Heavy debt and wrong biz  plans push more parties to question the necessity for a national airline

By RAHIMI YUNUS & LYDIA NATHAN / Pic By MUHD AMIN NAHARUL

Former managers of Malaysia Airlines Bhd (MAB) have mixed opinions on the future of the flag carrier, as heavy debt and wrong business plans push more parties to question the necessity for a national airline.

Tan Sri Abdul Aziz Abdul Rahman, who was the CEO and MD of the now-defunct Malaysia Airline System Bhd (MAS) between 1981 and 1991, said the federal government should keep MAB alive at all cost.

The government should save the airline, put aside its liabilities and ensure proper management is in place, he told The Malaysian Reserve (TMR).

Calls for the government to dispose of or shut down the national flag carrier have been getting louder amid the loss-making state of the airline for the last decade — forcing various bailouts from the government that costing billions of ringgit.

Abdul Aziz, 86, said MAB remains to be a national pride and that the government should not close it down.

“I am quite clear on this. MAB is a national flag carrier. Almost every country in the world has it and the government should maintain the airline, do not sell or close it.

“People from China want it (MAB). There are a lot of local people who want it too,” he said.

Abdul Aziz said the government should set aside the company’s liabilities and start a fresh national carrier with the right management in place.

“The problem they are having now is the liabilities. It could be between RM7 billion and RM10 billion of liabilities due to over 20 years of mismanagement.

“Now, the government is asking the current management to shoulder all that,” he said.

Abdul Aziz, who was awarded the Manager of the Year Award (1984) by the Harvard Business School Alumni and Aviation Personality (1989) by Aviation Week, said the last resort for the federal government will be to consider a joint venture (JV) for the ailing carrier.

Even then, Abdul Aziz said a JV should only be considered if the government does not have the financial resources to set aside MAB’s liabilities. In a case of a JV, the government should control the majority stake, he added.

Meanwhile, former Khazanah Nasional Bhd MD Tan Sri Mohd Sheriff Mohd Kassim said the government needs to consider shutting down MAB, if it is hurting the country’s financials.

Considering the detrimental losses incurred in recent years, Mohd Sheriff — who headed Khazanah between 1994 and 2003 — said the government should consider ceasing MAB operation as the funds could be put for better use elsewhere.

“There has been ongoing talks about shutting it down lately, so perhaps, it is an option the government could look at,” he told reporters after the Malaysian Strategic Financial Outlook Forum yesterday.

He opined that it has not been easy for MAB to turn into profits and noted the previous failed attempts.

“Bear in mind, there have been bailed out, not once, twice, but three times already, and it was not successful after each time. This proves it isn’t easy for them to be profitable,” he added.

Analysts have also predicted a tough recovery for MAB, as it did not meet its three-year target for profitability set by sole shareholder Khazanah.

An analyst said Singapore Airlines Ltd or China Southern Airlines Co Ltd could be a right strategic JV partner for MAB as it would most likely benefit both carriers.

“Close one eye on the national sentiment, Singapore Airlines could be the best partner as it has similar routes and customers with MAB. China Southern would make sense too as the airline has also focused on the Asean region,” the analyst told TMR.

The analyst, who declined to be named, said Middle-Eastern carriers would also be a good fit as the cash-rich airlines would want to expand to the East Asian region as their next growth area due to the crowded Middle Eastern market.

Former Prime Minister and Khazanah chairman Datuk Seri Mohd Najib Razak said the government should revert to the original turnaround plan crafted for MAB, in order to revive the ailing carrier.

“We (the government) had a turnaround plan (and) we (should) go back to that plan. We were confident when I was in office and we are confident that we could do a turnaround,” Najib told reporters at the Parliament lobby yesterday.

“MAB is our pride and joy. It must continue as our national airline and it must have a turnaround plan.

“When I was the chairman of Khazanah, our turnaround plan was working…it needed a bit more time. Therefore, there should be no reason why MAB should be sold off or closed down,” he added. 

To recap, two aircraft calamities in 2014 — MH370 and MH17 — had blemished the national carrier’s reputation as sales were heavily beaten. In the first half of 2014 alone, MAS (now defunct) reported a loss of RM750 million, 65% lower compared to the corresponding period in the preceding year.

However, even before the tragedies struck, the troubled national carrier had already plunged into the red as high costs, falling sales and the struggle to compete against emerging low-cost carriers saw the airline posting a cumulative net loss of RM8.4 billion between 2001 and June 2014.

In August 2014, Khazanah introduced a RM6 billion 12-point recovery plan to hoist the carrier back into profitability within three years of its eventual delisting later that year.

Since then, the airline has taken several stern measures which include the successive appointments of three new CEOs, a name change, consolidation of its operations from Sultan Abdul Aziz Shah Airport to the Kuala Lumpur International Airport, and the retrenchment of 6,000 employees.

Last year, MAB posted a lower loss than the RM812 million loss recorded in 2017. Although the results improved, it was still arguably unsatisfactory after five years of turnaround efforts and billions spent to keep the airline alive.

The last time it posted a full-year profit was in 2010 at RM237 million.