And the Winner Is?


On Aug 9, MAS and AirAsia had entered into a collaboration agreement to establish a framework to explore the possibilities of mutual co-operation. With that Tune Air Sdn Bhd, jointly owned by Tan Sri Tony Fernandes, Datuk Kamarudin Meranun and Datuk Aziz Bakar, gets 20 per cent share of the national airline. Many have expressed their fears that the merger might lead to less competition and higher airfares to consumers.

On the surface, it can appear as if Tony Fernandes is the winner of this development since AirAsia is directly competing with MAS. During the times when MAS was in the red, AirAsia was reaping profits.

Will the share swap enable MAS to rise again as a premium airline? It is common knowledge that MAS has been in the red for the past few quarters. Was it necessary for Putrajaya to intervene to help MAS? In 2002, BinaFikir consultancy, then led by Tan Sri Azman Mokhtar, (currently managing director of Khazanah Nasional Berhad, MAS’s ultimate main shareholder) had its books cleaned up in 2002 under the wide asset unbundling (WAU) exercise.

Since that WAU exercise, MAS had two rights issues, raking in RM1.6 billion in 2007 and RM2.67 billion in 2010 to fund its operations and fleet purchases.

In reality, there was a turnaround from 2006-2008. In December 2006, Datuk Seri Idris Jala and his management team joined MAS and took a few drastic measures including:

  • the sale of the iconic MAS building in the heart of Kuala Lumpur
  • the sale of the Four Seasons hotel in Langkawi
  • what about the London property?

Bear in mind that at that time, MAS  had little other assets to sell. Earlier in 2003, it had already sold all its aircraft to Penerbangan Malaysia Berhad (PMB) under the widespread asset unbundling (WAU) exercise.

If not for that move, MAS would have had cash flow problems. MAS at that time had little other assets to sell, having sold all its aircraft much earlier in 2003 to Penerbangan Malaysia Berhad (PMB) under the widespread asset unbundling (WAU) exercise — way before Datuk Seri Idris came into the picture.

Eventually, the share price of MAS improved and some sang glorious songs praising Idris for helping MAS to turnaround.

The 2004/2005 MAS annual report said:

Malaysia Airlines’ total revenue in 2004/2005 improved by RM2.6 billion to RM11.4
billion due primarily to the record 24 per cent increase in international passenger
traffic growth of 1.7 million passengers and a 21 per cent increase in cargo tonnage flown. International passenger revenue grew by 29 per cent to RM7.9 billion while cargo revenue increased by 44 per cent to RM2.4 billion.

These statistics differ from that of Wikipedia:

1. Prior to the Asian Financial Crisis in 1997, the airline suffered losses of as much as RM 260 million after earning a record-breaking RM319 million profit in the financial year 1996/1997. The airline then introduced measures to bring its P&L back into the black. For the financial year 1999/2000, the airline cut its losses from RM700 million in the year 1998/1999 to RM259 million. However, the airline plunged into further losses in the following year, amounting to RM417 million in FY2000/2001 and RM836 million in FY2001/2002. With these losses, the airline cut many unprofitable routes, such as Brussels, Darwin, Honolulu, Madrid, Munich and Vancouver. The airline recovered from its losses in the year 2002/2003. It achieved its then-highest profit in the year 2003/2004, totaling RM461 million.

2. In 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases.

A former MAS staff Song Eu Jun had this to say: