Turmoil taking toll on MAS

By Lee Wei Lian

April 24, 2012

KUALA LUMPUR, April 24 — Three incidents within just two weeks that forced Malaysia Airlines (MAS) to turn planes around mid-flight raise questions whether the combination of two management changes in less than three years, the controversy over its tie-up with AirAsia and a legacy of old planes are taking a toll on the carrier.

The airline is also facing having its coveted 5-star rating by Skytrax revoked and is in the midst of trying to recover from its worst ever annual loss, while bidding to regain the trust of its employee unions which are opposed to its equity exchange and collaboration with former rival AirAsia.

In less than a month, three MAS flights have experienced technical troubles that forced the planes to turn back — MH194 from Kuala Lumpur to Mumbai on March 30, MH193D on April 15 from Bangalore to Kuala Lumpur and most recently MH2 on April 17 from Kuala Lumpur to London.

File photo of a MAS aircraft at KLIA. The airline said recent flight disruptions were purely coincidental and ‘completely unrelated to staff motivational level’.

The timing of the incidents may also have been unfortunate given that MAS had just appointed a new engineering chief in January — Azhari Mohd Dahlan, who was formerly at AirAsia.

Following the aborted London flight, one news report mentioned the possibility of sabotage over disputes with management, something MAS has dismissed as speculation.

Analysts say that technical issues are widespread in the industry and doubt the recent troubles at MAS have anything to do with the ongoing structural changes at the carrier.

“MAS has one of the best safety records in the world,” said a Maybank Investment Bank aviation sector analyst.

He acknowledged however that a change in management could potentially impact the service levels of cabin crew.

“Whenever there is a change of management, you can’t help but feel demotivated,” he said.

While MAS has had financial troubles in the past, the one thing it could always boast of was its vaunted service levels.

That however could change as Skytrax has placed the airline’s 5-star status under review.

One frequent traveller, Philip Lee, relates his experience on a flight on April 2 to Narita as disappointing given his previous pleasant experiences with MAS.

He said the inflight entertainment system failed to work during the journey despite attempts to reboot it.

“The funny thing is that when we were about to arrive, the steward said that he hoped we had enjoyed the inflight entertainment system,” said Lee.

He noted however that the plane to Narita was an older Boeing while on a flight to Perth on April 15 on a newer Airbus A330, everything went smoothly.

Part of the problem could simply be that MAS’s fleet may simply be showing its age — the MH2 flight to London was on a Boeing 747 — an aircraft type that has already been phased out by Singapore Airlines and which MAS also plans to do the same.

MAS Employees Union (Maseu) secretary-general Abdul Malek Ariff said that recent changes had hit employees’ morale.

“The tie-up with AirAsia is affecting employee morale,” he said.

When contacted over staff morale, the carrier said its employees remained “supportive”.

It also said that the recent flight disruptions were purely coincidental and “completely unrelated to staff motivational level.”

“As proven before, during difficult times and transition periods, the majority have always rallied in support of the company, management and board to implement and execute our business recovery plan effectively and successfully,” said MAS executive vice-president for customer experience Datuk Mohd Salleh Ahmad Tabrani in a written reply to questions.

Mohd Salleh declined to address the potential loss of MAS’s 5-star Skytrax rating directly but said that it was positioning itself to be a “preferred premium airline.”

He said the introduction of the much anticipated A380 aircraft in July would further boost the airline’s product offerings.

“Our cabin crew remain consistently one of the best in the world, consistently delivering exemplary in-flight service,” he said.

MAS has had a turbulent past decade after the government bought back the airline from former corporate high-flyer Tan Sri Tajudin Ramli at RM8 per share or about double the market price at the time.

It then had its books cleaned up in 2002 under the wide asset unbundling (WAU) exercise that was engineered by the BinaFikir consultancy, then led by current Khazanah managing director Tan Sri Azman Mokhtar.

The state-owned airline had two rights issues since the WAU, raking in RM1.6 billion in 2007 and RM2.67 billion in 2010 to fund its operations and fleet purchases.

It was also lacklustre financially, shocking the market with massive losses last year even while rivals such as Singapore Airlines reported profits, albeit reduced.

The national carrier also suffered the indignity of having its market capitalisation surpassed by younger upstart AirAsia after its share price fell to record lows.

A share swap and accompanying collaboration framework with AirAsia unveiled last August was supposed to help put MAS, which posted its biggest ever annual loss in February, back on firmer footing amidst an increasingly challenging aviation environment.

Under the share swap, AirAsia’s main shareholder Tune Air Sdn Bhd exchanged a 10 per cent stake in the budget carrier for a 20.5 per cent share of MAS from Khazanah.

The idea was to have some of the business acumen that took AirAsia from a two-plane outfit to Asia’s largest budget airline in just 10 years rub off on the national carrier.

Following the share swap, the management team led by new managing director Ahmad Jauhari Yahya put together a business turnaround plan last December to help propel MAS back to profitability.

The new management’s efforts to restructure the airline and put it in a more competitive position however caused friction with the unions and employee associations.

Sources also told The Malaysian Insider last month that Putrajaya was having a relook at the share swap and was considering a special entity to take MAS off the hands of its main shareholders, Khazanah Nasional Berhad and Tune Air.

MAS also reviewed its business plans following internal opposition and dropped a proposal for a new regional premium airline.