MAS Ex CEO do responds to blog post

Here is the respond from MAS ex CEO Tengku Azmil for an article posted at blog rockybru relating to issues in MAS. My writing in this post is not about the problem but the willingness of the CEO to put down his explaination in comment section of a blog's post! which would exposed him for direct comment from readers. Even though the issues in MAS must always relevant to all rakyat, but that will be discussed in other post and at other time. By the way,his courage is commendable. 

Tengku Azmil Zahruddin said...

First and foremost, as the CEO, I take full responsibility for the 2Q10 results.

For MAS, the 2nd quarter has always been our weakest quarter and this was further aggravated by higher fuel prices during 2Q10. The average price of jet fuel was USD89.7 per barrel in 2Q10 compared to USD66.7 per barrel in 2Q09.

Whilst we are burdened with the additional fuel costs due to higher prices, the new FRS139 accounting standards which all Malaysian companies have adopted by January 2010, also meant we were hit by paper losses on our hedging instruments due to oil price volatility.

While some have said we would be better off without the hedging, I see it as a form of insurance against the risk of higher fuel prices. It has been barely 2 years since jet fuel rallied to a high of USD180 per barrel. Fuel forms one of the biggest costs for us as an airline, so we simply cannot afford to run unprotected against the risk of even higher fuel prices. Despite seeing the fuel prices dipping now and then, we see a clear and steady trend for fuel prices moving upwards.

Also, if you looked at our results more closely, you would be able to see that we have improved on all operating measures. We carried 18% more passengers, we increased our capacity by 5%, we saw higher revenues and we continue to contain our costs. In fact, our operating losses were a 33% improvement compared to last year, and this takes into account that the fuel prices went up by 44%.

On the subject of my share options, I would like to explain that MAS launched the ESOS scheme in 2007, covering all eligible employees. When I took over as CEO, the decision was made to replace my previous ESOS with a new one to reflect the greater responsibility. However, note that the number of shares granted is dependent on my performance which is tied to the company’s KPIs. In addition, the minimum exercise price was set to be a 20% premium to the share price at the time. This is unusual, as many companies issue share options at zero premium or at a small discount. This means that I will not make any financial gains unless the share price first went up by 20%. Unless MAS performs very well, I do not gain anything from the share options.

Moving forward, there’s no denying there are challenges ahead. We are continuously looking to improve and we remain optimistic about the rest of the year.

Tengku Azmil Zahruddin

Managing Director/CEO

Malaysia Airlines

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