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Sakmongkol ak 47

Tuesday 9 September 2014

Saving MAS-Part 3

In answer to our dear PM- I don't want to either speak up or talk down. i want too speak at eye level. so I repeat what Joan Rivers usually does at her opening- can we talk? 
I am asking, why did the government make the stupid mistake of allowing Air Asia to duplicate the same routes as MAS back then-? And allowing it to charge low cost fare which was the same as undercutting MAS.
Wasn’t that the same as allowing the other person to knife you? I am saying it as it is- and Air Asia was responsible for it. The good Doctor allowed that to happen without arming MAS.
In view of the Open Skies policy next year, I question the wisdom of downsizing MAS. Does anyone know the ramifications of Open Skies? It means any other airlines- Thai Airways, Air Asia, SIA, or whatever can fly into KLIA or any airports in Malaysia, pick up passengers and fly them to any destination within Malaysia and outside Malaysia. These people will be swarming at KLIA and KLIA2 and other airports offering their airlines. How can a downsized MAS cope and compete?
Now, tell me- if MAS by that time has reduced staff- the pilots presently are already fatigued, the crew are working like beasts of burden- with reduced capacity can it compete with these other airlines? Where are the planes, the pilots, and the engineering staff to cope with competition? You reduce staff means you’re shooting yourself in the foot.
Of course if we were to spend large amounts of money – RM6 billion or even more without changing the structure of MAS- if we give more money but retain the hemorrhaging culture in MAS- we will go bankrupt. Spending more money on MAS must be supported with a re-structuring of the business culture in MAS. That is a precondition. You spend more money but you retain the leakages and pilferage, you cut off your own wings, we will be dead. I am saying spend money- pubic money on MAS because we want to save MAS-but make sure we change the structure. Reduce the salaries of top management first.
Create its own low cost outfit- bring back and nurture Firefly so that it can compete with Air Asia. Now, why should people be alarmed when we want to compete with Air Asia? What is so sacrosanct about having Air Asia monopolise the low cost aspect of the airline industry.  My answer is simple- because Nazir Razak, Azman Mokhtar and Tony Fernandez like each other; they support each other. Nazir Razak who supports Azman Mokhtar as chief of Khazanah once expressed his admiration of the hustle and bustle at LCCT at that time and took it as indicative that AA is the most profitable airlines. It’s a low cost airline- people are attracted to it naturally.
But has anyone scrutinised the books of Air Asia? I am not an accountant- but can advance bookings be counted as current revenue and booked in in the current year? You have not received the money but you have counted them as current year earnings. Isn’t that a ploy to prop up the share prices?
Khazanah is a shareholder of Air Asia- perhaps they should be looking at how planes are bought. Are they bought directly or bought through an intermediary. I hear people are saying that an intermediary buys the planes at discounted price and then sold to Air Asia at the full prices. Air Asia does not belong solely to Tony Fernadez- there is public money by way of Khazanah.   If it were entirely his, we don’t give a damn.
If I were the government, I will ask people to look into this matter and also find out if Khazanah knows about this. If they know, then some people are in cahoots skimming off the plane purchases.
If Air Asia is damn good as many of its supporters insist it is, then it should not worry about a revitalised Firefly. Let firefly service the same routes as does  Air Asia.
Some people were actually planning to kill off Firefly. That would give a monopoly to Air Asia to dominate the low cost sector of the business. Remember when the Comprehensive Framework or something that sounded fanciful was thought of- the first thing they did was to kill off firefly. That is MAS’s own low cost outfit which could give competition to Air Asia. Why was it snuffed out? If Air Asia was that great, why ask the government to snuff out a potential competitor?
Now that every wants to fly and Air Asia thinks it can beat everyone, why don’t the government now allow MAS to nurture back Firefly and give it the same routes as that obtained by Air Asia? Air Asia has already got a head start- so it need not worry about competition from firefly. Come next year, when the Open Skies policy is implemented- it will be free for all. MAS should now arm Firefly to the teeth so that it can compete with Air Asia.
Now to those who glorify tony Fernandez who started with only 2 planes (and made money only when Dr Mahathir allowed it to fly low cost domestically), they should not protest if MAS which wants to make money by 2017, cultivate Firefly to the fullest. Tony Fernandez has proven one thing and he is an icon for doing this- any seller of pirated CDs can be successful.  Maybe not in running an airlines.
The Khazanah Plan is structured to cut down services and retrenching staff will make MAS a smaller airline. It will be difficult for a smaller airline to compete against so many larger airlines with extensive networks.  Air Asia for example –with its Air Asia Thailand, Air Asia Indonesia, Air Asia what not- is a bigger networked airlines. It will thrive better than MAS which the brainy people at Khazanah think is better suited being downsized. Have their brains shrunk or what?
In my mind, what MAS should do, in anticipation of the open sky policy is to do the reverse- expand more. It must counter the trend to downsize. Hence more pilots, more ground staff- MAS must operate on a larger scale. This requires more funds and some manpower. Clearly, the Plan to reduce and retrench workers- is wrong.
You are going to spend another RM1.6 billion to retrench workers. These people have worked with MAS for a long time- they have families and obligations. How much do you pay them individually? Why don’t you start by retrenching the top heavy section of the MAS employment structure? SIA must be laughing at us- responding by acting on the advice of outside consultants. These people asked MAS to do a chainsaw Al Dunlap on the company- by chain sawing the employment structure and services.
Apparently the problem at MAS wasn’t fixed when Idris Jala spent time in MAS- what he did was basically asset stripping and forward buying. That made the books looked good during his tenure, but the real problems which were not tackled by him and his band of merry men, came back to haunt his successors.
Next: The MAS union.


Anonymous,  9 September 2014 at 07:18  

Dato' I remembered MAS was at one time constantly pressuring the Govt to allow them to increase their domestic rates saying that they are losing money in this segment.

This may be the reason why Dr. M allow AirAsia into the domestic route. If AirAsia can make money with lower rates than MAS, it goes to show that MAS is useless.

To be fair, I think MAS people pretty well gave up knowing that politicians are using them as cash cows.

Why bother to save costs when there is a big pipe channeling money out to the cronies? Furthermore, it grandfather's money anyway.

In the end, it has practically make MAS people have the "go with the flow" culture and just earn a living mentality.

Anonymous,  9 September 2014 at 07:37  

That also happen to FELDA shipping?The piracy being planted into these corp.

Anonymous,  9 September 2014 at 08:36  

"I am not an accountant- but can advance bookings be counted as current revenue and booked in in the current year? You have not received the money but you have counted them as current year earnings" Here, I would disagree with your statement, Dato. As an occasional AirAsia customer, like everyone else I have to pay money UPFRONT. And my ticket gets burned when I don't fly. NO REFUNDS!So it would mean they correctly book in their revenue for current year but what they owe the customer is another story. And like a ponzi game, it keeps rolling over!

Anonymous,  9 September 2014 at 09:45  

First, get rid of the non-essentials VVIPs, VIPs on the salary rolls. This will have a dramatic effect in reducing costs...

Anonymous,  9 September 2014 at 11:28  

MAS even has routes to "hot" destinations (Phuket & Bali) which departs at odd (4.50AM). This may be good for golfers who don't need sleep. Even at peak holiday demand period(like Malaysia Day weekend & school holidays), MAS cannot seem to fill the seats. Even Air Asia does not use these time slots. Maybe you should ask in Parliament if there are decent load factors on these early flights. Eventually, they affect the whole route/ destination load factor. And those smart Khazanah people who look at this basic detail (total load per route) may decide to scrap the destination altogether (like Surabaya and Bandung). Or, was it by design to "give up" the route eventually.

Donplaypuks® 9 September 2014 at 17:25  


I checked up on Air Asia's Audited Annual Report some years ago.

There is a clear statement in it's accounting policies that ticketing and related revenue is accounted for on the basis of when a person actually flies, and not on the date he boooks a flight.

So, Air Asia cannot book in sales when money in received to falsely boost its turnover figures. Advance bookings are therefore reflected in the Balance Sheet as creditors.

Trust this is clear.

We are all of 1 Race, the Human Race

Donplaypuks® 9 September 2014 at 17:43  

As for competition, I am all for it. Neither Air Asia nor anyone else has any God-given right to a monopoly.

However, Air Asia's monopoly is largely a result of performance and not government sanction. They have succeeded where others have failed, including some who had more money than them.

MAS and Firefly were Govt created monopolies befor AA came in, and as you are aware "it's not the busines of Govt to be in business"!

The best policy is to open up the skies to local parties, so that anyone who has the ability to raise the finances and has the know-how, can start an airline, instead of allocation of licences by crony-priority.

The there will be real competition and may the best entrepreneur win, and the consumer become KING!

We are all of 1 Race, the Human Race

bruno,  9 September 2014 at 20:07  

Dato,as long as the gomen or gomen link companies are involved in MAS,politicians and their cronies will be sticking around like leeches.They think that it is their born rights to deserve free handouts.

Now back to the MB fiasco and the Kajang circus clowns.It shows how smart the opposition leaders are.To kick a good MB out because he would not give the PR leaders and their cronies free handouts.To show they can go face on for a showdown with the palace.Now with their tails between the legs like beaten dogs.So very quiet these last couple of days.Umno has sent boxes of jelly for these clowns FOC to rub into their sore butts.

Anonymous,  9 September 2014 at 20:24  

Dato' with my full due respect.
Firstly, government should not be involved in doing business. There are many government own company around the world goes bankrupt for this very same reason (too many politician involve in a company decision making) One good example Alfa Romeo.
Second, Airline (transportaton business) is high capital,high accident risk and low profit margin.
Third, I fully support open skies, it means Malaysia is easily accessible.(good infrastructure)


flyer168 13 September 2014 at 05:35  

"Saving MAS-Part 3"


Yes indeed.

The "Pirates of P....jaya"

Just to share this...

"...4.2. Five forces analysis

The Porter five forces model is used to identify factors which forces affect company’s ability to serve customers and make a profit...

5. Core competencies...

Having strong capabilities and core competencies, Singapore Airlines is outperforming among other competitors. First is cost-effective service excellence.

This core competency is combined and maintained by business strategy such as management strategy by communicating and motivating employees to build up Singapore Airlines’ reputation along with its mission, managing strategic resources by creating and managing subsidiaries to improve Singapore Airlines as wholly its excellent services and valuing network where Singapore Airlines have built good long-term relationship with its suppliers, partners and coalitions to ensure continuously its excellent standard services in high price sensitive market.

Besides, rigorous service design and development, total innovation, profit and cost consciousness ingrained in all employees, holistic staff development, and reaping of strategic synergies through related diversification and world-class infrastructure are continuous building up its core competency.

Another core competency of Singapore Airlines is its unique brand which consists of its name “first in flight” as well as its employees. Singapore Airlines is known as pioneering by continuously being the first in airline industry...

Also, its employees symbolized as “Singapore girls” that is representing charming, graceful, gentle and courteous is unique in the world which immediately linked to its unique brand (Chan, 2000).

6. Conclusion

Despite entering lately in airline industry, Singapore Airlines have built up its successful business by understanding external factors including opportunities and threats and maintaining its own core competencies. As the giant firm, Singapore Airlines should continuously consider and determine competitive environments to compete globally with other competitors.

The recent crises and the emergence of budget carriers require Singapore Airline to sustain its focus on achieving cost-effective service excellence and improving its unique brand in order to continue successful..."

Singapore Airlines: Managing Human Resources for
Cost-effective Service Excellence -

Jochen Wirtz and Loizos Heracleous

"Singapore Airlines (SIA) has managed and organized its human resources (HR) to achieve
sustainable competitive advantage and outperform other airlines in its peer group for decades.

The case describes the role of HR in SIA’s pursuit of the apparent conflicting objectives of service
excellence and cost-effectiveness, at the same time, through its approach to recruitment, selection, training, motivation, and retention of its employees.

“At the end of the day, it’s the software, people like us, who make the real difference.”

Richard Branson's 5 Rules for Good Business -

"Virgin Atlantic buys everything from aircraft to zips and everything in between.

The price has to be right, but so do the environmental and social credentials."

You be the judge.


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