Heated MAS AGM expected
KUALA LUMPUR, June 21 — Sparks could fly at this morning's Malaysia Airlines AGM as shareholders are likely to demand answers from the flag carrier's executives on the larger than expected losses posted in the first quarter as well as the uncertain outlook following the unwinding of the controversial equity-swap with AirAsia.
Despite unveiling a business turnaround plan last December, Malaysia Airlines (MAS) posted a first quarter core net loss of RM347 million, or 87 per cent of the full-year consensus net loss forecast of RM401 million, prompting research houses to revise the airline's net losses for the year up dramatically to as much as RM858 million as compared with previous estimates of RM521 million.
“It could be a scene like from the WWF (World Wrestling Federation),” said one industry observer. “EPF is likely to be quite vocal. Then there are the aunties and uncles who are also not happy.”
Other likely questions could touch on the stability of the top management following the departure of deputy CEO Mohammed Rashdan Mohd Yusof who quit on June 12, a mere eight months into his contract.
Speculation is also rife that chief financial officer Rozman Omar is also on his way out of the airline just four months after being appointed, which could potentially be a big loss as Rozman is one the most senior executives left with extensive airline industry experience.
Rozman was formerly AirAsia's regional head of finance.
A rash of departures from the company's top ranks could mean a period of instability which the airline could ill afford given its troubled situation and the tough outlook for the aviation sector this year.
Investors would also likely want to know if state asset manager Khazanah Nasional, which is MAS's biggest shareholder is preparing to 'do a Proton' and divest its stake in the carrier after the latest round of corporate and financial turmoil.
Khazanah had in January sold its entire stake in the national car maker to DRB Hicom for RM1.3 billion.
It said then that it had divested its stake to an investor who could take Proton to the next level of strategic growth.
Seven directors are also up for re-election at the AGM with one – Tan Sri Mohamed Azman Yahya, CEO of Symphony House – not seeking to be re-elected.
MAS has had a turbulent past decade after the government bought back the airline from former corporate high-flyer Tan Sri Tajudin Ramli in 2001.
Despite several turnaround efforts, the airline has been financially lacklustre, shocking the market with its worst ever annual loss last year even while rivals such as Singapore Airlines reported profits, albeit reduced.
It is also facing the prospect of having its coveted 5-star rating by Skytrax revoked.
To make up for depleted cash reserves arising from losses racked up over the past several quarters, MAS is proposing to raise about RM9 billion through a combination of perpetual Islamic bonds, commercial loans and government financial assistance to help with operational expenses and aircraft delivery.
One Maybank Investment Bank analyst said that the government should look to Indonesia's Garuda as an example of a turnaround plan that worked.
The analyst said that the Indonesian government did the right thing by appointing an airline man – Emirsyah Satar – to head Garuda and also came up with a pragmatic step-by-step approach to fixing its issues.
He noted that Garuda, which was worse off than MAS in 2005 when both airlines were just about to embark on their turnaround journeys, was now the star performer in the Asian region with its shares up more than fifty per cent over the past one year.
It also posted a 56 per cent increase in profit in 2011.
“They waited until they resolved all the structural issues before going for their IPO last year,” he said. “The shortcut is actually the long cut. Doing things step by step the right way is the short cut. If you try to do quick fixes, you will ultimately make things worse and consume more time.”