PETALING JAYA: Minister in the Prime Minister’s Department Tan Sri Idris Jala believes Malaysian Airline System Bhd (MAS) has a future — if it gets over the current turbulence.
He said the MAS management should religiously follow the business transformation plan 2 (BTP2), which was launched during his tenure as MAS chief executive officer (CEO) between 2005 and 2008.
The BTP2 consists of detailed, step-by-step processes for the airline to stay afloat.
“When I was with MAS, the question was what we should do for its future. [In BTP2] I predicted that by 2012, the worst-case scenario was for MAS to lose between RM650 million and RM1 billion or more, and that is what happened.
“If we could transform or did something extraordinary and followed all the steps [listed in BTP2], I predicted in turn that MAS could make up to RM1.5 billion profit,” Idris said as a panellist at the Emerging Leaders in the 21st Century’s session at the Asia Leadership Conference 2014 here yesterday.
The one-day conference, themed Leadership and Innovation in the 21st Century, was organised by the Sunway Education Group, the Jeffrey Cheah Foundation, the Centre for Asia Leadership Initiatives and Asia Leadership Trek with the support of the Harvard University Asia Centre.
For the record, the BTP2 initiative was to transform MAS into a five-star value carrier by embracing a clear five-step process, which included maintaining a five-star service, reducing costs, offering competitive pricing and growing the network by introducing new, demand-based routes.
Idris joined MAS as CEO on Sept 1, 2005 at a time when the national carrier had chalked up a loss of RM1.3 billion. But during his tenure MAS made at least RM851 million in net profit in just two years.
“When I joined MAS, we only had money to last 2½ months. We did not have money to pay salaries, nor money for fuel.
“Some might remember that we proceeded to sell our headquarters building for RM130 million to give us enough cash to operate for 20 days,” he said, recalling the time when MAS rose from its lowest ebb.
Idris left in 2009 to join the federal cabinet.
Meanwhile, in a separate interview, former international trade and industry minister Tan Sri Rafidah Aziz told Bernama’s Azlee Nor Mahmud that this would be the right time to restrategise, reorganise and restructure MAS — via its delisting and complete takeover of the ailing carrier by Khazanah Nasional Bhd.
However, she cautioned against expectations for Khazanah to return MAS to profitability quickly after its restructuring, given the vagaries in the international marketplace and stiff competition in the industry.
She said the objective is to create a leaner, structurally sound entity that commensurates with the expectations of an industry that is fraught with stiff competition.
Rafidah said rather than being tied down to public shareholders, an advantage for the government’s investment arm owning 100% of MAS is that it would have a free hand in turning around MAS in a comprehensive, intensive and extensive manner.
Khazanah is expected to pay 27 sen a share or RM1.38 billion in total to buy the remaining 30.6% stake it does not own in MAS.
Rafidah, who is AirAsia X Bhd chairman, said the plan to delist and buy back MAS shares is a big and important first step.
Its restructuring should be done in a “very comprehensive manner” so that it can be consolidated into an entity that serves not only Malaysians but the world.
However, the financial turnaround is not guaranteed to be foolproof because the airline industry is very competitive as proven by low-cost carriers penetrating the industry in a big way, she said.
This is made worse by cost uncertainty brought about by escalating jet fuel costs.
MAS has reported a net loss of RM433 million for the first quarter of this year, 59% more than the RM279 million losses reported in the same period a year ago.
Rafidah said areas that needed to be looked at to resuscitate MAS include the company’s own financial structure, its organisational set-up as well as its business strategies.
On MAS undertaking low-cost airline operations, she said: “That is not good for MAS, as you can leave the low-cost flying to low-cost operators. MAS should stick to the legacy airline model and relook at all the businesses it is undertaking, apart from its core business of flying to improve profitability.”
Turning to the MAS unions, Rafidah said there is nothing wrong with them but said: “It is so important that the unions accept whatever changes that have to be made [towards profitability] as it is pivotal.” — Bernama
This article first appeared in The Edge Financial Daily, on August 18, 2014.
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