Malaysia

Putrajaya mulls MAS-AirAsia break-up, unhappy with results

KUALA LUMPUR, March 9 — Putrajaya is reviewing the eight-month-old Malaysia Airlines-AirAsia alliance as it has failed to show any promised improvement or lift the morale of the 20,000-strong staff in the flag carrier that lost RM2.52 billion in 2011.

The Malaysian Insider understands that the Najib administration is also considering taking MAS private by directing state asset manager Khazanah Nasional Berhad buy back a 20.5 per cent stake exchanged with Tune Air Sdn Bhd, the majority owner of AirAsia, for 10 per cent stake in Southeast Asia’s largest budget carrier

File photo of a customer at the MAS ticketing office in KL Sentral.File photo of a customer at the MAS ticketing office in KL Sentral.“Datuk Seri Najib Razak is not happy with MAS’s performance which he was told would improve after the share swap,” a government source told The Malaysian Insider.

He confirmed that the MAS Employees Union (Maseu) had met and urged the prime minister to unravel the deal, which will break MAS into separate long- and short-haul operations. MAS also operates the Firefly community airline and MASwings for rural air services in Sabah and Sarawak.

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 Tan Sri Tony Fernandes and partners bought the two-aircraft operation and its debts for RM1.

Khazanah’s CIMB Bank advised both parties in the deal, which was seen as the last attempt to save MAS despite an earlier rescue programme in 2001 planned by advisory firm BinaFikir Sdn Bhd.

Coincidentally, BinaFikir co-founder Tan Sri Azman Mokhtar is now Khazanah managing director while the other co-founder Mohammed Rashdan Yusof is in charge of MAS short-haul operations.

“The prime minister wants to see the full picture of the deal and find the best way forward for MAS especially since the union has expressed concerns,” another source told The Malaysian Insider.

The MAS management, under managing director Ahmad Jauhari Yahya, has had townhall meetings with the staff, some of whom are unhappy with Rashdan’s management style

“There are some valid concerns as they feel he isn’t a people person and that is important in a service industry,” the source said.

Another area of concern is the talk of being redeployed outside MAS to the short-haul premium airline headed by Rashdan as that would mean a loss of benefits.

MAS has slightly more than 20,000 staff although former MD Datuk Seri Idris Jala had cut it down to 17,000 when he left in 2009. Industry analysts say the flag carrier could just do with one-third of its current staff especially with cuts in routes in the past six months.

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 Najib wants to win back in the next elections.

The entire airline group posted a net loss of RM1.28 billion for the fourth quarter of last year, bringing its total net loss for 2011 to RM2.52 billion. MAS, however, did see a marginal increase in group revenue, going up two per cent from the previous year to RM13.9 billion in 2011.

The airline attributed the losses to the increase in fuel price, which rose up from US$95 per barrel in 2010 to US$133 per barrel in 2011.

The bigger-than-expected losses were also due to additional provisions like redelivery of aircraft, impairment of freighters and stock obsolescence.

MAS hopes to finalise and announce a plan to raise funds and strengthen its balance sheet within the next 60 days. This is critical as the carrier’s plan to deploy 23 new aircraft this year would cost some RM6 billion.

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