MAG’s problems a microcosm of what’s wrong with Malaysia

 

From Walter Sandosam

A national carrier is inevitably, in one way or the other, the pride of a nation. It is no different for Malaysia. We collectively shared in the sadness and grief that engulfed us when two planes met different fates – one went missing, and the other was shot out of the sky.

The carrier never fully recovered from the unrelenting media coverage of these disasters. Just a few months ago, however, it posted a modest profit after posting losses for much of the decade and staff were paid a bonus. It appeared that things were picking up.

So what ails Malaysia Aviation Group (MAG) now? The focus now is on the blame game when attention rightly should be on putting things back on a sounder footing. Lamenting on past cronyism and obvious gross mismanagement is mournful. It is a closed chapter

The carrier has clarified that the reasons for the recent negative occurrences were due to, amongst others, staff shortage, especially on the technical side, late delivery of aircraft and global supply chain disruptions.

Should the board of directors and the president/CEO be blamed for this? The directors are seasoned persons of ‘who’s who’ standing who have served in blue chip multinational companies, both locally and abroad. Are they collectively incompetent? Khazanah also falls in this puzzle and by default the Prime Minister who is at the helm.

It appears that there are inefficiencies in the internal political ecosystem. Some policies have worked cross purpose and reflect myopic thinking, especially on new investments without thinking through the effect on locals.

One must bear in mind that the MAG board is not responsible for government policy to expand the aviation sector or to allow new foreign maintenance, repair and overhaul (MRO) outfits to enter the market.

Today, MAG has become a political football and some are milking it to the hilt. It is sad.

Over the years, the country has gone to great lengths by design or fate to shoot itself in the foot, not once but repeatedly. This is because political upmanship continues unabated with thinking limited to the short term. For Malaysia, this is disastrous.

On closer examination, the issues surrounding MAG’s operations, which operate in the aviation sector, represents a microcosm on what is wrong with the nation as a whole. We have made unimaginative and politically expedient decisions when at the crossroads.

Our neighbours appear to have gained a foothold, both in the region and global economy, ironically emulating Malaysia as a success model in addressing economic development.

Firstly, there is the issue of brain drain given meritocracy issues and the decline of the value of the ringgit. It has continued to depreciate due to high debt levels, fiscal and monetary policy and political stability. This notwithstanding relatively high prices for crude oil.

Secondly, the education system is all over the place producing university graduates who are unemployable and lack interest in the pure sciences. Only now, is there emphasis on technical and vocational education and training (TVET) courses to elevate technical competencies and upskill the workforce.

Hence, there is, for example, a dearth of technicians be it in aircraft maintenance and other technical fields. Obviously, we did not have the foresight to place TVET on a higher platform and market it as a viable alternative. Talent has been lost as they serve as despatch riders.

Thirdly, allowing new (MRO) industry competitors, both local and international to set up shop and poach trained local technical personnel is most disturbing. MAG, for example, is experiencing an attrition of its skilled workforce.

Such loss could have been mitigated as practised in the banking industry many years back when there was a penalty to pay for staff poaching especially by new foreign banks.

Lastly, what is most unappealing and disastrous from a reputational risk perspective is that the Civil Aviation Authority of Malaysia (CAAM) has put the carrier on notice – air operator certificate renewal is cut to one year.

What are the regulators telling the world? Look out, our national carrier is on the watchlist presumably on the safety of the fleet, so please in your best interest fly other carriers.

Ineptitude of the highest order is being displayed as alternative options would have managed perceptions better. Malaysia Airlines is definitely not a new ‘fly by night’ operation set up which needs such patriarchal overbearing and micro-managerial oversight

The regulator’s action is most discouraging to the staff who have chosen to stay and give their best. Negative repercussions may be unmanageable.

Deficiencies in the global ecosystem relating to delays by manufacturers in production of spare parts or aircraft deliveries are to blame.

Malaysia Airlines has taken the necessary steps to reduce the number of destinations and take efforts to improve supply chain issues as part of mitigation plans. This is a step in the right direction.

Other steps include embarking on an aggressive recruitment drive. Surely that has been ongoing but obviously without success. At the core, matching competitor compensation packages is a challenge.

This is where the dilemma lies as it will inevitably increase operating costs and leave precious little for investments in new aircraft, refurbishing the fleet and sustainability. With the reduction in flights and aggressive recruitment, the bottom line suffers adversely

It is unfair to fault Malaysia Airlines given the unproductive local ecosystem, created by past and present governments, and compounded further by inadequacies in the global ecosystem.

The national airline needs to be treated better both by the public and regulators given the existing shortfalls in both the local and global ecosystem. Malaysia Airlines has to get its wings back and soar to greater heights as it undoubtedly will with expansion of its fleet. - FMT

Walter Sandosam served as a senior research fellow at a private university, specialising in economics and accounting.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.