‘MAS-AirAsia share swap spells doom’

PKR's Rafizi Ramli calls the deal a “short-sighted” and “haphazard” endeavour that will see the airline industry suffering dire consequences.

PETALING JAYA: PKR has predicted that the recently announced share swap deal between Malaysia Airlines (MAS) and AirAsia will spawn a bleak future for the country’s airline industry.

The rival carriers will swap shares in a partnership that will see Tune Air taking a 20.5% stake in MAS while state investment arm Khazanah Nasional will own 10% in AirAsia.

The new alliance will also see MAS focusing on the premium market and leaving domestic routes to the budget carrier.

However, PKR views this development as short-sighted and a prelude to even bigger problems in the future.

According to the party’s strategic director Mohd Rafizi Ramli, the first sign of bad news is the indication that Government Linked Companies (GLC’s) transformation programmes are failing.

He pointed out that this is the third business turnaround plan heaped on MAS and is tantamount to an admission by Khazanah and the government that the previous two have failed.

“Is this an early premonition that the GLC transformation programmes are also failing since MAS’ turnaround is considered a key indicator of its deliverables?” he asked.

“Prime Minister Najib Tun Razak’s administration has increasingly turned to GLCs to funnel public funds for massive projects.

“In fact, 77% of investment in the Economic Transformation Plan (ETP) is being funded by GLCs thus the latest ongoings in MAS is the clearest sign that this much touted economic transformation has also failed,” he added.

Air transport policy needed

Rafizi pointed out that the only reason such a questionable deal has been allowed to transpire is due to the absence of an air transport policy in Malaysia.

And that, he added, has led to the country’s air transport industry continuing to operate on the basis of right connections with the political elite.

“The only way that Tony Fernandes managed to take over AirAsia in 2001 was to knock on (former premier) Dr Mahathir (Mohamad’s) door,” he said.

“If any company wants to launch a new airline today, it will not find any processes or procedures to guide it,” he added.

“In the absence of a specific and holistic national air transport policy it is unlikely that a new player can enter the market to challenge AirAsia’s dictates of the industry. Unless it offers something to politicians in power or if it has direct connections with the prime minister.

“So this is not an issue of MAS’ incompetency or AirAsia’s good business model but a question of an urgently needed national air transport policy,” he stressed.

Predicament for MAHB

Rafizi then highlighted the predicament that this share swap has created for Malaysia Airport Holdings Berhad (MAHB) which he noted has a “less than cordial” relationship with AirAsia.

“With AirAsia being the single domestic player means MAHB only has one customer and the leverage has shifted to the airlines.

“AirAsia now has the power to renegotiate and compel MAHB to accept terms that might be unfavourable to the latter and the public,” he said.

Furthermore, Rafizi added, MAS’ new board of directors will include AirAsia founders, Fernandes and Kamarudin Meranun, which will almost certainly pose a conflict of interest.

“Fernandes and Kamarudin cannot say they wear different hats and that their decisions on MAS are 100% independent of AirAsia’s interests.

“The two airlines are bitter rivals and any decision would to a certain extent be at the expense of MAS and to the advantage of AirAsia,” he said.

“In most countries, this sort of deal would never have stood the scrutiny of corporate governance. What MAS urgently requires now is a strong leadership with depth of knowledge in the air transport industry,” he added.