a) Negative operating cash flow for three years – which means it is not generating enough cash to meet its day-to-day operating costs – and has had negative free cash flow, operating cash flow minus capital expenditure, for six years - MAS punya union leaders, please note that when your company is bleeding cash every year, things MUST change. When I say CHANGE, I mean everybody, not the unions asking for management to CHANGE saja!!! When I say CHANGE, everybody must be open to change, are the unions open to change? Or do you barricade yourselves with demands and untouchable issues??!!
b) Downsize - No other choice but to downsize. I do not think this is a situation where you can GROW yourself out of the problem, because when you are negative cashflow, you are already doing a lot of things wrong. Staying the same is a NO-NO, so is getting more bailout funds to be bigger. You have to get to a size where you can compete well, then grow from that successful blueprint.
c) Renegotiate all Unfair contracts with suppliers - MAS can probably solve one third of its problem here. Can I use the word cronyism contracts, maybe I should not, so let's just say unfair contracts. Many of these supplier contracts are not fair no matter how you cut it. I mean, RM25 for one nasi lemak, or RM3.50 for a stick of satay ... pretty hard to justify. I would liek to put that contract up for open tender and see how much you save. Presently Brahim has a RM6.25 billion contract over 25 years @ RM250m a year. This was signed back in 2003, must haul up the management and directors for signing this contract. How to justify 25 year contract? Can we rescind, I think there are ample grounds that the contract may be signed on excessively unfair terms for one party, and that some people in management did not act in the best interest of MAS. Go to courts or go back into the room to renegotiate. Food is just one item, you can assume almost ALL supplier contracts need to be renegotiated, MAS is not supposed to be a charitable foundation for slicing off the fat to reward certain people. Go for fuel distribution contracts, maintenance and supply parts contracts.
d) Staffing - Like it or not 20,000 staff is too many for MAS to shoulder when AirAsia can operate profitably on just one-third. The union, please, do something that is best for everyone, sit down and come up with a viable, fair VSS program. Maybe we target 40% cuts via VSS, and no new hires, and mandatory retirement and attrition for 3 years. As staffing is the number two cost after fuel, you have to cut there. Staff must also agree that all units/departments must have KPIs to maintain, e.g. on time arrival and departure, lost luggage, time to retrieve luggage, wait lines for check in, etc... things that really matter to the end customer.
e) Outsourcing - This is one area which MAS must do really well. I do not think they do this well at all. If they wanted to operate on-line sales, they would go and create a new department, etc... there are blocks of operations that can be managed via outsourcing without reduction in quality and branding. MAS on line site still looks terrible and hard to navigate. Compare that to AirAsia's site, try and count the number of clicks to get to a decision, the ease to navigate search functions, how much info detail you "unecessarily require" potential clients to key in, etc... there are metrics to ensure that the outsourced components can be met by outside parties. Other outsource contracts: cleaning, etc...
f) Brand positioning - MAS has no other edge but to fight against AirAsia and LionAir on pricing. So you are offering to behave like a budget carrier while your cost structure is full service ... anyone from primary school can tell you that it will not work. Because, maybe some will opt for MAS instead of AirAsia if price is almost the same but that is for that ONE flight. At the day travellers will opt for whichever has the better time schedule to suit themselves as long as cost is not that big a difference. Hence unless MAS has a flight at the same time as all AirAsia flights, it will never work out. The last 3 years have shown that that strategy will only result in AirAsia's profits rising and MAS fortunes continuing to dwindle.
Unfortunately, I do not see a way out for MAS here. The only viable solution is to merge with AirAsiaX. MAS is on the turf of the best managed low cost carrier IN THE WHOLE FUCKING WORLD. We are not talking of Malaysia vs Singapore type of comparison, we are talking of Malaysia vs (Singapore/HK, Norway, Germany, USA) kind of comparison. Unfortunately, it is not entirely MAS fault, even if you get Cathay Pacific to operate from KL as a base, Cathay Pacific will also die, but not as horribly as MAS as they do not have crony capitalism as a cornerstone in their business model, but Cathay Pacific will also die in KL if forced to compete on the same turf as AirAsia - THATS BECAUSE KL/Malaysia is not a hub for business travellers, it is the best hub for budget travellers, thanks to the fact that we have over 2mn foreign workers alone and probably another 2mn illegals.
MAS also needs to get into their head that the bulk of the travellers within their network are flying for less than 4 hour type destinations, which makes business travel not that necessary. Plus you do not have the critical mass for longer haul flights, a big problem that AirAsiaX also has at the moment.
g) Khazanah Baby - All that I have written, Khazanah knows it already. Khazanah, which owns 69% of MAS, backed the recent rights issue. In 2012, Khazanah had tried to cut its stake in the airline, but the powerful Malaysian Airline System Employee Union (MASEU), which represents the airline's 20,000 workforce, rejected a share swap deal with AirAsia. Khazanah has no choice but to put MAS into bankruptcy, only then will the unions come to their senses and only then can MAS renegotiate all the contracts (cause if they do not, they get nothing in the long line of claims against the company, not to mention the years it will take).
As of end-December, MAS had total debt of 11.7 billion ringgit. Its next major debt repayments are due in mid-2022, when US$455.2 million worth of bonds mature. Bankruptcy need not be a bad thing, Japan Airlines' emergence from bankruptcy to become Asia's most profitable airline in 2012, but the carrier's union really need to play ball during the major restructuring.
h) One World - MAS joined the One World Alliance thinking that could act as a feeder and distributor to higher load factors for them. Unfortunately, we do not have that many global travellers that need reconnecting all the time. The loyalty programs that real travellers in this region RELY on are within their credit cards, they redeem flights, biz class tickets all within their credit cards.
Mr. Government,
You cannot expect MAS to do wonders when you "allow" MAS to shoulder so many burdens, unrelated costs, cronyism ... on a flawed business model, on a management that have their hands tied all the time .... AND EXPECT MAS TO COME OUT SMELLING LIKE ROSES!!! You can do that back in the 80s and 90s when competition was not that hot. Now, every single flight sector, biz class, first class, loyalty prgrams, etc... get enormous competition from all corners. You cannot protect MAS anymore.
Like Russell Peters would say, "Be a man", come out and make the hard decisions, anyway the real election isn't till a few more years, you can lose the 20,000 voters (and 50,000 indirect voters) but you will gain some credibility. ... and learn from it, ensure all GLCs operate competitively and not laboured under unrelated costs and leakages by cronyism capitalism.
Remember, if you do not make the hard decisions WHILE you can, eventually somebody else will make it for you, and it will look a lot less pretty then (I know that is hard to picture).
johnny cash
it s to late to do anything
2014-05-31 23:54