Bellew steps on Malaysia Airlines for bigger, better things

A QUESTION OF BUSINESS | Four CEOs in less than three years, and the last two - foreigners both - barely serving out a year of their three-year appointment periods cannot be good for an airline, especially one that is yet to be turned around such as Malaysia Airlines Bhd, which reportedly made a loss of over RM450 million for 2016.

But a rather quick appointment of the fourth CEO, a Malaysian who is currently chief operating officer at Malaysia Airlines, Captain Izham Ismail, may have been rather too hasty in contrast to the first foreign CEO, German Christoph Mueller, with a search taking several months.

The question is whether the new CEO, who takes over on Dec 1, after current CEO Peter Bellew officially leaves, has the necessary breadth and depth of experience as well as the stature to run an airline as complicated as this one, which is currently in the throes of a rather painful restructuring and is still making substantial losses. More on that later.

Mueller quit Malaysia Airlines in April 2016 after barely one year at the helm, citing infamously undisclosed personal reasons; but barely two months later, rumours floated he was going to join Emirates, which he did in September as chief digital and innovation officer. So much for personal reasons!

What was puzzling was that Malaysia Airlines did not seem to have an agreement to stop Mueller from going to another airline for a long-enough period of time. It also highlighted serious conflict-of-interest situations as Mueller had negotiated extensive code-sharing agreements with Emirates as he downsized Malaysia Airlines’ operations, relying on Emirates to make many international connections.

Was Mueller good for Malaysia Airlines? I examined this question in a column last year after his departure was announced. He was a cost-cutter and he slashed routes in addition to the planned layoff of 6,000 staff earlier under a RM6 billion rationalisation programme by Malaysia Airlines owner, Khazanah Nasional, in 2015. This is in addition to RM17 billion spent on the airline over the previous 14 years to make a total of RM23 billion.

However, in my opinion Mueller, as explained in that column, did not address the underlying problem - declining yields (a measure of how much revenue was being obtained per seat) even as load factors (a measure of seat utilisation) rose. Simply put, Malaysia Airlines was filling up planes by offering cheap fares, often lower than that of low-cost carrier AirAsia.

One would have believed that Malaysia Airlines, has learnt the lesson - to make CEO tenures firmer and contracts more binding. But the same problem recurred with Bellew.

A great betrayal

Bellew, the previous chief operating officer who was hired by Mueller, became CEO in July 2016 after Mueller’s departure. Now a little after a year into his three-year contract, he is going to rejoin European low-cost carrier Ryanair as chief operations officer on Dec 1. Bellew was previously director of flight operations at Ryanair, leaving in 2014 and joining Malaysia Airlines in September 2015 - it looks like he had, unlike at Malaysia Airlines, a long “gardening leave” before joining another airline. 

The surprising thing about his appointment was that the announcement came from Ryanair on Oct 17 and stated that he will join Ryanair in Dublin on Friday, Dec 1. Malaysia Airlines only then issued a statement which went as follows:

“Malaysia Airlines takes note of the unexpected announcement (my emphasis) by RyanAir Holdings PLC to the London Stock Exchange regarding CEO Peter Bellew. At a press conference with Malaysian and international media on 27 September 2017, Bellew had expressed his commitment to Malaysia Airlines when asked to comment on speculation that he would rejoin RyanAir. He said that he was happy to be in Malaysia and that the turnaround of Malaysia Airlines would be ‘the greatest achievement of my life’”. (Bellew, however, maintains he sent his letter of resignation to Malaysia Airlines on Oct 8.)

Note, “the greatest achievement” of his life. If that was so, why did he leave Malaysia Airlines? Did he lie when he gave that commitment to stay in Malaysia Airlines? “National service,” he said in a personal statement. He wanted to go back to his country, to the people he loved. He denied there was political interference, he said that it was not because of Prime Minister Najib Razak, and he said it was Malaysia Airlines’ decision to purchase Boeing planes, not Najib’s.

So this well-known corporate figure, who should have known the sanctity of contracts, has broken a contract with impunity with Malaysia Airlines, and there seems to be nothing that the airline can do about it.

Despite all of Bellew’s talk about this and that and how he loved Malaysia Airlines and its staff and everything is on track to turn it around… blah, blah, blah… there is one and only one reason he is going to Ryanair - it’s a better job for him - bigger, more prospects, probably more money.

Like Mueller before him, Bellew used Malaysia Airlines as a stepping stone to bigger, better things. And like Mueller before him, Malaysia Airlines is strangely powerless to do anything about it. The lesson about firmer, more secure contracts for CEOs had not been learnt.

There is no question about it - Bellew stepped on Malaysia Airlines on his way to bigger and better things. He left the airline at a crucial time in its turnaround programme, leaving it in a turbulence without proper and fit local professionals in place to take over. Despite all his talk, he has seriously jeopardised the turnaround programme for the airline and put it at significantly greater risk, rudderless in a perilous environment.

Malaysia Airlines and Malaysia owe neither him nor Mueller any debt of gratitude. They used and abused the airline for their own purposes, postponing turnaround and delaying and damaging the build-up of local capability to run the airline. They betrayed Malaysia’s trust in them, no less. 

What about the new CEO?

Is Malaysia Airlines compounding the problem by appointing a CEO who may not be quite ready for the job? Let’s look at what Malaysia Airlines says about the new CEO:

"Captain Izham (photo) has been integral to the airline’s ongoing turnaround effort. As COO, he was responsible for the operations division, which includes flight and airport operations as well as engineering. He led the restructuring of the engineering division for more efficient and leaner operations, and was also responsible for the airline’s fuel savings initiative ... Izham has 38 years of experience in the aviation industry, having started his career with Malaysia Airlines as a pilot in 1979.

"He broke world aviation records when he flew Malaysia Airlines’ first B777-200 eastward from Seattle to Kuala Lumpur.” That flight, Malaysia Airlines said, had set a world record for the longest and fastest round-the-world flight by a commercial airliner, with a total flight time of 41 hours and 59 minutes.

But how is it relevant to running Malaysia Airlines as a CEO? And what did it do for Malaysia Airlines at that time which was ravaged then by an inept CEO and major shareholder, local tycoon Tajudin Ali who took over in the early 90s and ran the airline into the ground?

“Appointed to a management position just 10 years after joining Malaysia Airlines, he has climbed through the ranks over the years, including as Senior Instructor Pilot, Fleet Manager, and Director of Operations. Prior to becoming COO in 2016, he served as CEO of MASwings, Malaysia Airlines’ sister company in Sabah and Sarawak,” the statement continued.

It’s not the most impressive of CVs - MASwings runs rural air services in Sabah and Sarawak with small planes. He could be a support person but a CEO? Does he have business qualifications/expertise on top of his pilot credentials? Does he have international exposure? Does he have the ability to navigate Malaysia Airlines through what is probably its toughest times ever? Shouldn’t the board have taken more time to consider someone more suitable, whether foreign or local?

That the board itself may have some concerns about him is indicated by the fact that there will be an interim executive committee. “To ensure a smooth transition, a Board Executive Committee will be in place for up to six months. It will be led by Chairman Tan Sri Md Nor Yusof and will include Board members Tan Sri Krishnan Tan Boon Seng, Tan Sri Zamzamzairani Isa and Mr Sheranjiv Sammanthan,” Malaysia Airlines said.

Captain Izham has many things on his plate - he needs to get revenue management on track, he needs to rebuild the brand, he needs to get back Malaysia Airlines' five-star rating lost in the madness of unhindered cost cutting which may have been too much in hindsight, he needs to reconfigure the fleet, he needs to keep morale up, and at least keep up with the scheduled turnaround to profit next year.

He needs to do this even as he builds up teams to execute his priorities - not an easy task at all. And he needs to do this when the airline is considerably weakened by the departure of two foreign CEOs in slightly more than two years - leaving in tatters Khazanah Nasional’s experiment to get foreign CEOs and hence top expertise to run the airline.

Much rests on the shoulders of Captain Izham - will it be too much for him? Could someone better be chosen? Will the country suffer yet again from poor management of the national airline?

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P GUNASEGARAM can’t recall a foreign - unless you call an ex-Malaysian foreign - CEO at Singapore Airlines, one of the most successful full-service airlines in the world. Email: t.p.guna@gmail.com.- Mkini