May Day! May Day! MH Declaring an emergency!

by Dr R@28

• The one power point slide PC by Ahmad Jauhari gave carries very extremely limited information. It does not augur well with the investment community. It took me a while to write a post about MAS turnaround plan as I need to do some detailed fact-finding. As there was very limited public information available, I had to talk to several insiders within MAS senior management. After listening to so many people, I am not convinced that it will succeed. The last few remaining assets would be floated to increase cash flow. The cash will be used to run two airlines under a similar but not the same brand. The existing airline will focus on specific profitable route. The loss making routes will be scaled down. MAS will have had a new premier airline that provides short haul services to business traveller within the region. It will carry limited economy seats. The new airline will offer new career opportunity for MAS employees to migrate at minimal additional cost. This around the bend approach will backfire.

• The airline biggest challenge is the current political climate. The union is holding government to the ransom. They are not being reasonable as they object to any downsizing or scaling down of remuneration and benefits. The company is trapped between these two challenges and is force to approach the situation by creating a new airline. Cutting down the loss-making route arbitrarily without understanding the underlying reasons would be wrong. It would simply reduce the opportunity to make money. I do not think creating a premium airline for short haul trips is a good choice. Many MNC’s are trying to cut down cost. Many companies now maintain a policy that employees can only take business class for trips that is longer than 4 hours. Who will then ride this premium airline? Would the income from the new premium service be able to sustain the whole airline? I am not convinced that it can.

• Based on my prognosis, the next 2 years, MAS will lose everything. The remaining business would have been floated. The negative cash flow would force the airline to sell its remaining business eventually. Once this happen, MAS would have nothing other than billions of debt. The current plan is not good enough. MAS have to do major human resource right sizing especially among the top 20%. Recovery can only happen if a blunt direct approach is taken in totality in all aspect. Is TF accelerating MAS demise?