The MAS-AA deal once again-2

Study the 3 points:-

1.         In an attempt to bolster the fortunes of the flag carrier, state asset manager Khazanah swapped 20.5 per cent of MAS stock for a 10 per cent stake in Asia’s biggest budget carrier Air Asia on August 9. 

2.         The swap enabled Air Asia bosses kemo-sabe Tan Sri Tony Fernandes and his Tonto partner Datuk Seri Kamaruddin Meranun to sit on the MAS board and will ostensibly help turn it around.

3.         Shareholders of Air Asia will get one free MAS warrant for every 10 shares in the low-cost carrier while MAS shareholders will get one free Air Asia warrant for every 30 MAS shares.

What does ostensibly mean? The usage of the term suggests, we are not sure whether this one time music company executive( who didn’t know anything too about running airlines) and an accountant( also zilch at running airlines) can help out MAS or not?

If we are not sure then why were the two given the chance to own 20% of MAS? Because the two had the benefit of luck on their side- when they took over the bankrupted AIR ASIA, with no experience, they had support from people- powerful people. They took that opportunity and make a successful career; hence they deserve to be given the honor of helping out MAS. Plus perhaps the same powerful people are still behind them.

The deal is founded on several debatable assumptions.

(1) The skills and business culture suitable for a business like AA can be applied without any loss in transition into a setting like MAS.

(2) a lot  hinges on the business leadership skills of Tony Fernandes. 

What are we supposed to do then?

(1) Look for a suitable business culture and a management team that supports that culture 

(2) find the necessary leadership.

This deal has been hyped up beyond what it deserves. MAS is in a sorry state. In order to sell the deal, we can muster all the resources to make it out that this deal is of strategic importance and all that. It’s easy to do that- just assemble all the CFAs who work at the various investment banks, give them a spruced up writeup and they will all sing the virtues of this CCF.

But haven’t we read and heard the same things whenever MAS was about to embark on some similar programs? When Tajudin Ramli took over MAS, the CFAs wrote the same upbeat notes. When Jala was managing, it was the same. In the end, despite the Nobel prized standard analysis of overweight, market weight and underweight assessments, MAS went downhill too.

Running MAS it seems is no longer a question of applying the technicians’ skills. We are sure MAS wasn’t short on that. Dato Tengku Azmil was a trained top accountant from Australia. I heard he was cited for excellent academic achievements in Australia. He is no mincemeat. Plus, he would have a real technical team looking out for MAS. In the end, MAS incurred further losses and he had to be replaced.

Something must be wrong in our basic approach.  Khazanah with all its constellation of cerebral stars, accountants and MBA’s cannot figure out what is the appropriate business culture that’s suitable for MAS. It cannot find leadership for MAS. So it takes the easy way out. Call in the cavalry.  

So why are we paying the people at Khazanah astronomical salaries if they can’t handle MAS? This serves to fortify my argument that we are better off dismantling Khazanah and all it investments portfolio transferred to PNB. 

Why don’t we let Azman Mokhtar take some portfolio and see whether he can operate the business profitably?

Let’s clear off one other thing. This isn’t a race issue. If it is, then we would have quarreled at Air Asia’s phenomenal success. We won’t have cited negatively the collusion between Kencana and Sapura which will effectively create a second PETRONAS. We would not have questioned Sapura’s purchase of PNB’s UMW stakes in the late 1990s. The thing is, if it were another Bumi getting the deal in this MAS-AA- we will be writing the same thing too. Probably more vehemently because such a deal would suggest a now familiar modus operandi. Reserve all the goodies for selected bumiputeras.

Let’s suggest this to Khazanah. Find someone who is musically inclined, likes wine and women, a football and pool enthusiast, likes it so much that he wants to buy a football club, likes racing and fast cars because that reflects his libido, pair him up with an accountant- hey presto, Khazanah has the perfect recipe for MAS success.  Its the perfect case study material worthy of being assigned to a HBS class. 

Will that do? No? Then having TF and KM on board will not ostensibly help MAS.

So we are not sure whether the end game of Khazanah is really to help out MAS. Because if its serious, then having TF and KM owning up to 20% of MAS share isn’t the prerequisite to helping out MAS. Not necessary even to have the two on board.

What has happened since then? Don’t feign surprise. Yes I ask what has happened and what has been publicly said in the short span? 

The first thing dear Danny boy did was to spend money. So, all these years, MAS was losing money because people don’t know what MAS is. It’s now time to make MAS a brand name. MAS which is losing money and which does not need brand identification sponsors jersey for QPR. Having MAS name emblazoned across the QPR jersey will translate into greater awareness of MAS and make it profitable?

This is the problem when you put in place technically competent young punk but who is one dimensional in thinking do his thing on MAS. The first thing he thinks is football. After football pub-crawl.

The plan is to glorify the idea that MAS operates as a premier full fare airline doing the long haul routes. That will make the giving up less painful. The fact is, the long haul routes have not been profitable in the first place with the given business culture that has been infused in MAS. It’s going to bomb right from the start because the one factor that is killing MAS-its business culture that breeds the wrong kind of management thinking hasn’t been sorted out. That one factor has not been excised. It’s going to succumb.

It’s forced to give up the profitable regional routes which will be taken over by Air Asia.  You are going to force MAS give up its profitable business sector arguing urging us to believe that’s it’s good that way. MAS with its debilitating business culture and fucked up management can now compete in the premium market and somehow be successful? What kind of warped business reasoning is this?

You want us to believe that MAS has been unprofitable because it contains incompatible business units within it system and by forcing it to give up these, the same business culture and management practices that have bankrupted MAS will miraculously turn MAS into a profit making airline?

But wait Dr Pangloss- the circumcision is not completed yet. There’s still a lot of foreskin left. MAS has a LCC business unit right? - Yes that one named after the fly that emits its own natural LED? No problem, confine it to run to the routes which Air Asia didn’t want in the first place maybe to places like Tebedu, Pos Betong and other god-forsaken places requiring turbo propelled planes. Yes the planes that once confounded some people to curse how and why the hell some stupid engineers designed planes with fans outside when they should be inside in the first place. 

Sap sap sway ma…Form a new business unit called Sapphire that evokes some glitter in the name to take over profitable Firefly’s business. We don’t get any Nobel awards for guessing who will be the major stakeholders in Sapphire.

It’s already happening. Personal business agenda nurtured from a different business culture is already being applied to MAS. We can see the writings on the wall, but incompetence on the part of government regulators and the almost reverential tolerance and rationalization of rapacious greed all seemed to make this deal, an above board and personal deal. The deal is further supported by the nauseating analyses by CFAs. It’s all bull.

The 1-2-3- reasons above have been touted as the rationale for the MAS-AA deal. So ok, the deal has already been done. The idea is to allow someone who is an expert and successful in that industry take over the helm.  I say ‘person’- to avoid treating this as a race issue. 

We have had similar experience in the past. A person, a Malay was given control over MAS and when MAS business got mixed up with his own personal business interests, things went awfully awry. What happened when Tajudin Ramli helmed MAS hasn’t been clearly laid bare for the public to understand. The government has to buy back the shares from that person by absorbing the huge losses.

But this time it’s different, comes the protest. It’s rah rah Tony. He is successful man- surely he can do miracles to MAS. All the others are fucked up subsidy fed Bumis man. Non bumis can do better brother, tamby. This person is a terrific businessman with a proven track record in this industry.

The principle is the same- personal business interests get mixed up with the business interest of MAS. The presence of the same personal interests makes this deal inherently wrong. As a single largest shareholder, TF will be calling the shots as well as aligning and re-engineering the business, but never jeopardizing his own personal business at AA. Unless sometime in the future he has been promised, he can have his cake and eat it too.  The future of MAS therefore is dependent on the skills of TF and AA business model.

How then do you guarantee that MAS will be successful? You get the guarantee if MAS becomes a low cost carrier itself. Then that would only require the transfers of the business culture and personalized business acumen of TF which has worked wonderfully for AA to make MAS successful. Simple what? - graft the culture at AA onto MAS. 

But let us humor those who want to turn this deal into a race issue- we make it race issue simpliciter- since AA business is successful because Tony the non bumi is there, let MAS be taken over by him.Setuju?

At some point in time, you have already told everyone, you want MAS to operate as a premier full fare airline. So ask yourself, will the AA business culture and personalized business experience and acumen that make AA successful can and will  also be compatible to make MAS profitable as a premier airline?

You have two clashing cultures that would immediately make you suspect, MAS is already doomed from this deal.

What is it that you want to do with MAS? I thought we have gone through so many downsides when people with vested and personal interests get involve in MAS business. We are not disturbing Tony in his business of making money at Air Asia. He is rewarded for his acumen and skills in the business field he has chosen. That is his personal interest. He does it by the AA model.

Will he apply the same model on MAS? That would place MAS on collision course with AA and if AA is TF’s first love, how will he do justice in his role in MAS to assist our national airline become profitable?  If he does that because of patriotic reasons, then that would place him in direct conflict with his interests in AA.

He will therefore expected do several things. First ensure MAS will not compete with AA. So he says, off with Firefly because FF is in direct competition with AA.  That’s done. Next, take out MAS from competing with routes AA wants. So he counsels the government its best MAS concentrate as a premium full fare airline doing the long hauls.

Can the culture that makes AA successful as a LCC be applied to MAS so that it can succeed as full fare premium airline? You have a directly opposing culture capable of making a success out of a LCC but which will be impossible to produce success in a premier airline. Simply because MAS will need to operate on a different business culture and business regimentation.

AIR ASIA and the practitioner of its culture is the wrong model and person to lead MAS. This is not a question of opposing the deal because it gives a non-Malay benefit and profit. This is primarily an issue of doing the wrong thing to save MAS.

addendum: TG Azmel did not graduate from Australia. Instead he graduated from Cambridge U with a First. He is a BA(Cantab). A reminder to those UMNO politicians who like to parade their purchased degrees that a person who graduates from Cambridge has a Cantab and a person who is from Oxford has an Oxon. I know of an UMNO political operative who proudly writes B.A( university of oxford) and another University of Cambridge.