MAS: Fated For Shutdown?

Malaysia Airlines Bhd (MAB) has struggled to survive.  Its on a life-support system with cash infusion from Khazanah.  Is it time to see it go?

There is a lot of emotion on shutting-down just like someone close passing on.  But take the emotion out, will it survive as a private-owned carrier?  Possible!  Market forces may suggest that it is sold to Emirates, Qatar or SIA.  (But Emirates and Qatar are rumoured to have subsidies.)

Why does it struggle, especially after shedding 6,000 employees in 2014?  In fact, a typical turnaround plan was followed: reduce employees, cut unprofitable routes, secure fresh capital.  So what’s left?  Morale is very poor.  Management has lost touch with employees and customers.  (Two Mat Sallehs saw the “writing on the wall” and left.)  Fuel cost and hedging is a nightmare – they need someone to fix that.

The other is revenue, it is not making great pricing decisions – so it gets “hammered” by budget airlines or other full-service ones like Emirates.  Walk into an Emirates or Qatar flight, it is always full.  And the stewards and the stewardesses are delighted to serve you.  They come from diverse background – Africa, East Asia, Europe, Middle-East, South Asia or South-east Asia.

According to WSJ, the average profit per passenger of the seven largest U.S. airlines was USD17.75 – for a one-way flight.  The average profit margin for these seven “sisters” was 9% in 2017.  Only 6 of 20 publicly traded airlines in South-east Asia had a profit in the last reported quarter (CAPA Centre for Aviation).  Revenues were impacted by falling fares and increased competition from budget airlines.

So do we have to shut it down?  No, it needs a new shareholder and a new management team.  If JAL, Garuda or Cathay Pacific can do it, why can’t we?  Forget agendas; just run it professionally.  If you are commercially focused to serve customers and employees, you will survive.  Just look at Air Asia.  Otherwise, we will have an unending cycle of “kitchen-sinking”, cash infusions, and employee separation schemes.