Facts about 2 airlines - MAS & SIA

Recently I read an article on MAS and Air Asia. HERE It prompted me to take a closer look at MAS from the financial angle. However instead of comparing to AirAsia I compare the financial statement of MAS with that of SIA. Why SIA and not Airasia ? The reason is AirAsia being a budget airline has a lower cost structure. Further it is always better to bench mark against a good competitor , isn't it ?

Although one would argue that it is not totally fair to compare the two airlines financial because of the different in companies size and different financial period as SIA financial year ends 31 March and MAS financial year ends 31 December. But in the absence of other info, financial statements comparison serves as a good starting point.

Now let us take a look at the two airlines' INCOME STATEMENTS.

I used exchange rate of 2.2 ringgit to 1 S$. The % shown is % to Sales of various expenses items.

MAS & SIA COMPARISON
	SIA	SIA		MAS
	$S	RM MILLION		RM MILLION
	YE31/3/2010	2.2		YE31/12/2010		Note
REVENUE	12,707	27,955		12,980
Staff cost	2,155	4,740	17.0%	2,164	16.7%
Directors Remuneration	5	11	0.0%	4	0.0%
Fuel cost	4,195	9,228	33.0%	4,384	33.8%
Depreciation	1,714	3,770	13.5%	373	2.9%
Armotisation of Intangible assets	43	94	0.3%	33
Aircraft maintenance	342	753	2.7%	1,467	11.3%	A
Commision	317	696	2.5%	487	3.8%
Landing,parking, & overflying charges	589	1,295	4.6%	246	1.9%
Handling +in flight meal +crew+passenger costs	1,416	3,114	11.1%	1,389	10.7%
Rental of aircraft	553	1,216	4.4%	1,607	12.4%	B
Material/Oth Engineering	375	826	3.0%	71	0.5%
Adevertising & Promotion	210	463	1.7%	93	0.7%
Computer booking system				184	1.4%	C
Insurance	58	127	0.5%	60	0.5%
Compay accomodation / Rental	142	312	1.1%	181	1.4%
Other Operating Expenses	532	1,170	4.2%	582	4.5%
	12,644	27815.92		13,324	102.7%
Operating Profit/(Loss)	63	139.48	0.0%	(344)		D
Derivative Gain				139		E
Finance Expenses (net)	-68.9	-152		-138
Finance Income	49.5	109		71
Other Operating Income	92	202	0.7%	536	4.1%	F
Associated Companies/JV	149	328		18
PROFIT BEFORE TAXATION	285	627		282

Those highlighted in color : blue and red are items that seems to be defy logic and common sense and are further explored below:

A) Aircraft maintenance

MAS is about half the size of SIA or put in another way MAS has fewer aircrafts than SIA but why the aircraft maintenance was so much higher than SIA. SIA use about 3% of sales to take care the maintenance but MAS use a whopping 11% of its sales revenue to service the aircraft. AND not only the % to sales was high , the absolute figure was also higher than that of SIA. I could not help but guess and hopefully I am wrong that someone are getting really rich at MAS and indirectly the nation's expenses.

If MAS could negotiate /control this at par with SIA it would have made/add RM700 million profit

Should MAS management give the shareholders and rakyat ,the indirect shareholders, some thorough explanations ????

But I could guess the explanation:- MAS's planes are older etc etc etc ..... Will you the stakeholders accept such explanations, if any ???

B) Rental of Aircraft

Is MAS leasing more aircraft than SIA ? Could the MAS management provide some details for comparison ????? Why the rental paid higher than SIA both in term of % to Sales and absolute figures. Without the number , one could only guess and wonder ???

C) Computer reservation system booking fees

I could not find similar item in SIA report. MAS auditor or the directors have treated this items separately Are the auditor/directors trying to tell the shareholders to look hard at this RM 184 million . IS MAS paying something other airlines that could avoid ?????????????? Explanation needed ..............................................................................

D) Operating profit; no,not profit it was LOSS

MAS actually was not making $$ but loss RM 344 million in operation if the Income statements was arranged according to SIA format.

MAS audited accounts treated the interest income as operating income . To be consistent with SIA presentation , I put the other income below the operation.

E) Derivative Gain

SIA Income statements do not have this item. Is MAS betting or gambling instead of hedging the fuel prices ???? Will MAS make a wrong bet in the future and change the gain to loss ???

F) Other Income

The total Other Operating Income shown in the Financial Statement of MAS is RM607 million after taking out the interest income and dividends there still left 536 million without detail . This is not a small figures as it take up 4% of sales and without this MAS will suffer a loss instead of profit before tax. MAS management should provide more details and information on this other operating income. In 2009 this was RM265 million.

Is MAS entering into other businesses other than airline without the shareholders approval ?????????????

Well after looking at the financial statements , one would have more questions than answers............................ Answers will most likely unavailable !