Concluding what "the untold MAS story" did not tell

Since Wednesday, this blogger was out of town to give an unscheduled talk. Thus we couldn't post the final two part of the series. Apologise for the delay.

Malaysia Airlines Berhad reported a loss of RM267 million for the first quarter of 2011. There was an operating loss of RM242 as compared to RM310 million profit for 1st quarter 2010. The reason cited was the high oil prices and higher ringgit. Read The Malaysian Insiders here.

It is funny that the reason for the losses were reported in such manner. Back in 1998-2001, a sharp decline in ringgit had resulted in massive operating losses for MAS. Chairman Tan Sri Tajuddin Ramli The higher oil should have been profitable for the arbitrage placed by Idris Jala.

When MAS suffered the massive losses towards the end of Tan Sri Tajuddin Ramli's tenure as Chairman, MAS undertook a massive financial restructuring exercise to do a massive sell and leaseback exercise. MAS did not have to be burden with acquiring asset and leverage.

Domestic operations which were a burden to MAS were taken out and given to Air Asia and other outfits including MAS own dedicated domestic subsidiaries.

There was no major financial crisis like what happened in 1997/98. During those tumultous time, ringgit weakened from the high of 2.47 in the first quarter of 1997 to just short of "see you at 5" at low of RM4.88 on January 7th 1998.

Why is MAS still making occasional quarter losses?

After Tan Sri Tajuddin Ramli left, everyone wanted to blame him for the problems in MAS. The opposition backed attempt with some member of MAS management attempted to blame him for an RM8 billion loss but still no proof is coming.

They attempted to pin him for the Hahn Airport loss but it did not hold up at the International Court of Arbitration (ICC). Should Rosli Dahlan and Dr Wafi decided to not wait for MACC and Police and go for civil court, it will not likely hold up.

MAS is not going to be stupid enough to pick on petty contracts to Edaran Digital

There was talk that Tajuddin had "sebat" money through an insurance broker, Cendanasari Insurance Broker Sdn Bhd and MAS could save millions by going direct to Lloyd's.

Since when do Lloyd deals direct with end customers? They do not even deal with Insurance Companies.

Check the rates given by Cendanasari. Why didn't anyone mention that it is lower than market? Otherwise, Puan Marni would have alerted Puan Nik Nadeemah and asked Rosli Dahalan to make a case out of it.

With competitive rates and no margin, how is Tajuddin to take make a cut out Cendanasari?

In our first posting on December 16th, 2010 here, MAS losses total PBT of RM750 million and total PAT losses of RM908 million. That is far from the allged RM8 billion.

When sales of aircraft and spares, sales of foreign quoted shares for RM100.4 million for March 2000 and sales of properties for RM83.4 million and RM104.9 million for 2006 and 2007, respectively, the following was MAS historical profit and loss:


Notice Tajuddin's total PBT losses was RM365 million and PAT losses was less than RM500 million. And notive also that post-Tajuddin MAS was still making losses and still erratic despte being relieved of several burdens.

Johari Yusof, an MBA student at the Islamic International University made a turnaround thesis of MAS. It is available here.

He made a good background study of Tajuddin's turnaround plan. That way no one should be taken in by oversimplified comments that Tajuddin's outsourcing plans resulted in higher cost.

Johari did commented that Tajuddin was expanding too fast.

Everyone is an expert on the hindsight. The truth to the matter was no one could survive a drop in currency like what happened. See another chart below to understand how it affected MAS instantaneously:


Tajuddin was picking up in profitability if not for the unexpected currency attack by Anwar Ibrahim's financier George Soros. No one could have survived in such a market.

But why did post-Tajuddin profitability was still erratic despite stable ringgit, no asset to deal and no domestic route to bring down profitability? Why is MAS with subsidise fuel is still making losses as compared to other Airlines?

Puzzling isn't it.

Those are questions to ponder within themselves and everyone in MAS need to be honest and truthful. Instead of that, MAS was only blaming others like Tajuddin.

MAS had identified Tengku Dato Seri Azmil Zaharuddin from Price Waterhouse London to lead. He was groomed at Penerbangan Malaysia Berhad, then understudy Dato Idris Jala, and finally took the mantle of MAS.

He still had not met expectations. Unfortunately, he is only known for bringing in royals from Terengganu to fill in high positions. He had not made any stamp in the airlines industry. Talk is he is about to leave soon.

Before that MAS staff got what they had always wanted i.e.someone from within to helm teh airlines, Dato Fuaad Dahalan. Read here. He was solely responsible for the 2005 massive failure.

It is also time to review what the CEO that this blog called Butcher from Shell did including making 141 MAS staff into instant half-a-millionaire.

Read his textbook turnaround plan again here and asked: Did he think properly and listen to those who understand airline? He was using novices and newbies to the industry as advisers. There were amaterish mistakes made.

MAS share price vis-a-vis Airasia is low. Could Airasia be a possible predator? Frankly, no. The reason in another posting.

Before we give our view in the next and final posting, read The Star's coverage of MAS last Saturday below:

Tough times for MAS
MAS: On a wing and prayer
Making the necessary changes to ensure sustainable profit
MAS needs the ‘wow’ factor again
Grappling with fuel costs