The hangman cometh at Malaysia Airlines

mas logo2IF Christoph Mueller, the new man appointed to head Malaysia Airlines (MAS) – to be renamed on 1 September as a new airline – appears to be a hangman at the onset, it is understandable since termination letters have been sent to all employees ahead of the airline’s re-launch .  It is estimated that at least 6,000 employees will be axed and others offered to join the new airline. Some may be offered short-term contracts.

The staff cuts should not come as a surprise. It is an inevitable path that struggling companies undergoing restructuring are apt to take, and in almost all cases when a new helmsman comes on board. Mueller himself is an experienced hand in that respect. When he joined Sabena in 1999 as CEO, he axed several jobs as a way to keep the Belgian airline competitive, but unfortunately it went into bankruptcy in 2001.

Mueller was best known for his success at turning around loss-making Aer Lingus when he was appointed CEO of the Irish airline in 2009. He implemented a slew of cost cutting measures that include axing more than 600 jobs. After six years, he left Aer Lingus to join MAS, which some observers consider to be a bigger challenge.

Courtesy Irish Echo

Courtesy Irish Echo

The Malaysian flag carrier has been battling years of financial losses, and it suffered two disastrous airliner incidents last year – the disappearance of MH370 on Match 8 with 239 people on board followed two months later by the shooting down of MH17 over Ukraine, killing all 298 passengers and crew. Added to that, Mueller’s appointment was not one that was politically acceptable in all quarters, including some local businesses. Former Prime Minister of Malaysia, Mahatir bin Mohamad, for one considered it an insult to Malaysians and had reportedly said: “I am worried, if we do not believe in ourselves, one day when we need a prime minister we can get a white man because he is smarter than us.”

However, it being a business appointment, the political invective loaded with sarcasm is unlikely to cost Mueller any sleep. It was not directed personally at him, just so he is an outsider, being the first foreigner to head the Malaysian state-owned company. The test, as he might say, is in the pudding.

On the industrial front, one may also consider Mueller fortunate to have been equipped with the experience of dealing with rather powerful unions at Sabena and Aer Lingus, that he should therefore be well prepared for similar tussles at MAS. In an interview with Cambridge University’s business school, talking about his experience at restructuring a company, he recounted: “The first year of a restructuring is really like a war situation.” For all the angst expressed by affected workers and sympathizers, Mueller is likely to find a more congenial field compared with his previous encounters.

But that does not mean he has an easy plate. In the same Cambridge interview, Mueller said: “My experience is it’s very difficult to create a winning team from existing management.” The issue is more than just trimming bloating staff numbers down the staff ranks. He explained: “There’s nowhere more obfuscation than in the boardroom at the beginning of a turnaround.” Every CEO bent on change knows getting the support at the top and getting them to fly in the same direction are critical in herding the flock whose compliance will then follow naturally.

It is to be expected that Mueller will likely replicate some of the things he did for Aer Lingus at MAS. These include reducing capacity and eliminating unprofitable services. The new MAS will cut back on international routes, and focus on domestic and regional routes. This is not new as the airline has already been abandoning or suspending unprofitable routes, both long haul and regional as it continues to reel from the throes of the global financial crisis. Downsizing will make it more manageable to reconstruct on strengths, then expand and grow on a firm footing from there. Mueller said MAS will maintain its presence internationally through alliances and partnerships.

As an outsider, Mueller is not weighed down by old baggage and biases, even as national pride may be hurt since MAS is the country’s flag carrier and a national icon. He is therefore in a better position to inject fresh ideas and make unprecedented moves although it would be foolhardy of him not to take into cognisance potentially political and cultural sensitivity of some of the measures he may put in place. Dealing with domestic issues even for a local leader may demand more delicate handling than international ones.

There is a stark similarity between Aer Lingus and MAS where the competition is concerned. For the former, there is Ryanair, and for the latter, AirAsia, the rivals in both cases being budget carriers. Mueller has been credited for staying attempts to takeover Aer Lingus by Ryanair, which is Europe’s largest budget carrier and the Irish national airline’s single biggest stakeholder. Regionally MAS has been facing stiff competition from AirAsia, which is Asia’s largest budget carrier. Shifting the focus from international to regional competition, the new and smaller Malaysian national airline’s rivalry with AirAsia can only magnify as it intensifies. It is to be seen if the restructuring will take its toll on two subsidiary budget airlines, namely MASwings and Firefly.

Yet it cannot be assumed that the task for Mueller at MAS is a carbon copy of that at Aer Lingus. In his own words, Mueller described his challenge at MAS as a “hard reset” for the airline. He talked about “a new start in markets where our brand is tarnished” but was careful not to disparage the old name as “we want to be as well-known as the old carrier.” Yet he has made it clear that “the travelling public needs to understand we are not just MAS in a new disguise but truly a start-up.”

It looks like an ambitious overhaul in not so many words, and the “orang puteh” (white man) is working fast to prove the battle is his to win. A month into his job, Mueller is expected to unfold his program, or at least some early measures, by the end of the month. It will add to his credit that he, as a foreigner, when finally succeeding in bringing MAS back into the black, also manages to rebrand the airline that he has promised will still be “Malaysian at heart”.

This article was first published in Aspire Aviation.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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