Wednesday, June 13, 2012

Who are to be blamed if MAS needs help?

I just came back from a meeting with a government linked organization. My meeting stretched until after 5.30pm. When I walked out of the office the entire building was just empty and dark except for the lobby.

Now let me point this to MAS. How many times have they changed CEOs after the Tajudin Ramli debacle? Except probably for Idris Jala, do you have the feeling that the other CEOs have the political strength and will to push through the right agenda? Or is the more important agenda to protect their own positions, addressing the demand from the powers that be and in pleasing the Board of Directors? How do they attend to a minister who wanted to upgrade the entire family including the maid to first class for example? Can they say no? If they can't, how does the management rally the staffs?

These are questions which you probably have answers but we still blame MAS for failing. MAS is competing in a very competitive industry. They have Emirates, Singapore Airlines, Cathay Pacific, Thai Airways and Qantas to contend with besides the shareholders and government to answer. On top of that, over the last 10 years they have the most successful low cost airline in the region back at their heels. Yes, part and parcel of competition, we should say. But really, is Malaysia a much better and preferred business and convention destination? Are we a top notched tourist destination? If we are, then we are able to help MAS as they probably are finding it easier to fill up their seats. Fact is our neighbors (Singapore and Thailand) are doing better in this aspect - tourism and convention. Yet again, we are blaming MAS. We want them to do as well as SIA. In business, once you are on a high gear, you are flying. However, once you are stuck in a traffic jam, you will be crawling and be facing disgruntled people around you, while continuing to fail.

The latest sukuk fund raising called "perp" is not going to help. Yes, it is an exercise to stop the rot but at 6.9% financing costs, their financials are not going to strengthen. It is an exercise to make the financial guys look presumingly good. Yes, the fund appears in the equity section of the balance sheet and not on the debt section, but really are the prospective financiers to MAS in future be that blurr that they do not know. If I may be blunt, it is just an exercise to delay their demise as they are going to increase the costs of doing business for MAS. It is an exercise to make the balance sheet look nice, not the cashflow and the P&L. It is just a financial engineering, not business reengineering.

What does MAS need then? MAS needs a total revamp out of the eyes of the public. It needs to cut routes even though the cabinet may oppose to it. Can they do that?

If they can't, who should we blame here? The people for expecting too much from MAS and the government for giving us too much hope!

My call is follow Ananda Krishnan footsteps, delist MAS, really clean it up this time, have a no nonsense CEO on board for long term and only list it back after this. This time, I will support for this although I do not support Ananda's delisting of Astro.

Or an even more drastic move, can they do a GM? - as what the Obama administration did to the automotive giant few years ago, which is let it go bankrupt. From here, they probably can terminate some of the unjustified long term contracts. Just a naughty thought!


Anonymous said...

Hello kawan, bila u mention jala I gelilah. Are you on sleeping pill?
Pls read below to understand better.

Felicity said...

I probably was sleepy, yes. However, we give what was due to Idris. During his helm as the CEO, MAS did do better both revenue and profits. To compare MAS against SIA is similar to comparing GDP per capita or income of Malaysia and Singapore, which is tough. My article was about letting MAS have some time and pick themselves up rather than just having financial engineering.

Anonymous said...

I agree with Anonymous-1. Idris was overrated by media. He was wronged when his fuel hedged in 2008-10 resulting in MAS paying high priced above market. He was smart to leave MAS just before it turned huge losses. He is a natural politician.

Felicity said...
This comment has been removed by a blog administrator.