recovery plan that was mapped out by national strategic investment fund Khazanah Nasional Bhd on Aug 29 will see a series of measures put in place to completely overhaul the airline.
They include the streamlining of its workforce by 30%, a reduction of its net gearing from the current 290% to a target range of 100% to 125%, a restructuring of its business model to one of lower cost and greater yield, and the establishment of a new company called Malaysia Airlines Bhd (MAB).
A new law called the MAS Act was also passed in Parliament in late November to facilitate the carrier’s rescue plan.
Under the MRP, the operations, assets and liabilities of MAS will be migrated to MAB by July 1. Khazanah also plans to relist the new company in three to five years, which means sometime between end-2017 and end-2019.
The process of reinventing MAS will be led by its new chief executive officer (CEO)-designate Christoph Mueller, effective tomorrow. Mueller, with a strong track record of transformation and turnaround in the aviation industry, is the first foreigner to helm the flag carrier.
The other CEOs who have served the airline in the past decade include Ahmad Jauhari Yahya (2011 to 2014), Tengku Datuk Seri Azmil Zahruddin Raja Abdul Aziz (2009 to 2011) and Datuk Seri Idris Jala (2005 to 2009).
Besides three CEOs, the past decade has also seen two — not including MRP — major restructuring efforts to improve the company’s financial performance, though apparently to no avail.
The last one was in 2013, when MAS launched a turnaround plan under Ahmad Jauhari after the carrier recorded a staggering net loss of RM2.52 billion for the financial year that ended on Dec 31, 2011 (FY11).
The plan, which saw it cutting routes to prominent but unprofitable long-haul destinations, among others, managed to narrow losses in FY12 to RM430.74 million. However, the company bled again in FY13 with a net loss of RM1.17 billion.
Before Ahmad Jauhari could do more to stem losses, MAS was hit by the baffling disappearance of flight MH370, which went missing from Kuala Lumpur to Beijing in March this year.
The way MAS was perceived to have muddled up the management of the crisis at the height of the incident also caused its reputation to suffer internationally.
Even as it was slowly picking up the pieces after the incident, another flight, MH17, was tragically downed in Ukraine in July, delivering what is now widely regarded as the death blow to the already crippled carrier.
Unsurprisingly, MAS recorded a net loss of RM576.11 million in the third quarter ended Sept 30 of FY14, with the full nine months of the year showing a net loss of RM1.33 billion.
However, the history of MAS’ financial is not all in the red. There were also some past successes that some may have forgotten.
In 2005, MAS posted a staggering loss of RM1.3 billion due to increases in fuel, staff, and maintenance costs, as well as low yield per available seat km (ASK) due to poor yield management and an inefficient route network. However, the company managed to return to profitability in FY07 following various initiatives launched under its two-part business turnaround plan (BTP) in 2006, when it was under the leadership of Idris, who is now minister in the Prime Minister’s Department and CEO of the Performance Management and Delivery Unit (Pemandu).
(Pemandu oversees the implementation and assesses the progress of the country’s Economic Transformation Programme as well as the Government Transformation Programme.)
When the BTP came to an end, the airline posted a profit of RM853 million in 2007, exceeding its initial target of RM300 million by 184%.
Moving forward, the future of the national airline remains uncertain in an increasingly challenging and competitive aviation industry. In Malaysia alone, it will be competing with three to six carriers for most major routes.
Airline capacity growth per year in the Malaysian market, which stands at 10%, is also outpacing demand growth of 8%.
In addition, consumer confidence in Malaysian carriers has been shaken by not just the twin MH disasters that saw the lost of 537 lives, but also the crash of Indonesia AirAsia’s flight QZ8501 that were carrying 162 passengers on Sunday.
Hence, the road to restore the national carrier to its glory days is one that is long and riddled with challenges.
Mueller’s job, which has been termed “one of the toughest jobs in aviation” today, is indeed not one to be envied, but supported at all levels if MAS is to become a major contributor to the nation’s economy once more.
This article first appeared in The Edge Financial Daily, on December 31, 2014.