The MAS-AA deal once again-1

The MAS –AIR ASIA deal.

Will the ending of this secretive corporate deal be like this? - Air Asia buys over MAS? No, not even that- its finally give Tony what he has always wanted- own a piece of our national airline. That will make him a Prime Minister in the airline industry. 

Sometime in the future, the Khazanah people together with CIMB I suppose, will lend Tony’s Tune Air a lot of money to mop up the entire shares in Air Asia. Then Air Asia will be injected into a listed vehicle like MAS freeing Tune Air from debt. Tony’s share via Air Asia which will then be injected into MAS will be converted into substantial shareholding in our national carrier. Maybe from 20% to 40 pct.

So let’s go back to retrace our steps. Khazanah and Tony and CIMB takes us through the motion of making magic before the public eye. They are allowing Tony and company take up 20% of MAS shares under the pretext that Tony and that accountant Meranun can do their magic for MAS. Stupid MAS’s capitalization is at RM 5 billion while Air Asia stands at RM 11 billion. So how can MAS with a shotgun compete with Air Asia which has a rocket launcher? Air Asia is fully loaded firing live ammunition while MAS fires blanks.

Air Asia made more than RM 1 billion profit in 2010 while MAS incurred nightmarish losses despite Jala being there followed by Dato Tengku Azmil. Air Asia has more planes than MAS while MAS owns or leases boneshakers and call itself the airline with the golden service and touch. What a joke and this joke has been allowed to be uttered for too long by incompetent people at MAS and Khazanah.

Then with so many factors assisting Tony and Kamarudin, MAS does indeed make profit. Some bright people at Khazanah will advise the PM to suggest since Mr. TF is already the single largest shareholder of MAS and he has made profit why not merge Air Asia with MAS? By Jove, what a jolly good idea, I'd say.

How? Assist Tony take Air Asia private and then allow him to inject the new entity into MAS. Give cheap loan to Tune Air to mop up the entire shares of Air Asia and then allow it to be injected into MAS. Tune Air the original owners of Air Asia will be freed from debt and the entire debt is now absorbed into the merged entity of a new MAS. The MAS owners will be Tony and company and Khazanah. Certainly and naturally, that will create synergies (read profits for some people) and hear this, gets protection from the Malaysian government. 

It’s a long bullshiting exercise but one necessary to lead astray so many pesky bloggers. Some of them buyable but others are not

I am trying to find the one thing that is repulsive about the MAS-AA deal.  Why is this attempt by Khazanah in trying to mend MAS our national pride, appears to be a leaving a bitter after taste? What’s so distasteful about it?

My one reservation about this deal is that it shows Khazanah as trustee to the nation’s wealth and therefore enforcer about how our assets are being managed isn’t trying hard or serious enough to keep it national and strategic. Diluting the nation’s share in MAS can also diminish what potential advantages the country can leverage by having a national airline. Every country has one that it leverages on to give it comparative advantages.

The share swap with Tony Fernandes is effectively paying protection money. Give Tony shares in MAS in return of a pledge by Tony that he will not use Air Asia to compete with MAS. It’s a payout to Tony in return for TF‘s promise not to work hard.

It’s also the old game of carving out the monopoly board among business rivals. Better to cooperate rather than bludgeon each other. So will MAS make profit after this after it secures a promise from Tony to not disturb it? 

The people at MAS appear to blame some unprofitable costs center (such as Firefly) for its losses. And it believes that removing this will turn MAS profitable plus having Tony and whoever else on board will allow MAS to benefit from their skills.

It’s more like better to keep friends close and enemies closer. I go to a friend’s burial not to pay my respects but to make sure he’s dead. So keep Tony on board to ensure he’s not up to mischief which MAS people and by backward linkage, Khazanah people are incapable of dealing with.

My suggestion: Then, better to fire more people at MAS and Khazanah too. Close down Khazanah entirely would be a better solution so that they can’t do more damage and economic mischief.

What does the deal give Air Asia? It will also involve actually giving unhindered access to Air Asia to get more profitable routes. It will also involve removing a potential competitor in the form of Firefly which will be re-launched to become a regional carrier. Will that place it on a collision course with the AA associate Asia X? (Is that a porn rated business or what?)

The people at MAS will say, this will allow MAS to operate as a premium carrier. Let me ask one question- was its inability to operate profitably due to it having a low cost carrier business? If its losses were not due to it having a low cost carrier unit, then removing the LCC will not cause MAS to become more profitable. Simply because the cause or causes turning it into a loss making business are due to other reasons. It has nothing to do with having a low cost carrier business in Firefly.

The people at MAS are pulling wool over our eyes.  Air Asia made more than RM 1 billion profit in 2010 simply because it operates better and has more planes. You can’t run an airline business without planes. New ones at that. If you have old ones, the maintenance costs will kill you. What more, if the billings for repairs and maintenance are astronomical and not audited carefully. Can MAS check the profitability of the firms that it engages in repair jobs? Did they make money? If they do, then what has MAS done about it? 

Then we have to ask also why can’t MAS buys its planes direct instead of having Penerbangan Malaysia buys on its behalf. It doesn’t know how to buy planes or can’t count money?

It has chosen the easy way out at the behest of some vested parties in Khazanah, Air Asia and the common matchmaker. Plus it’s all done in a cloak of secrecy? Why? Afraid someone else can turn out to be a spoiler?

So I am accusing them of having lesser patriotism.

Those brain boxes at Khazanah couldn’t figure out how to sort out the mess at MAS after identifying the causes? You can only think of the short cut way by bringing in outside help in the form of someone operating in the industry on a different business model? You are making the mistake in assuming skills successful in one model are transferable into another. 

Yes we all agree it’s the business acumen, it’s the entrepreneurial talent that are needed to help out MAS. Because if it’s a question of only the amount of grey matter, then those existing in Khazanah alone can potentially turn out to a source of star business school professors.

After Jala left, the man responsible for managing MAS is a top notch trained accountant  from Australia. He is a super clever person. Why isn’t this clever person not able to nurse back MAS into better health? Was he undermined by vested interests? Or was MAS intentionally left to drown and the clever person made to run around like a headless chicken so that Khazanah could deliver the coup de grace to our national carrier? 

So that at the end of Tengku Azmil’s tour of duty, khazanah could declare to the PM, MAS is a hopeless case and the only way that it can saved is to bring in the white knight in the person of Tony Fernandes? (No pun intended yes Tony).

Finally the one thing I find revolting about the deal, is Khazanah wasn’t serious about saving MAS. It wasn’t industrious enough and hence opted for the lazy man’s solution- bring in another person to solve the problem instead of doing it yourself.

As promised I am now returning to a favorite hunting ground- the MAS AIR ASIA deal. It may been a slip of the tongue; the banker involved as match-maker said that, the arrangement between MAS and AIR ASIA was planned as far back as 2 years ago. That means some people undertook to grant unto themselves, god like qualities in deciding the fate of MAS.

About AIR ASIA we don’t care. It’s a private business entity and is said to be run profitably. Government has no business to interfere into the affairs of a private company. If its employees are worked like enslaved laborers, it’s their business too.

When I talked to people at MOF, it appears to me, the general feeling is that blame for the surrendering of MAS shares should be attributed to Khazanah’s corporate frolics. It was all Khazanah’s idea to have MAS’s shares swapped with that of Air Asia. The main reason, which is now increasingly questioned, is that in that way, the government can secure the services of the miracle man Tony Fernandes. 

Well, I think this is a stupid way of trying to solve MAS problems if it thinks the solution is injecting Fernades’s business acumen into the running of MAS. He is good- we can grant him that, but good for Air Asia not necessarily for MAS. 

Next: Just a foot more, and MAS would have struck mother lode.