Azwan: A JV can stop the rot at MAB

By RAHIMI YUNUS / Pic By TMR

Malaysia Airlines Bhd (MAB) should find a joint-venture (JV) partner, while maintaining a majority stake, to help the ailing national carrier return to profitability.

Accenture Malaysia country MD Azwan Baharuddin said a strategic partnership with another airline could expand MAB’s network, giving the carrier an edge to compete with other full-fledged carriers.

“Proton Holdings Bhd has done that (JV) with Zhejiang Geely Holding Group Co Ltd. It may not necessarily be with China, but any airline that could give us the same impact to MAB’s turnaround,” Azwan told The Malaysian Reserve (TMR).

Azwan also disagreed with the suggestion that the country should pull the shutters on MAB or surrender its majority stakeholding.

Former CEO of now-defunct Malaysia Airline System Bhd Tan Sri Abdul Aziz Abdul Rahman had suggested that the government shut down the airline if it continues to bleed.

The spotlight on MAB emerged recently after Khazanah Nasional Bhd announced a RM6.27 billion loss before tax last year. The unexpected loss was largely due to its RM7.3 billion impairments, half of the provisions being contributed by the state-owned airline.

Following the dismal results of the sovereign wealth fund and MAB’s continued disastrous results, there were calls for the government to end its help to the national carrier. Billions of taxpayers’ money had been injected into the airline, largely through the state-owned fund.

Azwan said the management is not the real issue facing MAB today, but its network, or the lack of it, has hindered the national carrier’s progress to become profitable.

He said MAB should have more medium-and long-haul routes, but money-making destinations tend to be in the short and medium-haul sectors, which AirAsia Group Bhd has claimed ownership.

“AirAsia is in total command of that space. MAB is in a very difficult position where Malaysians nowadays generally travel for those short-distance trips and comfort is no longer a top priority,” Azwan said.

Azwan also said MAB may consider changing the “Malaysia Airlines” brand to just “Malaysia” as applied by some other national-linked airline, in order to have a more global appeal. 

MAB has been in the red since 2011, with full-year net losses crossing billions, despite a RM6 billion turnaround plan initiated in 2014 by Khazanah.

The airline, which had once served South America, South Africa, the US, and Europe, was reduced to just a handful of long-haul destinations, including London and Australia.

The network rationalisation has shifted MAB’s focus to the Asia-Pacific region — particularly to China and India — but that sectors too, are fast filled by competitors and new entrants.

A partnership with another carrier would help fend against fuel price volatility and foreign exchange — the two greatest threats to the national carrier.

Globally, Azwan said MAB is struggling to compete with rivals such as Singapore Airlines Ltd, Cathay Pacific Airways Ltd, Qatar Airways Ltd and the Emirates.

He said the group’s cargo arm MAB Kargo Sdn Bhd (MASkargo) also relies heavily on the routes served by MAB and that half of MASkasgo’s transhipment revenue is contingent to the network size.

“The challenge is…can partnership with another foreign airline be considered to expand MAB’s network? Co-investors can potentially work (on this) because MAB’s reach can be differentiated,” he added.

Meanwhile, Frost & Sullivan Malaysia MD Hazmi Yusof said he agreed with Prime Minister (PM) Tun Dr Mahathir on the need to evaluate the national airline.

“I do agree with our PM that it’s good to evaluate the feasibility of any organisation, MAB included, as this involves a large amount of taxpayers’ money,” he said.

Hazmi said many factors, especially externally, have changed since the beginning of MAB’s transformation.

TMR had reported earlier that Singapore Airlines or China Southern Airlines Co Ltd could be a right strategic JV partner for MAB as it would most likely benefit both carriers, according to an analyst.

The analyst, who declined to be named, said Singapore Airlines has similar routes and customers with MAB, while China Southern has also focused on the Asean region.

The analyst added that 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.