Will MAS assets be in better hands with Jentayu?

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KUALA LUMPUR: Jentayu Danaraksa Sdn Bhd plans to buy 82 aircraft as well as MAS Engineering and Firefly from Malaysian Airline System Bhd (MAS), but the proposal raises the question of whether the ailing national carrier’s assets will be in better hands with Jentayu at the helm than its current major shareholder Khazanah Nasional Bhd.

According to Jentayu Danaraksa’s major shareholder and managing director Feriz Omar last Friday, the firm intends to be involved in aircraft leasing and budget airline, should the acquisition of these strategic assets materialise.

“We will focus on the aircraft leasing business as this is the heart of the aviation industry. You need to own the planes, then you lease them out. Then it depends on how dynamic and how creative you are,” said Feriz.

The little-known but ambitious advisory firm also plans to take over Syarikat Penerbangan Malaysia Bhd (PMB), which leases aircraft to MAS. PMB is currently owned by the Ministry of Finance (MoF) and has four old aircraft. 

To recap, Jentayu Danaraksa on Nov 3 made an alternative proposal for the restructuring of MAS, which was backed by the MAS Employees Union (Maseu), the biggest union of the loss-making airline. Its plan will avert the need to lay off 6,000 airline workers, which Khazanah had proposed in its 12-point rescue plan.

In a closed-door media briefing last Friday, Feriz claimed that “funding is not a problem at all”, but declined to disclose exact details of the funding.

As Jentayu Danaraksa was only set up in August, applying for bank borrowings could be difficult because the company has no track record to speak of.

But Feriz is unfazed by the possible daunting prospect of obtaining financing. He said the acquisition of PMB will be funded by “equity financing with our own investors”, while the purchase of the 86 planes will be done via aircraft financing, “because every single plane will be backed by [a] leasing contract”.

As for the purchase of MAS’ maintenance, repair and overhaul (MRO) business under MAS Engineering, Feriz said it will be funded by a combination of aircraft financing and equity injection. The funding for the potential acquisition of short-haul airline operator, Firefly, remains unclear. 

Setting aside financing concerns about Jentayu Danaraksa’s plans, it still remains to be seen whether the firm has a more viable plan than Khazanah to restructure MAS, and more importantly, if it has the right people to execute the alternative rescue plan.

In last Friday’s briefing, Feriz mentioned some big names that were purportedly in his team, such as former MAS managing director and chief executive officer Tan Sri Abdul Aziz Abdul Rahman, AIA and American Insurance Group director Mohd Daruis Zainuddin, and former Standard & Poor’s aviation analyst Shukor Yusof.

“We have a mix of aviation experts and capital market players. My team was prepared six months back, and we are ready to meet MAS. We have shown seriousness,” he said.

Abdul Aziz is being hailed by Jentayu Danaraksa as the man who brought MAS to its peak. But it should be noted that during his leadership, low-cost carriers (LCC) such as AirAsia Bhd and Malindo Air Sdn Bhd had yet to enter the market. In the post-LCC era now, market dynamics have changed drastically.

So, going forward, it will be a big challenge for Jentayu Danaraksa — even with Abdul Aziz captaining the ship — to ensure that it does not repeat Khazanah’s failings and mistakes in MAS.

It should not be forgotten that before Khazanah unveiled its final RM6 billion recovery plan to rescue MAS, the sovereign wealth fund had injected billions of ringgit into the loss-making airline under previous bailouts, which had also flopped.

While Jentayu Danaraksa’s plan is backed by Maseu, it has not gone unnoticed that the main reason the influential union supported the firm’s proposal is that the realisation of its plan would absorb the airline’s employees who would otherwise be retrenched under Khazanah.

Nevertheless, Jentayu Danaraksa seems confident that all the non-profitable MAS assets will do well in its hands.

“Please open the door for Jentayu. We see not just light, but spotlight at the end of the tunnel,” said Feriz.

He said the government has the right to hold shares in Jentayu Danaraksa too, though the firm has no plans to pick up shares in MAS.

“It is not going to be free shares for the government, but at least a golden share,” Feriz said, adding that this will strengthen Jentayu Danaraksa’s move to be an aircraft leasing flagship in Malaysia. 

However, that raises another question: Will Jentayu Danaraksa be able to ensure that the government won’t interfere in its business direction in the future? 


This article first appeared in The Edge Financial Daily, on November 17, 2014.