MAS-Air Asia Share Swap Deal

The Federal Government’s decision to swap a 20.5% stake in MAS for a 10% stake in AirAsia warrants a closer scrutiny in light of various ramifications that arise out of the exercise.

For a start, the deal amounts to Khazanah Nasional Berhad’s tacit admission that the two Business Turnaround Plans (BTPs) implemented since 2006 under the stewardship of two CEOs have failed. The more pertinent issue is whether this is an early premonition that the GLC Transformation Programmes are also failing, since MAS’ turnaround is considered a key indicator of its deliverables.

The extent of GLCs’ involvement in nation building and powering the economy is an important subject. Barisan Nasional had often abused the GLCs for its vested interest creating a nexus of political business cartels at the expense of taxpayers’ money. Of late, Dato’ Seri Najib Tun Razak’s administration had increasingly turned to GLCs to funnel public funds for massive projects without a similar accountability to the Parliament if the projects had been included in the national budget instead.

Thus, the well being of the GLCs is crucial for the economy and the failure of the 2 BTPs should be viewed in this context. Since the present government is so keen to showcase its KPI deliverables to the rakyat, surely the latest on-goings in MAS is the clearest sign that Dato’ Seri Najib Tun Razak’s much touted economic transformation has also failed.

I also have to press for accountability of this decision for its past failures and future impacts on the national air transport industry. The employees of MAS have been subjected to a 5-year roller coaster ride under the pretext of a business turnaround. They have been loyal to MAS’ management all the way and have delivered their part of the bargain; even when there were times that their voices were not taken up earnestly by the management. The fact that the share swap deal was mooted and finalised without their input is most unfair to the employees. It is unsurprising that the 2 BTPs have failed when it seems that the employees’ views (being a major stakeholder in MAS) continue to be sidelined by Khazanah’s and MAS’ managements.

The share swap deal is short term in nature and haphazard in terms of its impact on the future of the air transport industry in the country. In fact, Malaysia has never had an air transport policy or any legislation specifically governing and directing the development of the air transport industry. The entrance of a new player into the industry is usually a result of having the right connections with the political elites thus creating a near monopoly in the industry.

In this perspective, the rakyat had benefitted greatly from the previous competition between AirAsia and MAS especially for the domestic market. Unfortunately, there is a great risk that this feat will be reversed due to the share swap deal as we are looking at only one dominant domestic airline dictating the market. In the absence of a national air transport policy, it is unlikely that a new player can enter the market to challenge AirAsia’s dictates of the industry.

Therefore, the consumers and MAHB (the airport operator in the country) will bear the brunt of the impacts of AirAsia’s emergence as the dominant domestic airline. AirAsia will be in a position to fully leverage its dominant status to arm-twist MAHB into agreeing to its terms, considering its relationship with MAHB has been less than cordial in the past.

The judge is still out there whether or not the collaboration will be able to harness the synergies between the two airlines, especially when both are bitter rivals to begin with. The often touted benefit of the collaboration is the withdrawal of MAS from the domestic market to leave it to AirAsia, on the pretext that the former can focus on premium market. Ironically, this decision could have been done independently by the MAS and Khazanah leadership without bringing AirAsia into the picture. The participation of AirAsia in the business decision-making of MAS signifies a great conflict of interest that should have alarmed analysts anywhere.

What MAS requires urgently now is a strong leadership with the depth of knowledge in the air transport industry to bring about operational and cost efficiency. This cannot be done via a committee with different people who bring a great many interest to the board room; often in conflict with each other. The decision to appoint an EXCO with an interim chief operating officer is worrisome given the urgency of the matters.

I therefore urge Khazanah and MAS leadership to rethink of its current strategy and expedite the appointment of a CEO with the right background and criteria to lead MAS, so that MAS’ and its stakeholders’ interest can be safeguarded.



23 AUGUST 2011

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