MAS in for more turbulence without AirAsia, says WSJ
KUALA LUMPUR, May 3 — Malaysia Airlines (MAS) is “shooting themselves in the foot” for cancelling its share swap with AirAsia, the Wall Street Journal wrote today while pointing out that without the deal, the ailing national carrier may have to struggle with even deeper cost cuts.
The influential business newspaper wrote in its “Heard on the Street” column that MAS was already bleeding red ink due to rising competition and fuel prices, and the proposed share swap deal was meant to help shore up its balance sheet.
“Now the share swap is history, however, Malaysia Airlines’ (MAS) employees could find they face even deeper cuts,” the paper wrote.
Quoting MAS chairman Tan Sri Md Nor Yusof in March, WSJ wrote, “The deal was a key to reviving ‘a very sick patient’.”
But without AirAsia on board, this “sick patient” would have to find ways to cure itself by slashing uncompetitive routes and finding other cost-cutting methods.
The Malaysian Insider reported as early as March that Putrajaya was reviewing the share swap and was considering a special entity to take MAS off the hands of its then main shareholders, Khazanah Nasional Berhad and Tune Air.
Yesterday, The Malaysian Insider also reported that the boards of MAS and AirAsia have agreed to set up a company to buy aircraft, parts and oil for economies of scale ahead of the Asean open skies policy, despite the unwinding a nine-month-old share swap that saw opposition from politicians and the flag carrier’s unions.
It is learnt that AirAsia chiefs Tan Sri Tony Fernandes and Datuk Kamarudin Meranun will leave the MAS board, which had been a bone of contention among staff of the national carrier.
Khazanah’s nominee, Datuk Mohamed Azman Yahya, will also resign from the AirAsia board.
The collaboration framework and share swap had also come under scrutiny from the Malaysia Competition Commission (MyCC) due to concerns of a domestic monopoly.
Khazanah and Tune Air agreed to the share swap last August, after four previous unsuccessful attempts for an alliance between MAS and AirAsia, which soared from a decade ago when Fernandes and partners bought the two-aircraft operation and its debts for just RM1.
Khazanah’s CIMB Bank advised both parties in the deal, which was seen as the final attempt to save MAS despite an earlier rescue programme in 2001 planned by advisory firm BinaFikir Sdn Bhd.
Following the share swap, the management team led by new managing director Ahmad Jauhari Yahya put together a business turnaround plan last December to help propel MAS back to profitability.
The new management’s efforts to restructure the airline and put it in a more competitive position however caused friction with the unions and employee associations.
Cutting staff could improve costs but is seen as a major political liability in Selangor, where MAS has most of its operations and the state that Prime Minister Datuk Seri Najib Razak wants to win back in the next election.
In a statement yesterday, the state asset manager Khazanah explained that the share swap deal was unravelled as it had become an impediment to the recovery efforts of the loss-making flag carrier.