The deluge of opinions on MAS-Air Asia saga have been dominating business pages. I have not spoken on the matter for the longest time, but its a brilliant textbook case of what is wrong with Malaysian government linked companies' strategies.
The Blame Game
Former MD of MAS, Tan Sri Aziz Abdul Rahman said that the rot started 15 years back. The highly regulated environment forced MAS into a corner. That the authorities failed to appreciate MAS' role and responsibilities and allowed Air Asia to compete, albeit unfairly, with MAS. Yes, that is absolutely correct. The government did not reassess MAS' position when it allowed Air Asia almost a free hand.
MAS is not just any company, it was set up with a strong historical legacy, and with it came a lot of baggage and was burdened with a lot of routes it had to do, not necessarily profitable. MAS airfares was also controlled to a large extent.
I am all for free market competition, I absolutely abhor the "protection still being given" to other quite silly industries we need not have such as autos, cement, steel and IPPs. However, the government failed to recognise the lumbering giant in MAS and basically allowed for "unfair advantage" to Air Asia. They should have removed the 'shackles' from MAS first before allowing Air Asia in.
The Tajuddin Factor
Well, we know who was behind that saga, and that basically further locked MAS into a long period of vegetation, without any long term plan to match the competition from the 90s till early 2000. There was no coherent strategy to counter the advent of budget airlines.
Positioning
MAS would have been better prepared if it had known its position in the market place. KL is not a business hub, you can try but you have to acknowledge that it will never match Singapore and HK. Malaysians were not aggressive international travellers to start with. Yes, nowadays the situation has improved somewhat but not 10-15 years ago. Hence the international routes, especially to Europe and the US were deadbeats.
Can MAS Return To The Black Consistently?
Yes, but it must shrink its size and reach. You can market yourself as the premium airline but you know you are competing with Cathay Pacific and Singapore Airlines for the same catchment. How many of us take the other two airlines when we travel longer distances instead of MAS, that answer in itself is what's debilitating MAS. When you add the fact that HK and Singapore are also business hubs, they already have natural substantive load factors for most international routes. Hence they can play the market share game by offering Malaysians low fares to connect to other international routes via Singapore and HK (you can also lump Qatar Airways and ANA into the same boat), something MAS cannot do. When they already have pushed past breakeven load factors, to steal market share from MAS is something they will gladly do even at a loss.
The National Prestige
Just because its our national airline does not mean we will ALWAYS MUST fly to New York, LA, and other major European routes. Routes management must be "profitable and can leverage" on existing business model for your passengers. So what if MAS only flies to half their current routes? Most important is to stay relevant and profitable. The amount of money being pumped in is basically our money.
Air Asia
As many as there are admirers, there are detractors. Did they get an uneven handed leg up in the early days? Yes, but it wasn't even a GLC. Fine, I say if it wasn't going to Air Asia, it will always be someone else with a similar business model. Be glad that its Air Asia. There are tons of budget airlines but which has been better managed than Air Asia? Like it or not, the company has a clear idea of their catchment passengers. They know the middle class of Southeast Asia will be major air travellers.
If they did well in Malaysia because of certain favours? You certainly cannot begrudge it for doing just as well in Thailand and Indonesia, can you? They are doing it so much better than any budget carrier in the region, and possibly its the best managed budget carrier in the world, even though Fernandes did not invent the industry.
MAS-Air Asia Tie Up
It should have gone through. Only by lining up interests will MAS get a chance to survive. Now, more than half of MAS routes compete unfavourably with Air Asia, how will you compete? Your premium international routes are also in trouble as well with the problems elucidated earlier. Basically, to survive, MAS will have to be another Air Asia, now why do you want to do that all over again?
If it was me, I would have done an even larger share swap, maybe 30% for 40%. Yes, the flip flop by the government to appease the 22,000 employees union was unnecessary, it just prolongs the pain.
After the hoo-hah WAU asset unbundling, and followed by Idris Jala revamp, MAS had some light at the end of the tunnel. Why not let Jala finish the job, or was the initial results just cosmetic in nature. So now, we have to get someone even better than Jala to redo the whole thing?
Problem Solving
The whole shebang about rebranding, sprucing up the age of planes are all useless. The problem lies in not knowing where your customers are and the options they have. MAS has a terrible balance sheet to do the revamp, how to compete?
Mark my words, I think MAS will go deeper into problems, and we will still have to do the share swap with Air Asia sometime down the line.
The Blame Game
Former MD of MAS, Tan Sri Aziz Abdul Rahman said that the rot started 15 years back. The highly regulated environment forced MAS into a corner. That the authorities failed to appreciate MAS' role and responsibilities and allowed Air Asia to compete, albeit unfairly, with MAS. Yes, that is absolutely correct. The government did not reassess MAS' position when it allowed Air Asia almost a free hand.
MAS is not just any company, it was set up with a strong historical legacy, and with it came a lot of baggage and was burdened with a lot of routes it had to do, not necessarily profitable. MAS airfares was also controlled to a large extent.
I am all for free market competition, I absolutely abhor the "protection still being given" to other quite silly industries we need not have such as autos, cement, steel and IPPs. However, the government failed to recognise the lumbering giant in MAS and basically allowed for "unfair advantage" to Air Asia. They should have removed the 'shackles' from MAS first before allowing Air Asia in.
The Tajuddin Factor
Well, we know who was behind that saga, and that basically further locked MAS into a long period of vegetation, without any long term plan to match the competition from the 90s till early 2000. There was no coherent strategy to counter the advent of budget airlines.
Positioning
MAS would have been better prepared if it had known its position in the market place. KL is not a business hub, you can try but you have to acknowledge that it will never match Singapore and HK. Malaysians were not aggressive international travellers to start with. Yes, nowadays the situation has improved somewhat but not 10-15 years ago. Hence the international routes, especially to Europe and the US were deadbeats.
Can MAS Return To The Black Consistently?
Yes, but it must shrink its size and reach. You can market yourself as the premium airline but you know you are competing with Cathay Pacific and Singapore Airlines for the same catchment. How many of us take the other two airlines when we travel longer distances instead of MAS, that answer in itself is what's debilitating MAS. When you add the fact that HK and Singapore are also business hubs, they already have natural substantive load factors for most international routes. Hence they can play the market share game by offering Malaysians low fares to connect to other international routes via Singapore and HK (you can also lump Qatar Airways and ANA into the same boat), something MAS cannot do. When they already have pushed past breakeven load factors, to steal market share from MAS is something they will gladly do even at a loss.
The National Prestige
Just because its our national airline does not mean we will ALWAYS MUST fly to New York, LA, and other major European routes. Routes management must be "profitable and can leverage" on existing business model for your passengers. So what if MAS only flies to half their current routes? Most important is to stay relevant and profitable. The amount of money being pumped in is basically our money.
Air Asia
As many as there are admirers, there are detractors. Did they get an uneven handed leg up in the early days? Yes, but it wasn't even a GLC. Fine, I say if it wasn't going to Air Asia, it will always be someone else with a similar business model. Be glad that its Air Asia. There are tons of budget airlines but which has been better managed than Air Asia? Like it or not, the company has a clear idea of their catchment passengers. They know the middle class of Southeast Asia will be major air travellers.
If they did well in Malaysia because of certain favours? You certainly cannot begrudge it for doing just as well in Thailand and Indonesia, can you? They are doing it so much better than any budget carrier in the region, and possibly its the best managed budget carrier in the world, even though Fernandes did not invent the industry.
MAS-Air Asia Tie Up
It should have gone through. Only by lining up interests will MAS get a chance to survive. Now, more than half of MAS routes compete unfavourably with Air Asia, how will you compete? Your premium international routes are also in trouble as well with the problems elucidated earlier. Basically, to survive, MAS will have to be another Air Asia, now why do you want to do that all over again?
If it was me, I would have done an even larger share swap, maybe 30% for 40%. Yes, the flip flop by the government to appease the 22,000 employees union was unnecessary, it just prolongs the pain.
After the hoo-hah WAU asset unbundling, and followed by Idris Jala revamp, MAS had some light at the end of the tunnel. Why not let Jala finish the job, or was the initial results just cosmetic in nature. So now, we have to get someone even better than Jala to redo the whole thing?
Problem Solving
The whole shebang about rebranding, sprucing up the age of planes are all useless. The problem lies in not knowing where your customers are and the options they have. MAS has a terrible balance sheet to do the revamp, how to compete?
Mark my words, I think MAS will go deeper into problems, and we will still have to do the share swap with Air Asia sometime down the line.
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