MAS Reboot

Starbiz had a decent article by K Sidhu today on where do MAS go from here, my comments in colour. Please note the effort to put in some soundtrack to the commentary:   

".. moving forward for a sustainable business model. Bankruptcy is an easy route, but contrary to popular belief, doing that will not change MAS’ rights to fly to destinations, as the right of routes lies with the Government. It’s also the prerogative of the Government as to who gets these rights.

The tougher job is in dealing with existing contracts, some of which are non-negotiable for several reasons. (Bankruptcy or a privatisation are the first steps to take. The government will want to "force pressure" on certain parties to renegotiate certain contracts. That is paramount BEFORE Tony Fernandes will even sit at the same table. AAX will probably not partake in any scheme whereby MAS is still burdened by staffing cuts restriction and some unreasonable contracts).

The corporate future of MAS seems to be attracting a flurry of speculation and opinions. The week began with talks of delisting, but by mid-week, there was chatter that a merger with AirAsia X was the best way to save the airline. But this is not viable, as both are different airlines and AirAsia X is also loss-making. Any merger would only make it worse for MAS. (This is where I disagree with Sidhu. I strongly believe AAX would be an excellent fit. Think of it as a code sharing of the intimate kind, where they have same owners - for this to work, Khazanah and Tony must hold shares in newco holding controlling stake in AAX and 100% of MAS. What MAS is getting is management structure and discipline from AAX, The consolidation of purchasing and aircraft maintenance could yield benefits. AAX's link up with Rakuten is amazing to me. The new launchpad will elevate AAX into the much desired routes to San Francisco and New York. Not to mention possible links from Tokyo to bigger domestic destination , if permissible. AAX's work is cut by half with the tie up with Rakuten, my most admired Japanese company. The status and reach of Rakuten's many online and social platforms will make for ease nich marketing and channels flow through. MAS will stay full service and maintain a 20% premium to AAX. They may even fly both planes if same routes have sufficient traffic. Management by yields will determine whether to just have one plane. The key is code sharing with MAS, this has to be worked out. Maybe they could resolve it via a 20% fee if an AAX client move to MAS flight and vice versa. This to me is the best viable option on the table.)

Major shareholder Khazanah Nasional Bhd, which has a 69.4% equity in MAS, had denied any possible merger with the long-haul, low-cost carrier yesterday.

But there are other theories circulating as well – from the possibility of Petroliam Nasional Bhd emerging as a white knight to rescue MAS and a group of young turks being courted to take over the airline to an exco team of former MAS senior executives coming together to help the airline until it is fully restructured.

Amidst all this, the vociferous union – Malaysia Airlines System Employees Union – which claims to represent 13,500 employees, wants the top management of MAS out. Such a scenario is making many MAS employees jittery. Many fear that they will lose their jobs.

Apparently, the management of MAS has received the green light for a new business plan, which entails some drastic steps to to turn the airline around. They may involve job cuts of up to 30% of MAS’ current workforce of 19,800 employees and a salary reduction of 30%. If the plan is approved, who will decide which employee should leave and who should stay? (I don't quite understand why the union would stand in the way of a restructuring. You know very well it can no longer operate under such a ladened structure. What the union should be going for, in the best interest of their union members and the country, is arrive at a decent VSS for at least 30%. I think if VSS scheme is agreeable, the selection of and attrition will be manageable by AAX manegement. It also makes it less imponderable if it was executed by MAS own management. Nobody owes anyone a living. You do not get to work for your entire life in a job even though you may like it very much. There should be no guarantees in employment. Ask any remisier who joined in the 90s. The industry tanked for them with internet broking and variable rates, so... cry and whine? No, you move on, you did not forsee the problems within your company and industry consolidation. You did not move on. VSS is the best option.)

Currently, the critical areas in MAS are under-staffed and there is a lack of expertise in some areas. An exercise to trim the workforce in a highly-skilled industry may lead to more problems for the airline than it already has. (Err... whatever critical areas that MAS lack CAN & WILL BE EASILY COVERED FROM AAX side, I think. Don't you?
There should a special office called "shared services" between the two to cut out duplication and improve integration efforts plus savings.)

If indeed shedding the workforce is the plan to revive MAS, then Khazanah does not need six to 12 months to come up with a plan for the national carrier.

In times of crises, the first thing companies tend to do is trim the workforce. This is a common phenomenon. But in the case of MAS, will job cuts solve its problems?

The airline has many issues besides manpower woes. The critical areas being a change in perception and ramping up sales.

Also, has it done enough to stop the leakages in the supply chain, or is it still paying above-market rates for its contracts? If so, why are these contracts not being renegotiated immediately?

There are some talented and dedicated people in the company. They have stuck with the airline through the good and bad times, to the extent of foregoing their increments and bonuses. 

Surely, there must be a better solution to resolve their predicament, rather than implementing measures that would force them to leave the company in big numbers. After all, they are blameless as far as those untoward incidents as concerned not only now but in the past too."