15 March 2019
ANALYSTS and politicians cannot just argue to shut down or sell our Malaysia Airlines based on its accumulated loss of RM2.5 billion without acknowledging the flawed execution of the turnaround plan. Post-restructure, we still refer to our national carrier as MAS instead of MAB, showing our deep love for our Malaysia Airlines.
Personally, I have only flown on Malaysia Airlines and its One World Alliances for all my professional and personal trips throughout my lifetime, but only twice on AirAsia. I am not writing this article to protect my Enrich points or free flights, but to protect the 14,000 personnel in our national carrier that ensure my dignity by timely arrival at my clients’ countries and safe return home to my loved ones.
Malaysia Airlines’ patronage
MAB inherited 30% stakes in Brahim’s SATS Food Services Sdn Bhd from MAS. The remaining 70% is held by Brahim’s SATS Investment Holdings Sdn Bhd, a subsidiary of Brahim’s Holdings Bhd. Before restructure, Brahim’s Holdings Bhd held 25 years’ concession to supply in-flight catering for 25 years ending in 2028. Brahim’s Holdings Bhd negotiated with Khazanah to honour the regressive one-sided concession after Malaysia Airlines’ restructure.
The “new deal” expires on 2020 with an option to extend for another five years. Technically, the concession is effectively three years shorter and 25% cheaper than the original concession. More than 50% of all the meals lifted by Brahim’s SATS Food Services go to the national carrier alone. This locked-in contract shuts the door for the national carrier from utilising an open tender for cost reduction. These locked-in contracts are common within the national carrier, but violates Khazanah’s 12-point initiative for Malaysia Airlines.
Losing focus by competing with AirAsia
Malaysia Airlines has a market share of 20.6% for international traffic and 32.3% of domestic traffic in KLIA/klia2 and an estimated 35% of total traffic in other airports in Malaysia. AirAsia has not eaten into Malaysia Airlines’ market share, but has made airline travel cheaper for lower income Malaysians. AirAsia effectively brought more new travelers with only a small number transitioning from Malaysia Airlines to AirAsia.
The AirAsia model profits by slashing all the hospitality and premiums offered by Malaysia Airlines that are unnecessary for the budget-conscious or short distance travels. Malaysia Airlines was supposed to cater to premium, corporate, and long-distance travels. The restructuring effort saw Malaysia Airlines reducing long-distance flights to focus on Asean, Asia-Pacific, and domestic, competing for budget-conscious travelers, which is a terrible idea.
Malaysia Airlines remain one of the favorite choices for travelers from Australians, New Zealand, South Asia, and Western Europe. While the MH370 and MH17 incidents dented Malaysia Airlines’ image, reducing flights was knee-jerk reaction. The perception has evaporated, and Malaysia Airlines should expand its international network. I agree with former Malaysia Airlines CEO Abdul Aziz Rahman that Malaysia Airlines has lost its purpose, just because Malaysia Airlines tried to compete with AirAsia.
Bring unions into the board of directors
When Malaysia Airlines failed spectacularly in 2015 during low fuel prices, many analysts were quick to blame staff perks. This perception set the stage to lay off nearly thousands of people who dedicated their lives for decades to build Malaysia Airlines. Most decisions involving the operation of Malaysian Airlines never involved the staff. The workers remain the biggest stakeholders without decision-making power within the national carrier’s management.
Khazanah must allocate at least 1/3 of the board of directors to the unions representing the workers in Malaysia Airlines. The flight attendants, pilots, flight technicians, and engineers must be represented in the board of directors. History have showed us how foreign educated executives appointed through political patronage with no special bonding killed Malaysia Airlines. We cannot expect different result from same action. The workers will surely make their decisions as it is their bread and butter.
While it is important for Malaysia Airlines to be financially sustainable, but judging from Malaysia Airlines’ loss purely by numbers is unjustified as political patronage and loss of focus has been left unaddressed. Without addressing these fundamental issues, Malaysia Airlines will remain the biggest corporate blunder after 1MDB. Malaysians are ready to fund our national carrier’s recovery plan to protect jobs, not the political patronage. – March 15, 2019.
* Sharan Raj is the vice youth chief of Parti Sosialis Malaysia.