The 7th MAS Bailout in 13 Years

Khazanah has worked out a "12 Point Plan" to bailout MAS. Someone said this "12 points", "Newco" etc are typical Mckinsey talk. The con-sultans are making money again.  Khazanah does not have the smarts to sort out this type of mismanagement.  Their mismanagement created this mess in the first place.  

(By the way dont ask how Medini is doing. The Chinese developers - from China - are giving away FREE RM1.0 million apartments in south Johor fo every purchase of an apartment in Shanghai !! Thats how bad the property situation is in Johor.)

I was reading BK Sidhu’s story about MAS in The Star yesterday (Sat 30/8/14).  BK is a wonderful writer. She can make things look so good and then suddenly she gives a duku. 

First lets start with a joke. The PM says injecting RM6.0 billion into a Newco to save our national airline operations (aka MAS) from going under is NOT a bailout.  The PM says its an investment.   And the PM feels that he has outsmarted everyone. 

The real joke is when the PM says that every Ringgit from the RM6.0 billion "investment" in Newco will be recovered. This is where BK delivers a duku – “Since taking over MAS in 2001…Khazanah has injected more than RM7.0 billion into MAS, which Azman (Mokhtar) does not think would be recoverable.”

If the super dunggus could not recover RM7.0 billion in 13 years, how on earth are the same super dunggus going to recover RM6bil in what THREE years?  Or is it 20 years now? 

And folks, this bailout is NOT RM6.0bil ok. MAS has debts totalling RM11.7bil. Who is going to tanggung those RM11.7bil debts?  The short answer is YOU,  Mr and Mrs Rakyat Malaysia Suckers. For example read this : 'the plan calls for conversion of some debt into equity. Kumpulan Wang Persaraan (KWAP) agreed to swap its existing RM750mil sukuk with ordinary equity.'  

There you are folks – already a RM750mil hutang has been absorbed by you and you, Mr & Mrs Rakyat Malaysia, just like that. So now the bailout will be RM6.0bil + RM750mil = RM6.75bil. 

Ok a few more questions. MAS does not even own their building anymore. They do not own any airplanes. All their airplanes are owned by Penerbangan Malaysia Bhd (from that WAU bailout). So how in Allah's name did they stack up RM11.7bil in debt? Hutang apa ini RM11.7bil?

I believe there will be more ‘absorption’ of this RM11.7 billion debt. Why? Because if you transfer all this RM11.7bil debt to that Newco which they are planning, it will kill Newco even before a single flight takes off.

People in the know say that MAS’ local bankers (err CIMB and Maybank??) will also write off some of their portion of that  RM11.7bil debt.  Bankers call it a ‘haircut’. Since CIMB and Maybank are GLCs, it actually means you and you again - Mr & Mrs Rakyat Malaysia Suckers.  The Chairman of CIMB is the PM's brother. Do you think he is going to do anything to embarrass his brother the PM? Not likely. If you feel embarrassed so what? Who cares?

The question is how much more of MAS RM11.7bil debt will be 'turned into equity', 'haircutted' by the GLC banks etc?  Khazanah is not divulging this part of the story.

And here is another nightmare.  Folks say that the new MAS Act will also authorise the Minister of Finance Inc to issue gomen bonds to raise funds to retire some of that RM11.7bil MAS debt.  To be repaid  from tax collections. Thats you and you again Mr and Mrs Rakyat Malaysia.  

So the total bailout is NOT RM6.0bil. It is going to be much, much more than RM6.0bil.  Err...PM's Advisors....ente semua boleh faham ke semua isu ni? Ini belum lagi high finance tau. Ini baru arithmetic Darjah Lima.

This 7th bailout of MAS will wipe out ALL the projected GST collections of RM5bil - RM6bil ??  So Mr and Mrs Rakyat Malaysia, you will be paying GST taxes to pay for the super dunggus incompetence at Khazanah Nasional.

Which is why I feel MAS will end up selling their family silver namely MAS Kargo, MAS Engineering, the CEO's car and so on. They have to sell assets to reduce debt. And if the assets are sold to cronies or to Khazanah itself, they will engage in the "Buy High Sell Low" business model.  Just wait and see. (Like that food catering contract lah). 

Of the RM6bil bailout, they say a sum of RM1.4bil is for the "privatisation of MAS". Come again? What exactly are you paying for with that RM1.4bil?

Another RM1.6bil will be used to ‘shut down’ the existing company. Come again? Why are you paying RM1.6bil to shut down a loss making company? Why does it cost RM1.6bil to shut down a company?

They say some of that money will be used for VSS to layoff some 6000 employees. Ok fine. But here is a tiny ‘by the way’ fact. Some of the RM1.6bil will be used “to pay penalties for early termination of contracts with suppliers’.

We need to know who are these suppliers and how much they are being compensated? Most importantly we want to know if the former PM’s brother’s company (that food caterer) will get any of these penalty payments. If so, how much? Don’t be shy.

I have found new friends in Parliament who I can pujuk to ask these questions when the next Parliament session begins.   Sawadeekap.

By the way, I want to register a duku here. Say there is a very senior management executive in MAS whose sister is also a major spare parts supplier for MAS aircraft engines. Doesn’t that raise conflict of interest issues?  It may even raise corruption issues.  Well thank  Allah this is just a fluke. I just made up the story.   Its not true at all.  Just like Mary Jane is not a girl or even Chinese.

But the food catering company that has an almost monopoly supply of inflight meals to MAS was  owned (now partly) by the brother of the present  Advisor to MAS (the ex PM). Doesn’t that raise conflict of interest issues? Yo super dunggu, what do you think?  And that is how we lost the entire airline. They flew it into the ground.

Now they say the CEO Ahmad Jauhari will leave by end June 2015. That is nine months away. Shouldn’t he leave now? So that you can appoint a new CEO soonest. If changing the CEO is a good thing, then why keep the 'old' CEO for another nine months? For your information, nine months is three full quarters. 

So this means there will be no new CEO for three full quarters? If Ahmad Jauhari is not going to be involved in the restructuring, then why pay him CEO salary for nine more months? And please dont say that he will be involved in the restructuring. Because if he is helping in the restructuring, then why change the CEO? But if the 'old' CEO is roped in to plan the restructuring, wont that be committing suicde again? Just thinking aloud. What do you think?

Here is a silly question – does this mean that all the super dunggus in Khazanah will still achieve all their KPIs? Which they have been achieving non stop for the past 11 years?

(Err..it will be September soon. How many TNB shares is Khazanah planning to sell this year? You know to make the books look good.  Or other “blue chip” counters that dictator Tun  Dr Mahathir gave you – all those years ago).

Why fire just the CEO? Fire the entire line up of the super dunggus at Khazanah. The music has stopped and the super dunggus have no chairs to sit on. The musical chairs game is over.

Unless they find another GLC fellow, maybe a toll highway manager, to become the CEO of MAS. Or maybe a toll collector.  Talk is Jamaludin the former Maxis guy will be roped in to become the new CEO of Newco.   If that is the case then why employ McKinsey or any other con-sultan to do a global search for a new CEO? Buang duit saja.

The consultans are getting rich from this thing again. You and you Mr and Mrs Rakyat Malaysia are being suckered again.


By the way what will they name Newco? Let me guess  Malaysian..jeng..jeng..jeng..Airlines !! 

Folks, so what should be done with MAS? Simple - first change the entire management team at Khazanah. People have been saying this for ages. Khazanah has been mismanaging MAS for 11 years now.  This is the seventh bailout of MAS.  With such a poor track record, do you honestly think Khazanah will manage MAS to success over the next 11 years? I dont think so.

In the past 10 years, Khazanah has appointed FIVE CEOs for MAS. Now they are firing the CEO again. A CEO lasts an average of two years ?? What type of management is that? It is as if some people are intentionally sabotaging MAS from succeeding.

Here is some business management I learnt when I was in Standard Five : Dont appoint an Advisor whose brother is also a main supplier to the company. That is bad business. Other people who are not as kind as me will call it 'conflict of interest'. 

Dont allow your stationery suppliers and napkin suppliers to dictate company policy. You know when you change your logo, change the livery of the A380 or change the address of the HQ (from Subang to KLIA) then you must spend money on new stationery, new business cards, new napkins etc. All this costs money. 

Dont hire the same con-sultans who have been giving you bad advice all these years.

Dont buy spares that you dont need (like spare Black Boxes or spare T-72 axles, thats from another story but you get the meaning).

Find out the best practises in buying fuel in the industry and try to do the same lah.

Bring back those fantastic muffins which MAS used to serve on its flights. Dont buy muffins that are made in a house belonging to family members of a company director.

Chop off those cheap fares for retired Civil Servants. And no upgrades either.  (Can or cannot?)

Expand the engineering business. Other than Boeing and Airbus, prepare now for the Chinese airplanes. Yup they are coming.

Rationalising routes is ok but my suggestion is expand, expand, expand to new and profitable routes. Tora, Tora, Tora. Be aggressive. Identify new routes with potential and start working now to enter those routes. Negotiate with foreign governments, negotiate with other airlines, use our diplomatic leverage (kalau ada). Work out clear delivery dates to enter new routes. If there is profit flying to the North Pole, just do it. Nike !! If there is no profit, then drop it.

It does not matter much if flights are below eight hours or longer than eight hours. As long as there are loads and routes are profitable, just do it. All this requires work. That is a four letter word.

This is still a viable business. MAS has a 67 year track record. Few can match the national airline.  MAS certainly deserves better management. Unfortunately Khazanah is just not the right fit.