What ex MAS Abdul Aziz says?

MAS ex-MD Abdul Aziz cautious of MAS-AirAsia share swap
Written by theedgemalaysia.com
Wednesday, 14 September 2011 13:48

Tan Sri Abdul Aziz Abdul Rahman has driven MAS to its peak during his tenure as Managing Director and CEO from 1982 until 1991. Surely what this learned figure want to say about what is going on now have merit and substance that we need  to at least listen to;

KUALA LUMPUR: MALAYSIAN AIRLINE SYSTEM BHD  (MAS) former managing director Tan Sri Abdul Aziz Abdul Rahman has expressed caution about the share-swap deal between MAS and AIRASIA BHD , pointing out this corporate exercise may not resolve MAS’s woes.

He was quoted saying by Bernama on Wednesday, Sept 14 that the share swap would not necessarily mean a solution to the ailing national carrier which continues to suffer losses due to high operating costs.

MAS recorded an operating loss of RM413 million year-on-year in 2Q ended June 30 compared to a RM286 million loss a year earlier, due mainly to higher fuel cost.

Abdul Aziz, who was MAS managing director and chief executive officer from 1982 till September 1991, also said MAS and AirAsia should disclose more details about the nature of their collaboration to clear the air among various stakeholders in the country.

He pointed out that instead of a share swap, stakeholders should find out the reasons for MAS' current position, which in was due to two possible causes.

“Firstly, it was due to lack of good management over the past 15 years and secondly, it may be caused by the government’s failure to have an orderly air transport policy.

"As far as I am concerned, AirAsia was initially approved on the ground that it travels to international routes not taken by MAS instead of what happened later, the frills-free airline was also involved in domestic routes.

“With Malaysia being a ‘price-sensitive’ market, this collaboration would also bring about continuous competition for MAS," said Aziz, when interviewed on “Kerusi Panas” (Hot Seat) programme hosted by Wan Syahrina Wan Abdul Rahman of Bernama Radio24 on Tuesday night.

He said domestic travellers would opt for lower airfares rather than premium travelling.

“Under such circumstances, both airlines are not cooperating but rather competing with each other in which MAS will ultimately lose out as it relies heavily on premium air travel service,” he said.

Bernama said the share-swap deal signed last month expected to see MAS focusing on premium travel while AirAsia maintaining its grip on the low-cost sector.

Aziz said it was also illogical to conclude that domestic airlines’ competitiveness in the international market would be enhanced by having a single entity through such collaboration as MAS already have the capabilities to do so.

“This move is unnecessary as MAS already has its own edge to compete globally such as quality services although it is still lacking in terms of a strong marketing strategy compared to the airlines in the Middle East,” he said.

For the future, Aziz suggested that MAS changed its way of handling flights such as introducing low-cost seats within its fleet of aircraft in order to stay competitive.

He said a thorough study was needed should such a plan was taken into consideration.

To recap, in the second quarter ended June 30, 2011 MAS posted net loss of RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

For the six months ended June 30, MAS’ net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010, despite posting higher revenue of RM6.68 billion, impacted adversely by higher fuel costs.

As for AirAsia, it reported earnings of RM104.25 million in 2Q ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%.

Earnings fell 47.5% from the RM298.93 million a year ago. It said fuel costs increased by 31% to an average US$140 per barrel from US$106 a year ago.

“Fuel costs rose to RM441.67 million in 2Q from RM318.40 million a year ago. Other operating expenses increased to RM45.51 million from RM35.26 million,” it said.

Operating profit was reduced to RM214.80 million from RM222.55 million. Revenue declined 15.2% to RM1.07 billion compared with RM933.40 million a year ago. Earnings per share were 3.80 sen versus 7.2 sen.

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