Full private & independent ownership key to MAB’s revival, says don

10 Jul 2019 / 14:16 H.

KUALA LUMPUR: Complete and independent ownership by private parties, free from any political interference, is key to the revival of Malaysia Airlines Bhd (MAB), says an academic.

Professor Dr Sufian Jusoh, director of the Institute of Malaysian and International Studies (IKMAS) at Universiti Kebangsaan Malaysia, believes part of the challenge faced by MAB’s current top management is making crucial decisions when they are due, as the airline is still subject to approval from parent company Khazanah Nasional Bhd.

“MAB doesn’t have 100% power in its decision–making, as they are generally pending Khazanah’s consent.

“Generally, management will need to improve, with the Board being 100% private, free from other considerations and focused on delivering the best for its customers,” he told Bernama.

In 2014, Khazanah, the government’s investment arm, took over Malaysia Airlines, making it the sole shareholder even though the country’s sovereign wealth fund already held 70% of the airline’s equity interest.

Khazanah then quickly announced a 12–point enabling plan, with total investment amounting to RM6.0 billion, to return Malaysian Airlines to sustained profitability and revive the country’s national flag–carrier.

In all, the government has spent about RM25 billion to turn Malaysia Airlines around since 2001, starting with “WAU” led by the consultancy Bina Fikir.

Some 6,000 low–level and mid–level staff at Malaysia Airlines lost their jobs as the airline struggled to stay financially afloat.

Sufian is of the view that we should not to be too ‘nostalgic’ over Malaysia Airlines and that changes for the better should be made the top priority although it might require a certain degree of ‘sacrifice’.

“The government must let it go and let the private sector take over the airline. In this way, the government will free itself from the issue of profitability and liability of the airline.

“The private sector then can focus on the operation of the airline” he said.

He also suggested that Datuk Pahamin A Rajab, who recently submitted a proposal to the prime minister to take over Malaysia Airlines, and any other interested party, acquire the entire stake in the airline, in order to prevent a recurrence of previous legacy problems.

He also said Malaysia Airlines’ current Board members may have to read the current and future challenges in the aviation industry well, to avoid making ineffective decisions.

Sufian said Pahamin, the former founding chairman of Airasia Bhd and former Secretary–General of the Ministry of Domestic Trade and Consumer Affairs, has the track record in the aviation industry to put him and his team of bidders in good stead to help the airline recover.

Pahamin, together with the AirAsia team led by Tan Sri Tony Fernandes, successfully turned around the low–cost carrier into a profitable company and cleared all its debts of US$11 million (RM45.6 million) within a year.

From a company that had only two Boeing 737–300 jet aircraft, the fleet expanded to 252 units comprising 220 Airbus 320 and 32 Airbus 330, delivering world–class service at low fares to more than 500 million guests across Asia Pacific.

Pahamin reportedly said he intended to acquire a 49% stake in MAB with Khazanah holding the remaining 51%.

“I strongly believe the government should think through the total privatisation and reduce the role of Khazanah in MAB.

“Pahamin and partners, or any other interested parties, would need to take over 100% or have a majority stake. Otherwise they will still be subjected to Khazanah’s decisions, having no majority (interest in Malaysia Airlines).

“Foreign investors could be brought in and the government should allow foreign interests own more than 49%,” he explained.

Pahamin has indicated that one of the partners is from Britain and the market has been whispering that the foreign investor is Virgin Airlines founder Richard Branson.

But can privatisation save Malaysia Airlines?

Why not? Malaysian Airlines has gone through a fair share of restructuring. The same applies to Garuda Indonesia and Thai Airways International.

Most of the time the restructuring involves utilisation of public funds to the tune of billions of US dollars.

Governments should save their money by not bailing out airlines and by allowing a higher level of liberalisation of foreign ownership in registered and licensed airlines like Malaysia Airlines.

One should note that British Airways is no longer owned by the British government while Swiss International Airlines (the successor to Swissair) is no longer owned by the state of Switzerland. British Airways is 100% owned by the International Consolidated Aviation Group (IAG), with dual listing in London and Madrid.

IAG also owns several other airlines including Iberia of Spain and Aer Lingus of Ireland. Swiss International Airlines, on the other hand, is owned by the German carrier Lufthansa, who also owns Austrian Airlines. Korean Air is not owned by the Korean Government and is a private entity.

“Many good airlines are not owned by the government, so what is wrong for Malaysia Airlines being owned by the private sector carrying a Malaysian flag? It should not be a problem,” Sufian said, pionting out that liberalisation of ownership and control might lead to a healthy outcome.

“I believe in full liberalisation of ownership and control. This will allow Malaysia Airlines access to the much–needed capital injection and appropriate expertise,” he said.

On Tuesday, Prime Minister Tun Dr Mahathir revealed four separate offers have been made to the government for Malaysia Airlines but the government has yet to decide on the winner as the proposals are still under study.

He also said the prospects of Malaysia Airlines have been additionally threatened by the rise of low–cost carriers.

When asked whether Pahamin should run Malaysia Airlines (if his proposal is accepted) in the low–cost segment, Sufian said the airline must remain with its current premium business model or else it would only affect the competitiveness of the airline given the country already has strong players in the low–cost segment.

“Obviously, I don’t think they want Malaysia Airlines to compete with AirAsia and AirAsia X, they must go to different segments.

“Malaysia Airlines should remain in the premium segment but needs to ensure that it is cost–effective so that this would enable them to create yield and buy new planes.

“They cannot sell assets, because at the moment if they do that it will only send out negative signals in the market,” he said.

Malaysia Airlines is an icon to all Malaysians, and they want to see it survive.

It is now in the hands of the government to either make of break the deal. — Bernama

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