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Showing posts with label MH17 crash. Show all posts
Showing posts with label MH17 crash. Show all posts

Saturday, August 30, 2014

Medicines for ailing MAS: losses RM2bil, 6,000 job cuts, RM6bil capital injection a bailout?





New medicine for ailing MAS

FOR the first time ever, a government-linked company (GLC) will lay off workers and renegotiate contracts with suppliers and employees – a move that will obliterate the view that companies owned by the Government provide steady employment and are safe paymasters.

In its strongest action to rehabilitate the ailing Malaysia Airlines (MAS), the Government has given its undertaking to its investment arm, Khazanah Nasional Bhd, with the necessary legislation to bring the employees and suppliers to the negotiation table.

This is among the highlights of a 12-point plan unveiled by Khazanah yesterday to resuscitate MAS.

To recap, Khazanah, in a bid to save MAS, has proposed to take it private and delist it by year-end. It has a 69% equity in MAS and has offered to buy the remaining 31% in the airline at 27 sen a share.

A new Bill called the MAS Act will be tabled in Parliament before July next year to facilitate the migration of MAS’ existing operations into a new company (Newco), which will take over MAS’ operations on July 1 next year.

“The MAS Act is to facilitate the migration of the existing operations to a Newco. It is something that was proposed by the Government so that a new airline can take over. It will have a finite life,” Khazanah managing director Tan Sri Azman Mokhtar told the media yesterday.

“The Government will allow the transfer of the AOC (air operator’s certificate) and tax losses to the Newco.”

Apart from the establishment of a Newco to carry on the business of the existing airline, the plan calls for the conversion of some debt into equity and Khazanah injecting RM6bil more into the airline. Kumpulan Wang Persaraan (KWAP) agreed to swap its RM750mil existing perpetual sukuk with ordinary equity, meaning that it will eventually become shareholder in MAS.

 
Azman: 'The MAS Act is to facilitate the migration of the existing operations to a Newco'.

Of the RM6bil, a sum of RM1.4bil is for the privatisation of MAS, RM1.6bil for cost incurred in shutting down the existing company and a voluntary separation scheme to reduce the workforce by 6,000 and penalties for early termination of contracts with suppliers, and RM3bil for working capital for the Newco to take over the operations.

Since taking over MAS in 2001 from Tan Sri Tajudin Ramli, Khazanah has injected more than RM7bil into MAS, which Azman does not think would be recoverable.

However, he is confident that the RM6bil capital that will be pumped in can be recovered.

“We have done the financial modelling and are confident that the money can be recovered,” he said.

“Also, it is a conditional injection of funds, meaning that the money will only be available subject to the MAS management fulfilling the conditions set out in the recovery plan.”



Azman admits that renegotiating contracts with suppliers, leasing agents and converting debt to equity could have some effect on the credit ratings of MAS and other companies within the stable of the strategic investment fund.

However, he opines that the shedding of the workforce and the renegotiations of contracts is only to bring about a significant change in work practices and supply contracts.

“It would not be done arbitrarily. There is some bench-marking on the pricing of the contracts. The suppliers will be given an option to migrate to the Newco on new terms,” he said.



Azman is also confident that the new MAS will achieve profitability by the end of 2017. The new plan will also see net gearing reduced from 290% now to about 100% -125% eventually.

But not many share Azman’s sentiments, as MAS has undertaken half a dozen restructuring exercises over the past 13 years and yet remains in dire straits.

“I obviously do not share the same sentiments as Azman and am not as optimistic about seeing a profit in 2017. I don’t think the new plan goes far enough to resolve the structural problems within the airline. You can call it downsizing or rightsizing, and the plan may appear bold and courageous by slashing 6,000 jobs, but the question is: how much can you actually save from that?” Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics, asks.


He says, “The real issue in MAS the past decade is an ill-conceived strategy and financial mismanagement. That’s the key contributors to the losses, shareholder value destruction and the mess built up over the years. While I do agree that MAS is overstaffed, resulting in low productivity levels compared to Singapore Airlines (SIA) or Cathay Pacific, it is not a critical aspect of the overall picture. The losses registered over the years by the airline are not because the airline is overstaffed, but because it had a management which, unfortunately, had little understanding of the airline industry and was slow to adapt to the dynamics of the landscape of the industry,” Shukor says.

Route rationalisation 

MAS has been loss-making for the past 10 quarters, and the amount has ballooned since the two tragedies hit the airline within a space of four months since March this year. The first was on March 8 when a plane, MH370 en route to Beijing, disappeared.

The second was on July 17 when MH17, which was on the way from Amsterdam to Kuala Lumpur, was shot down while flying over Ukraine.

Even before the first airline tragedy on March 8, the airline was already losing close to RM1bil a year due to competition from low-cost carriers and Middle-Eastern full-service carriers (FSCs).


However, the losses exacerbated to RM2bil following the airline tragedies.

For the second quarter of 2014, MAS announced on Thursday an RM307mil net loss, bringing its first-half losses to RM750mil.

 

A lack of demand and the massive cancellations of flights has become a norm after the two incidents, and the policy to refund passengers after the MH17 mishap has further seen flight bookings going down. The airline’s strategy of pushing for loads at the expense of yields has also backfired. However, it has embarked on a new plan to drop fares to win back customers, a strategy which, however, does not guarantee high yields, which MAS needs.

MAS’ current yield of 20 sen per seat kilometre is lower than Cathay Pacific’s 24 sen and SIA’s 22.9 sen.

Azman says there are several conditions for the money to be injected into MAS.

Among them is route rationalisation, whereby the emphasis is on destinations that are within eight hours of flying time. The plan is also to bring short-haul cost within the 15% of the low-cost carrier competition, at parity with Middle-Eastern FSCs and below those of the regional FSC competition. The Newco will only focus on profitable routes and secure global connectivity via oneworld and other alliances, says Khazanah, adding that MAS will come up with a business plan and fleet requirements.

Maybank Investment Bank senior analyst Mohshin Aziz says that with one-third of the jobs going, the route network also needs to be reduced by one-third.

“We were hoping to get the details of the route cuts, but they were not forthcoming. We really believe MAS should terminate its long-haul routes, such as Frankfurt, Amsterdam, Paris, Istanbul and even Dubai as soon as possible.

“They need to reduce frequencies on their Australian routes to twice daily from thrice daily now, and terminate the Brisbane and Adelaide routes,” Mohshin says.

Since the network will be reconfigured, MAS will also have to reduce the number of aircraft it flies from its current fleet of 127 to bring down cost.

Khazanah says MAS needs to renew its focus on revenue management to increase unit revenue by 10% to 15%, and among other things, it needs to also unbundle ancillary products and services and revamp its loyalty programme.

Staff buy-in

A major part of the success of Khazanah’s new plan for MAS hinges on the support of the airline’s employees and their unions. Yesterday, Azman met representatives of the unions to tell them of the new plan, but will the unions support the plan?


A major part of the success of Khazanah's new plan for MAS hinges on the support of the airline's employees and their unions.

“It was a good and frank discussion. I think we were at pains to try and explain what would be happening. And explain that the vessel of the Newco will not be able to carry everybody,” Azman says.

Throughout the day, Khazanah officials and MAS senior team members had various briefing sessions with its employees.

For now, the ties are somewhat strained between the senior team and many of the unions and their members, with many worried about the selection process of who would be axed.

Under the new plan, MAS will undertake a voluntary separation scheme to reduce its workforce to 14,000, with the plan also involving reskilling, redeployment and job creation.

“There seems to be a renewed effort to harmonise now so that Khazanah’s vision of rebuilding a national icon will succeed. But at a glance, the plan is wishy-washy and they are not able to give us details. We are worried as to who will decide on who stays and who leaves. We also do not want the existing team to decide, as there would be no professionalism, only partiality,’’ said a source.

Khazanah says the process of transfer migration and separation will be conducted with “utmost care, fairness and due process”.

A Khazanah official added that “the decision on who stays and who leaves will be done by the Newco”.

“The search for a new chief executive officer (CEO) for the Newco has begun and we are looking at both Malaysian leadership talent and global aviation specialists, basically for the CEO (post),” Azman says.

“Hopefully they will hire the best in the industry and not just anyone for the hot seat. It should be someone with entrepreneurial spirit and expertise to drive profits,’’ says an expert.

The current group CEO Ahmad Jauhari Yahya will leave MAS in June next year.

The plan to set up a Newco is also seen as a way to weaken MAS’ vociferous unions, although an expert says that the Newco could also set up new unions, provided there are no conditions attached to the Newco’s staff appointment letters.

Would minority shareholders sell out?

The biggest challenge Khazanah will face is whether it can get enough minority shareholders and institutional funds to vote in favour of its plan to privatise MAS at an EGM to be called in the coming weeks.

It needs 100% acceptance to take MAS private, and then there will be grounds for the Act to be established.

Khazanah cannot vote at the EGM, given the fact that it is an interested party and institutional shareholders only hold less than a 4% equity in MAS.

Now that there is a serious plan to resuscitate MAS, it is possible that some minorities may want to hold back and not sell their shares. Not only will MAS be profitable by 2017, but there is also a plan to relist the Newco in 2018-2020.

“There will be some minorities who will give up their shares, as holding MAS has been one painful episode. But there are yet others who may see that there is going to be creation of value in the future. So, why sell and miss out on future growth?” opined a source.

However, if Khazanah fails to get 100% equity in MAS, then the entire revival plan will be off.

By B.K. Sidhu The Star/Asia News Network

Radical plan to revive MAS

Khazanah Nasional Bhd has unveiled a radical plan to revive the ailing Malaysia Airlines that calls for job cuts, a capital injection of up to RM6bil and creation of a new company (Newco) to carry the airline business.

To facilitate the migration of the existing business to Newco, the Government will table a new law in Parliament called the MAS Act.

Khazanah managing director Tan Sri Azman Mokhtar said that the new legislation would have a finite life and was needed to facilitate the migration of the existing business to Newco.

In a move to ensure that Newco has a leaner workforce and cleaner balance sheet to compete effectively in a tough operating environment, Khazanah wants to see job cuts of 30% from the existing MAS workforce of 20,000 employees.

It is one of the many conditions Khazanah has imposed on the management of MAS if it were to inject more funds into the ailing airline.

 

“In our opinion, we think that Newco with its business model will require a workforce of about 14,000. A net reduction of 30% is an across-the-board number,” said Azman at a media briefing yesterday.

The job cuts also affect the top leadership of MAS, which comprises a team of 500 staff called the Extended Leadership Team (ELT). Most of them were holding senior positions with long service.

Azman said the current chief executive officer (CEO) of MAS, Ahmad Jauhari Yahya, has indicated his wish to leave.

In commending the MAS CEO for having led the airline during its toughest period, Azman said Ahmad Jauhari would remain in place until the transition.

“We have embarked on a global search for a new CEO and have engaged an international firm to undertake the task,” he said.

Some of the other conditions of the 12-point plan mapped by Khazanah for the recovery of MAS include the relocation of the airline’s existing headquarters in Subang to the KL International Airport and Khazanah owning 100% of MAS.

Towards this end, Khazanah is undertaking a privatisation of MAS at 27 sen per share.

Azman clarified that Khazanah had engaged a consultancy to undertake a review of MAS on Feb 26 this year, before the first airline tragedy on March 8.

“The review came about after the Government was concerned about the financial and general state of affairs in MAS,” he said.

On March 8, a MAS aircraft en route to Beijing went missing and further exacerbated the airline’s losses.

The Cabinet approved MAS’ proposal on Wednesday and yesterday the various stakeholders, which are mainly the unions, existing airline management and some key directors, were summoned for a briefing.

The management and union have been told to work together to decide the shedding of the workforce, he said.

The MAS Act is expected to arm Khazanah with the necessary bite to carry out the radical measures, especially in negotiating the new contracts and collective agreements of the unions.

“The Act would allow for the Air Operators Certificate (AOC) to be transferred from the existing MAS to Newco and the assets and liabilities,” said Azman.

By July 1 next year, Newco is expected to take off.

Azman said that employees who were not absorbed into Newco would be offered a retrenchment scheme or given an option to be absorbed into a scheme for re-training.

Towards this end, Khazanah is working with three business process outsourcing firms that have vacancies for 3,500.

Azman said Khazanah explored several options in coming up with the plan.

“Putting in more money into MAS would not save MAS. So we felt that enabling MAS to start on a clean slate and putting in new money into Newco provided it met the conditions stated was the best option,” he said. - The Star

Related articles:

MAS losses likely to double to RM2bil by year-end
Many workers will be affected, says union
Not so friendly skies for other airlines, too
MCA Youth calls for concerted effort to help MAS
RM6bil is not a bailout, says Najib 
Clean slate for MAS  

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Friday, July 18, 2014

Another Malaysian plane crash shrouded with mystery in Ukraine killing all 298 people!

Photo taken on July 17, 2014 shows the debris at the crash site of a passenger plane near the village of Grabovo, Ukraine. A Malaysian flight crashed Thursday in eastern Ukraine near the Russian border, with all the 280 passengers and 15 crew members on board reportedly having been killed. (Xinhua/RIA Novosti)

MOSCOW, July 17 (Xinhua) -- A Malaysian flight crashed Thursday in eastern Ukraine near the Russian border, with all the 283 passengers and 15 crew members on board reportedly having been killed.

A Malaysia Airlines Boeing 777, which was flying from Amsterdam to Kuala Lumpur, started descending 50 kilometers before entering Russian airspace, and was subsequently found burning on the ground on Ukrainian territory," Interfax news agency quoted an aviation source as saying.

The plane disappeared from radar at an altitude of 10,000 meters and then crashed near the city of Shakhtarsk in Ukraine's Donetsk region, it said, citing Ukrainian law enforcement authorities.

An advisor to Ukrainian Interior Minister Anton Herashchenko wrote on his Facebook that "280 passengers and 15 crew members have been killed."

A Xinhua reporter was stopped by local militias some 5 km from the crash site, and was asked to wait for permission to move closer. Witnesses said they heard loud explosions and saw human remains and identity documents scattering around.

The Chinese Embassy authorities in Kiev maintained close contact with Ukrainian partners, and were verifying information on any potential Chinese casualties, an official told Xinhua.

Ukrainian President Petro Poroshenko said the plane could have been shot down, but the Ukrainian Armed Forces had nothing to do with it. Prime Minister Arseny Yatsenyuk said the government has formed a special investigative commission for the incident.

The Ukrainian Prosecutor General's Office said law enforcement authorities could not access the crash site for investigation, as it is controlled by the self-proclaimed Donetsk People's Republic (DPR).

Russian President Vladimir Putin Thursday informed U.S. President Barack Obama via telephone of the plane crash, and "had a detailed discussion on the acute crisis in Ukraine," the Kremlin press service said in a statement.

Putin said both of the conflicting sides have to cease fire immediately, and Russia had taken measures to resume consultations of the contact group "with participation of representatives of southeastern Ukraine."

The president has also offered his "deep condolences" to Malaysian Prime Minister Najib Razak over the deadly incident.

The cause of the crash was yet to be determined, but Kiev and eastern separatists have traded accusations over the responsibility. Kiev authorities said the militias shot down the plane with a Buk air defense system.

Meanwhile, Andrei Purgin, first deputy prime minister of the DPR, said they "simply do not have such air defense systems, our MANPADs have a firing range of only 3,000 to 4,000 meters," Interfax reported. Purgin said they will give the plane's flight recorders to Moscow for testing.

"Of course, we most likely will give them to the Interstate Aviation Committee (IAC), to Moscow. High-level experts, who will be able to determine exactly the reason of the catastrophe, work there," he said.

The crash came on the same day the DPR separatists claimed they had shot down two Ukrainian warplanes, an An-26 transport jet and a SU-25 fighter, which Kiev laid the blame on Russia.

Malaysia Airlines said in a statement it had received notification from the Ukrainian air traffic control that it had lost contact with flight MH17 at 1415 GMT, some 30 km from the Tamak waypoint, approximately 50 km from the Russia-Ukraine border. The Boeing 777 had left Amsterdam at 12:15 p.m. local time and was expected to arrive in Kuala Lumpur at 6:10 a.m. (2210 GMT) on Friday, the airline said.

Malaysian Prime Minister Najib Razak said Friday on his twitter account that he was "shocked by reports that a Malaysian Airline plane crashed," adding that they have launched an immediate investigation.

Meanwhile, Malaysian Deputy Foreign Minister Hamzah Zainuddin said that his ministry was working closely with the Russian and Ukraine governments on the tragic incident.

"We are working closely with both governments to get information," he said, adding, "currently we have some of the information, only waiting to be verified." - Xinhua

 蘋果日報:


‘Plane may have been shot down’

PETALING JAYA: A Malaysia Airlines plane flying from Amsterdam to Kuala Lumpur has crashed in the Ukraine-Russia border, and Ukraine’s president said the jet may have been shot down.

Reports said the Boeing 777-200ER carrying 280 passengers and 15 crew is believed to have been shot down near the village of Grabovo in the rebellion-wracked region of Donetsk.

MAS said it lost contact with the aircraft at 1415GMT (10.15pm Malaysian time).

Flight MH17 left Amsterdam’s Schipol Airport at 12.15pm local time (6.15pm, Malaysian time) and had been scheduled to arrive in Kuala Lumpur at 6.10am today.

Interfax-Ukraine news agency quoting unnamed security sources said teams from the emergency services were trying to reach the scene. However, it has not been determined who is responsible for the act and whether it was intentional or accidental.


Crash site: Smoke rising at the site where MH17 is said to have crashed in the donetsk region in ukraine.

The fate of the passengers and crew has yet to be verified, but reports have quoted the Ukraine Interior Ministry as saying there were no survivors.

Ukrainian President Petro Poroshenko said in a statement in his website that the Ukraine armed forces did not fire at any targets in the sky.

The country’s Prime Minister Areseny Yatseniuk has ordered an investigation into what he said was an "airplane catastrophe".

However, Anton Gerashenko, an adviser to the Ukraine interior minister, said on his Facebook page the plane was flying at an altitude of 10,000m when it was hit by a missile fired from a Buk launcher. The Buk missile system can fire missiles up to an altitude of 22,000m.

Rebel leaders have also denied involvement, telling Russian news agencies that they were not responsible for shooting down the plane and pledged to allow "international experts" access to the crash site.

The pro-Russian rebels, who are fighting central Kiev authorities, claimed the plane had been shot down by a Ukrainian jet.

"Witnesses saw the plane being attacked by a battle plane of the Ukrainian forces," the government of the self-proclaimed Lugansk People’s Republic said in a statement. "After that, the passenger plane split into two in the air."

MAS said on its Twitter feed that it "has lost contact of MH17 from Amsterdam. The last known position was over Ukrainian airspace. More details to follow."

The region where the plane went down has seen severe fighting between Ukrainian forces and pro-Russia separatist rebels in recent days.

On Wednesday evening, a Ukrainian fighter jet was shot down by an air-to-air missile from a Russian plane, Ukrainian authorities said yesterday.

Earlier this week, Ukraine said a military transport plane was shot down on Monday by a missile fired from Russian territory.

This is the second tragedy involving MAS in four months, when a Beijing-bound airliner – also a Boeing 777-200ER – with 239 people on board went missing an hour after it took off from Kuala Lumpur International Airport on March 8. The search for Flight MH370 – in the southern Indian Ocean – is still ongoing. - The Star/Asia News Network

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