Malaysia Airlines can’t make up its mind

Courtesy Reuters

While beleaguered Malaysia Airlines (MAS) gets deeper into the red and is looking for a strategic partner to prop it up, it seems not to be in any real hurry to accept any of the proposals it is said to have received. It has been reported that MAS needs up to RM21 billion (USD5.17 billion) to stay afloat until 2025.

A new slate of potential white knights made known recently, one different from the initial list, include AirAsia Group Berhad, Japan Airlines, Air France-KLM and Malindo Airways. No mention was made of four other local companies and Qatar Airways which subsequently clarified that it was not considering equity participation but interested in helping MAS get back on its feet. The proposals by the local companies apparently didn’t sell as they had limited or no aviation experience.

What has since changed? AirAsia which had previously insisted it was not interested has now emerged as a front-runner, which industry observers had at the onset said would be the best bet of success for the ailing MAS. AirAsia chief Tony Fernandes had proposed a merger to include budget long-haul AirAsia X. It is however understandable that the powers that be may not be too enthusiastic about being taken over by a rival compatriot which is a budget carrier and which has grown bigger than the national flag carrier.

Japan Airlines seems lukewarm about its interest which has been fanned by a commercial partnership with MAS to open access to each other’s destinations in their respective countries. The Japanese carrier continues to maintain its interest in expanding that partnership but steers clear of a firm potential investment in MAS. If at all it is interested, it is believed the stake would be small.

Air France-KLM on the other hand is said to have proposed a 49-percent take-up. However, that too has become an “iffy” judging by a statement released by the Euorpean conglomerate: “Air France-KLM had previously been in contact with Malaysia Airlines’ shareholders, but at this stage Air France-KLM is not a current party to the sales process of Malaysia Airlines.”

Malindo Airways is unlikely to be able to stand up against AirAsia in the run-in.

Why is MAS hesitant or is it pussy-footing, hoping for a better deal? Over time, the interest has shifted. It seems there is division within the company. The proposals by foreign companies are said to be better than those by local contenders, but there is reservation about selling out to an alien entity.

However, the saga holds a mystery card. Malaysian prime minister Dr Mahatir Mohamad said “there are about five proposals but of course some of them are just no go.” The fifth proposal is not known. Is it a “no go” or could this be the surprise choice, and who could it be?

Previous speculation had thrown up names like British Airways which seems more interested in expanding its stronghold in Europe while preferring a wider commercial arrangement elsewhere.

More recently there was suggestion that Singapore Airlines might be interested to work with MAS to support each other in the region and world-wide. But the deep rivalry between the close neighbours which goes back a long way to when they split and became competitors is not something that is easily forgotten.

Apparently, Dr Mahatir was said to be unhappy with how the ongoing evaluation was proceeding, so it may not be long when MAS finally accepts the hand of one of the suitors, whether already named or yet to be known.

What’s behind the partnership between Singapore Airlines and Malaysia Airlines?

This article was published in Today on 26 November 2019

https://www.todayonline.com/commentary/whats-behind-partnership-between-singapore-airlines-and-malaysia-airlines

Malaysia Airlines: Waiting for the white knight

Courtesy Reuters

IN July, there was much excitement about Qatar Airways’ interest in acquiring Malaysia Airlines (MAS), being one of four proposals received by the ailing flag carrier of Malaysia. It seems that has as quickly dissipated.

According to sources, apparently only one proposal from local investors Jentayu Danaraksha Sdn Bhd (JDSB) is left on the table. The consulting firm is fronted by former MAS chief executive officer Tan Sri Abdul Azia who retired in 1991.

But MAS’ owner Khazanah does not seem to favour JDSB which in 2014 said it was keen to revive the carrier but was snubbed.

There has been ambiguity as to whether MAS prefers a local or foreign investor. But there is now new excitement about the possibility that Japan Airlines (JAL) might be that white knight. Much has been hyped about JAL being a good fit for MAS since it had only not too long ago pulled through a difficult time of near collapse and would therefore know what’s needed to rescue MAS.

JAL has earlier tied up with MAS to operate joint flights between Japan and Malaysia, and it looks like a natural step forward to take on a bigger role. Besides, both airlines belong to the OneWorld Alliance (and so too Qatar Airways).

And while the powers that be at Khazanah are gushing with excitement about that prospect, JAL president Yuji Asaka said it was too early to consider an equity investment in MAS but future discussions were possible.

Extending its reach internationally may be a strategy for JAL in competing with rival All Nippon Airways. So far it has partnered with airlines which include China Eastern Airlines, Hawaiian Airlines and Garuda Indonesia in commercial agreements. But equity acquisition is so far not on the card. So it may be a long road, so patience may just be what MAS needs right now.

Will Qatar Airways be Malaysia Airlines’ white knight?

Some three to four months after Malaysian prime minister Mahatir Mohamad said ailing Malaysia Airlines (MAS) may shut down or be sold, he revealed he had received four proposals to take over the national flag carrier.

The first known interest came from former AirAsia non-executive chairman Pahamin Ab Rajab and five partners, whose consortium is looking at scooping up a 49 per cent stake in MAS. Whether AirAsia is part of the consortium is not clear, but the budget carrier’s chief Tony Fernandes had said he was not interested as it would be a mistake for a low-cost operator to want to go full-service. (See Can AirAsia save Malaysia Airlines, 8 July 2019)

Qatar Airways now emerged as the second prospective white knight come to the rescue of MAS following a meeting between Dr Mahatir and Qatar Emir Sheikh Tamin Hamad al-Thani. Both Qatar and MAS belong to the OneWorld alliance. At least that’s common ground for a start, unless geopolitical problems Qatar faces with its neighbours that lead to its isolation in the region stand in the way.

But, of course, no doubt Qatar has the funds to shore up the loss-making MAS. There are good competitive reasons for doing so. The tie-up will certainly boost Qatar’s standing in Southeast Asia and the extended Asian region. Dr Mahatir has recognised that MAS suffers from fierce competition, and Qatar’s aggressive strategy in the international arena may well also push the Malaysian carrier in the same direction.

The acquisition will complement Qatar’s investment in Europe, where it is already a major shareholder of the International Airlines Group (IAG) which owns British Airways, Iberia, Vueling and Aer Lingus. With a share of 20.01 per cent, it s IAG’s largest single stakeholder.

It is interesting that of the four proposals received by MAS, Qatar is the only foreign company. It is not known if the other proposals are from industry players apart from the suggestion that Mr Pahamin had an aviation link in a non-executive capacity. That probably explains how many industry experts think MAS’ best bet is AirAsia, once a carrier heavily indebted and now Asia’s leading budget operator.

Qatar’s credentials as the world’s best airline voted by Skytrax respondents are impressive, but national pride to keep the flag carrier in local hands may present a hurdle. Yet one only has to look at Swiss International Air Lines now owned by the Lufthansa Group and the merger between Air France and KLM to appreciate how in business, the desire to survive will dictate the course. Already Dr Mahatir has assured his people MAS will retain its name.

Can AirAsia save Malaysia Airlines?

Courtesy Reuters

Back in March, AirAsia chief Tony Fernandes said he was not keen on acquiring Malaysia Airlines (MAS).

This came amidst speculation of a likely scenario when Malaysian Prime Minister Mahatir Mohamad mulled over the future of the beleaguered flag carrier, suggesting it might be better off sold if not downsized or expanded as the case may be with a change of management.

Dr Mahatir said: “Although we hired foreign management, MAS still faced losses. Therefore, one of the options is to sell.”

Four turnaround initiatives without success had apparently cost the government MYR250 billion (USD 6.05 billion).

Recent events have led to renewed speculation of AirAsia’s interest. Former AirAsia Group Bhd non-executive chairman Pahamin Rajab is said to have met Dr Mahatir. However, it might well point to Mr Pahamin’s personal interest eyeing the top job at Malaysia Airlines following the resignation of Tan Sri Mohammed Nor Md Yusof as chairman.

But if the acquisition does come about, it would be an interesting case of how a budget carrier came to assimilate a larger national carrier. AirAsia, once itself heavily indebted, had become Asia’s leading budget carrier.

There are clear benefits of such a merger. The two carriers can complement their networks and not compete as rivals on the same routes given AirAsia’s ambition to expand into the long-haul market, unless the products differ substantially in their make-up. This can be modelled after the likes of Singapore Airlines-Scoot and Qantas-Jetstar complement.

The execution is key. The industry has seen one too many examples of assimilation by a legacy carrier of a low-cost operator. For AirAsia, the big question must be one of how its operating culture will mesh with that of MAS, noting in particular that its success lies in the austere budget model although this does not imply it is not inclined to be service-bias.

One can’t help but wonder how and why MAS has failed to change in spite of earlier initiatives at restructuring, so much said about cost-cutting and perhaps not enough focus on the operating culture. So can AirAsia work the magic?

But, of course, only if Mr Fernandes wanted it. He had said: “For low-cost carriers to go full-service… is a mistake.” He had also called Malaysia Airlines “old-fashioned”. For him, the priority is to transform AirAsia into a “travel technology company”. In his words, to be “more than just an airline”.

The real question then is: Is MAS ready for the transformation?

Can Malaysia Airlines do a Swiss turnaround?

No lesser a person than Malaysia’s Prime Minister Dr Mahathir Mohamad had suggested a review of the country’s national airline to decide whether “we should shut it down or we should sell it off or we should refinance it.”

Courtesy REUTERS/Edgar Su

The loss-making Malaysia Airlines (MAS) has long been a subject of several reviews. Two fatal incidents in 2014 – the disappearance of flight MH370 bound for Beijing from Kuala Lumpur and the shooting down of flight MH17 over Ukraine – had not made it easy for the carrier to successfully execute a three-year turnaround program following privatization.

Malaysia made a net loss of RM812million (US200 million) in 2017. The airline said 2019 closed “on a marginally lower loss compared to a year ago.”

Dr Mahathir had said that although MAS hired foreigners to manage the carrier, it was still losing money.

Christoph Mueller, known to be a “turnaround” veteran, was appointed CEO in 2015, moving from Aer Lingus. But his term was shortlived, leaving in 2016. Slashing 6,000 jobs – a third of the workforce – seemed to be a flash in the pan. The next foreign CEO, Peter Bellew who moved from Ryanair, resigned suddenly less than a year in the job.

The problem seems deep-seated. National pride aside, Dr Mahathir had suggested that one way to save the airline was to sell it.

Apparently the airline has since received offers from both local and foreign parties.

Malaysia may look at the new Swiss International Air Lines (commonly known as Swiss) which rose from the ashes from the former Swissair that went into bankruptcy in 2002. It was a painful transition as the new airline continued to make losses until 2006 following the Lufthansa Group’s acquisition of a minority stake in 2005. Two years later, Lufthansa finalized the takeover of Swiss.

So much again about national pride and not selling a national icon for sentimental reasons. That is understandable. Is politics standing in its way of a recovery? Is the airline carrying old baggages that are difficult to unload? A number of industry watchers have suggested that MAS look to the example of its successful close rival Singapore Airlines which is said to be commercially driven before all other considerations.

Is Malaysia Airlines now a budget long-haul carrier?

Courtesy GETTY Images

Courtesy GETTY Images

IT is baffling how Malaysia Airlines (MAS) gets entangled in the PR mess when it decided to ban checked baggage on its flights from Kuala Lumpur to Europe. Economy class passengers were allowed only one cabin bag of up to 7 kg and first/business class passengers double that allowance.

MAS cited “strong headwinds” as the reason.

Public reaction pointed to the ludicrousness of the decision. Considering that such flights are long-hauls and the northern winter, it was an affront verging on what some travellers would consider as unreasonable.

Apparently, for safety reasons MAS is taking a longer air route to reach European destinations, having suffered a fatal loss when one of its planes was shot down over war-torn Ukraine in July last year. Taking the longer route means using more fuel, so that would increase operating costs.

Has MAS become a budget long-haul, as it undergoes massive restructuring under the leadership of ex-Aer Lingus chief Christoph Mueller?

Although MAS reverted the ill-conceived decision after two days of negative public reaction, the damage has been done. Didn’t Mr Mueller see what was coming?