The poor performance of MAS in the last two quarters was a matter of concern to many. Then came the explosive announcement that Malaysia Airlines and Air Asia will swap shares in a deal which will see Tan Sri Tony Fernandes become the single biggest shareholder. The deal was apparently stealthily sealed after negotiations that stretched for about a year.
Many are alarmed over this development which poses serious concerns that Air Asia can dominate MAS thereby reducing competition between the two to the detriment of end-users. In the long run, this could lead to a virtual monopoly of the domestic airline industry. In such a scenario, we will be exposed to the risks and concerns associated with such a monopoly bearing in mind that other cronies and political power brokers could be lurking in the shadows.
Is there a conflict of interest notwithstanding his purported ‘non-executive’ position since the swap is accompanied by effective participation of Tony Fernandez and his nominees in the board of MAS? Have corporate governance rules been violated? Surely they have a framework of laws and guidelines for economic efficiency and ensure a firm's responsibility towards its investors and stakeholders. However, considering the level of secrecy in which this was discussed, we must question the level of transparency in the decision-making of a national issue. In fact, the Securities Commission must investigate if there any irregularities exist.
Remember back in the old days when Telekoms Malaysia monopolised the industry and service was atrocious? Only when the industry was opened to competition did we see service improve (at least some improvement). In the UK, gas and electricity is extremely competitive. Even foreign companies operate in the UK. In Malaysia we only have Gas Malaysia and TNB. That is why service is bad and expensive. In the UK, dozens of companies need to fight for the business.
With competition it can only mean good news for the consumer. And that is why many countries have anti-monopoly laws to protect the consumers.
In the US, the MAS-Air Asia deal would be blocked and citizens like you and me can go to court to file a class action suit to get the court to prevent such monopolistic mergers.
When Singapore joined Malaysia in 1963, it shared Malaysia's common currency. Later on, Singapore was expelled, became independent in 1965 and lost its monetary union. In 1967 Singapore established a Board of Commissioners of Currency and released its own notes called the orchid. The orchid is now known as the dollar (SGD). Today, the exchange rate is RM2.5: SIN$1.
Looking back, Malaysia-Singapore Airlines (MSA) came into being in 1966 as a result of a joint ownership of the airline by the governments of Malaysia and Singapore. After six years, the airline ceased operationsin 1972 when both governments decided to set up their own national airlines. That was how Malaysian Airline System, now called Malaysia Airlines, and Singapore Airlines were formed.
According to a SIA report dated 28th January 2011, the third quarter of 2010-2011 operating profitWAS UP 58% to SIN$509million (RM1.27billion). And how much does MAS make?
B.K. Sidhu of The Star reported that Malaysia Airlines (MAS) NET PROFIT FELL BY 65% to RM226mil for the fourth quarter ended Dec 31, 2010 from RM640mil a year earlier due to higher cost of fuel despite carrying more passengers during the quarter. The fourth quarter is normally the most profitable quarter for airlines. In terms of revenue the airline reported an 8% a rise to RM3.6bil from RM3.3bil previously.
In short, the two reports show that SIA makes about MORE THAN FIVE TIMES what MAS makes and that is taking MAS accounts at 'face value". With a fine-toothed comb, the figures may be less or even be a loss.
So why merge MAS and Air Asia when we should be talking about the poor performance of MAS? South of the border, a premium airline is raking in money while in our own homeground, the opposite is happening!! Why can't MAS stay afloat despite the many injections over the years? (ReadIs Mas Still EMAS?)
Air Asia is a very highly geared company so how can that merger help MAS? Is this another DRB-Hicom reprise?
Years ago, DRB was bleeding and highly geared. What happened was not actually a merger but more like Hicom buying over DRB's debts. To add insult to injury, HICOM 'bought' DRB but DRB ended up owning Hicom - a classic case of a a reverse takeover.
So are we going to see the same here?
Recently, BBC announced that Air Asia is buying 200 of the A320neo jets, in a deal worth about $18bn (£11bn). India's IndiGo confirmed an order for 180 planes from Airbus. The report said the new versions of the A320 are in demand as their new engines make them more fuel-efficient and cheaper to run. Airbus said that the Air Asia deal made the Malaysian carrier its biggest airline customer for its single-aisle product line. Altogether, Air Asia has now placed firm orders for 375 aircraft from the A320 family, with 89 already in service.
In view of the current economic situation, this deal is worrisome. If they were to cancel the deal, they would have to pay a heavy penalty. So, with the swap shares deal, does it mean that MAS is going to 'buy' Air Asia's 'debts' or financial commitments and then Air Asia ending up owning MAS? Is this an asset stripping move in the corporate game where the rakyat end up as losers? It certainly smells like DRB-Hicom all over again.
Is the Govt selling its crown jewels? If so, why to to Air Asia? Was this deal a sweetener to keep the Air Asia HQ within Malaysia instead of Indonesia? (Read THIS.)
As for now, the only way for MAS to make it is to merge with SIA!!! Then, we can be almost 100% sure it will be profitable!! Does this deal benefit the interests of the minority at the expense of the majority? What about the employees of MAS who have served our national carrier with selfless dedication and loyalty in spite of the circumstances they have been facing?
For further reading:
1. MAS profit down on higher fuel costs
2. Is MAS still EMAS?
3. The MAS Scandal
4. Top 100 Airlines Sites Directory - Singapore is Number 5. Can you find Malaysia in the top 100? :-)
5. Travel Weekly - Top 100 Airlines
Many are alarmed over this development which poses serious concerns that Air Asia can dominate MAS thereby reducing competition between the two to the detriment of end-users. In the long run, this could lead to a virtual monopoly of the domestic airline industry. In such a scenario, we will be exposed to the risks and concerns associated with such a monopoly bearing in mind that other cronies and political power brokers could be lurking in the shadows.
Is there a conflict of interest notwithstanding his purported ‘non-executive’ position since the swap is accompanied by effective participation of Tony Fernandez and his nominees in the board of MAS? Have corporate governance rules been violated? Surely they have a framework of laws and guidelines for economic efficiency and ensure a firm's responsibility towards its investors and stakeholders. However, considering the level of secrecy in which this was discussed, we must question the level of transparency in the decision-making of a national issue. In fact, the Securities Commission must investigate if there any irregularities exist.
Remember back in the old days when Telekoms Malaysia monopolised the industry and service was atrocious? Only when the industry was opened to competition did we see service improve (at least some improvement). In the UK, gas and electricity is extremely competitive. Even foreign companies operate in the UK. In Malaysia we only have Gas Malaysia and TNB. That is why service is bad and expensive. In the UK, dozens of companies need to fight for the business.
With competition it can only mean good news for the consumer. And that is why many countries have anti-monopoly laws to protect the consumers.
In the US, the MAS-Air Asia deal would be blocked and citizens like you and me can go to court to file a class action suit to get the court to prevent such monopolistic mergers.
When Singapore joined Malaysia in 1963, it shared Malaysia's common currency. Later on, Singapore was expelled, became independent in 1965 and lost its monetary union. In 1967 Singapore established a Board of Commissioners of Currency and released its own notes called the orchid. The orchid is now known as the dollar (SGD). Today, the exchange rate is RM2.5: SIN$1.
Looking back, Malaysia-Singapore Airlines (MSA) came into being in 1966 as a result of a joint ownership of the airline by the governments of Malaysia and Singapore. After six years, the airline ceased operationsin 1972 when both governments decided to set up their own national airlines. That was how Malaysian Airline System, now called Malaysia Airlines, and Singapore Airlines were formed.
According to a SIA report dated 28th January 2011, the third quarter of 2010-2011 operating profitWAS UP 58% to SIN$509million (RM1.27billion). And how much does MAS make?
B.K. Sidhu of The Star reported that Malaysia Airlines (MAS) NET PROFIT FELL BY 65% to RM226mil for the fourth quarter ended Dec 31, 2010 from RM640mil a year earlier due to higher cost of fuel despite carrying more passengers during the quarter. The fourth quarter is normally the most profitable quarter for airlines. In terms of revenue the airline reported an 8% a rise to RM3.6bil from RM3.3bil previously.
In short, the two reports show that SIA makes about MORE THAN FIVE TIMES what MAS makes and that is taking MAS accounts at 'face value". With a fine-toothed comb, the figures may be less or even be a loss.
So why merge MAS and Air Asia when we should be talking about the poor performance of MAS? South of the border, a premium airline is raking in money while in our own homeground, the opposite is happening!! Why can't MAS stay afloat despite the many injections over the years? (ReadIs Mas Still EMAS?)
Air Asia is a very highly geared company so how can that merger help MAS? Is this another DRB-Hicom reprise?
Years ago, DRB was bleeding and highly geared. What happened was not actually a merger but more like Hicom buying over DRB's debts. To add insult to injury, HICOM 'bought' DRB but DRB ended up owning Hicom - a classic case of a a reverse takeover.
So are we going to see the same here?
Recently, BBC announced that Air Asia is buying 200 of the A320neo jets, in a deal worth about $18bn (£11bn). India's IndiGo confirmed an order for 180 planes from Airbus. The report said the new versions of the A320 are in demand as their new engines make them more fuel-efficient and cheaper to run. Airbus said that the Air Asia deal made the Malaysian carrier its biggest airline customer for its single-aisle product line. Altogether, Air Asia has now placed firm orders for 375 aircraft from the A320 family, with 89 already in service.
In view of the current economic situation, this deal is worrisome. If they were to cancel the deal, they would have to pay a heavy penalty. So, with the swap shares deal, does it mean that MAS is going to 'buy' Air Asia's 'debts' or financial commitments and then Air Asia ending up owning MAS? Is this an asset stripping move in the corporate game where the rakyat end up as losers? It certainly smells like DRB-Hicom all over again.
Is the Govt selling its crown jewels? If so, why to to Air Asia? Was this deal a sweetener to keep the Air Asia HQ within Malaysia instead of Indonesia? (Read THIS.)
As for now, the only way for MAS to make it is to merge with SIA!!! Then, we can be almost 100% sure it will be profitable!! Does this deal benefit the interests of the minority at the expense of the majority? What about the employees of MAS who have served our national carrier with selfless dedication and loyalty in spite of the circumstances they have been facing?
For further reading:
1. MAS profit down on higher fuel costs
2. Is MAS still EMAS?
3. The MAS Scandal
4. Top 100 Airlines Sites Directory - Singapore is Number 5. Can you find Malaysia in the top 100? :-)
5. Travel Weekly - Top 100 Airlines
- masterwordsmith
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