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Saturday, September 6, 2014

MAS: The mother of corporate restructurings

MAS: The mother of corporate restructurings
IT is aptly billed as the mother of all restructurings in the sense that corporate Malaysia has not seen anything quite like it.
The five-year plan to return Malaysia Airlines (MAS) to profitability and sustainability comes with a price tag of RM6 billion which Khazanah Nasional Bhd will pump in under a 12-point recovery plan unveiled on Friday.
This massive and absolutely challenging exercise has been keenly anticipated by the market as well as the public and in a sense to bring some relief or a closure of its own to the bad news that has been plaguing the national airline for most of this year.
Basically it entails the creation of a new company (NewCo) to accommodate a revamped MAS, cutting the workforce by 30% or about 6,000 employees so that it will end up with the right size of 14,000 and for the airline to revisit its work practices and contracts.
For the downsizing, two companies have agreed with Khazanah, the government's strategic investment fund which owns almost 70% of MAS, to absorb over half of the 6,000 employees to be laid off and who will be retrained and reskilled.
Under the plan that will be keenly watched, MAS will be delisted by the year-end but is expected to be relisted within three to five years to enable Khazanah to recover its capital injection, which its managing director Tan Sri Azman Mokhtar insists is not a bailout but an investment that comes with strict conditions.
And concerns among many that the airline might change its name were put to rest as the new company will retain the iconic Malaysia Airlines that's so recognisable globally.
There has been tremendous cheer and applause greeting the MAS overhaul plan as well as the political will at the highest level, something that cannot always be taken for granted but this time around, it's very obvious.
Prime Minister Datuk Seri Najib Abdul Razak is more than confident that Khazanah which is in charge of the revamping will recover "in full and more" its investment but expects the targets to take longer than the three years set by Khazanah.
"God willing, in that three years, we will see a positive turnaround from MAS," he said while reassuring the workers to be laid off that their welfare will be considered a priority and the rightsizing will be done in a humane and compassionate manner.
What I consider as one of the best news is the support expressed this time around by the powerful MAS Employees Union (Maseu), the biggest of the airline's unions and which has been seen in the past as bent on blocking or stalling previous turnaround plans.
For example, it was Maseu's strong opposition to the share swap between MAS and AirAsia in 2011 that led to the mega deal to be aborted just eight months later without being given time to prove its worth.
I must add here that there wasn't a strong political will to back up this particular deal then as Maseu president Alias Aziz was reported to have met Najib three times to tell him that the share swap was bad for MAS before it unravelled.
Alias told me over the weekend that the union is all for the plan and will play its role in ensuring its successful implementation.
Its only concern is to ensure that the 6,000 employees expected to leave MAS will be gainfully rehired at their new companies and "not out of jobs after just two or three years".
"We are giving our support to the plan because we have confidence in the leadership of the prime minister in this regard and we see him as having a genuine interest in our welfare," said Alias, who has been heading Maseu for over 20 years.
As for the many contracts that MAS had entered into and which will be reviewed, Alias said the union had voiced its strong views on some of them in the past but such views had been largely ignored. He cited the 25-year catering contract which many in the market have described as bloated. He said Maseu wanted it to be majority-owned by MAS but which ended up in the airline having only a 30% stake.
To add value to the Khazanah turnaround plan, I spoke to an internationally-acclaimed top airline industry executive for his views for some tips moving forward for MAS.
His views are exclusive for readers of this column and wherever doable, let's hope it will help our corporate surgeons who will operate on MAS and nurse it out of its sickbed.
On top of his tips-list is: "We must know the market. Don't do all. Will die."
He said many airlines lose so much money because they try to do everything.
"MAS is premium, hence sell and price to that market and have only planes or number of planes for the market. For example, the Ritz Carlton hotel chain doesn't have budget rooms."
He also said airlines cannot have too many business plans or plane types adding that "If I were MAS, I would only have B737 and Airbus 330 and 380 aircraft.
And it's equally important for MAS to get out of Europe, except flying only to London and Paris while using its global connectivity via MAS' Oneworld Alliance and other code-share partners to fly the other European routes.
The executive also suggested that MAS use the 737 planes to operate a great business class and premium economy service but to destinations of only up to six hours as well as to get out of the leisure routes.
And he said it's also more viable for MAS to get out of the engineering and cargo business.
Time will tell if these and other plans laid out by Khazanah will bring MAS out of its prolonged air turbulence and see the light at the end of a long tunnel especially given the past year having been made more traumatic by the MH370 and MH17 tragedies. -Sundaily

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