Saturday, April 13, 2013

How Long More, Long Suffering MAS

Sigh ... so what was the game plan ... I see, a RM3.07bn rights issue. Following the dismantling of the share swap between Air Asia and MAS,  what is the next game plan for MAS, more so since it is deeply in the red with RM2.5bil in net losses for financial year ended Dec 31, 2011. It is also in dire need of RM5bil in funding for it has aircraft deliveries lined up, including five A380 superjumbos.

The only good thing to come out was the SPV. On the setting up of the SPV for procurement, MAS will take 50% equity stake, AirAsia 35% and AirAsia X 15% to procure in the areas of fuel and oils, marketing, insurance, aircraft components, parts and services, communications and information technology and ground handling.

Remember WAU .... after a lot of hoohah, and consultants got promoted ... WAU failed to resuscitate MAS. In stepped Idris Jala, all good while he is there, he got promoted somewhere else .... MAS continues to bleed. Can somebody see a trend here? There is no continuity. If I am going to consult I will make sure it is on firm footing, not collapse soon after.

The MAS employees are another bunch of xxxxxx, the share swap deal was probably the best thing they can hope for. But they were scared, if you are good, why be scared. If you are inefficient and bloated and wants to keep all that, then I can understand why you guys want to gang up and screw the deal - but you all know you cannot keep the status quo and hope things will turn out well. 

You got no more assets to monetise or unbundle!!!

Let's keep politics and personalities out of the picture as that has been clouding a proper financial and economic justification for MAS going forward. Forget about whether you like Tony, forget about how he got here, with or without favours, you are not going to unseat something that is quite formidable.

a) MAS just cannot compete as a full service when most of your routes are based in Malaysia, where you have probably the best managed budget airline in the world at your home base. Can anybody NOT see that?

b) To reinvent, MAS will probably have to be another budget airline, only that Air Asia have had a huge head start.

c) The only flights MAS has an advantage is long haul and from Malaysia, that is a small market. No matter what kind of alliances you sign with other airlines, you have to acknowledge where Malaysia is. The only crowd you can latch on are from NZ and Australia as feeder traffic - even that is tough as there are already a few budget airlines servicing OZ-Sing and OZ-KL.

d) Malaysia is in a unique position, We, unfortunately, have the largest foreign workers contingent from Asia and that has dictated how fast Air Asia can open those relevant routes.

e) With the share swap, Air Asia can probably scale back Air Asia X, and later merge it with MAS - then you are talking of MAS rejuvenation.

f) We do not have a huge business class or first class ready passengers.

g) Air Asia is operating in a very competitive wage scale with primarily Malaysians, who are capable and not expensive. The same formula when they decide to open hubs in Thailand, Indonesia and the Phillipines. The overall riding cost ratio for Air Asia is very very competitive, thats why Malindo will fail, thats why Tiger will fail.

h) Despite the grumblings, many will still use Air Asia, it is always on time, in fact the many flights I took, they departed early and landed earlier than scheduled. To even get that MAS will have to rework so many things.

To me, its another RM3bn down the drain. Its putting band aids on a person with cancer. Believe you me, Khazanah will force MAS to do the share swap with Air Asia within 2-3 years. We are just prolonging the inevitable.


Malaysian Airline System Bhd (MAS) has fixed its rights issue price at 23 sen per share to raise up to RM3.07 billion.
MAS said the board of directors has approved the issue at an entitlement basis of four rights shares for every one existing MAS share.
"The issue price represents a discount of 34.3% to the theoretical ex-rights price of 35 sen and 72% to the 5-day volume weighted average market price of 82 sen," the airline said a filing with Bursa Malaysia yesterday.
MAS also said the rights issue, which is the fourth pillar in its long-term financing plan, will be undertaken on a minimum subscription basis based on major shareholder Khazanah Nasional Bhd's full entitlement to the rights shares.
"In the event only Khazanah (which holds 69% in the airline) subscribes for its full entitlement to the rights shares, this will raise gross proceeds of RM2.13 billion."
MAS had said it plans to use the proceeds of the issue for capital expenditure and working capital.
Shares of the airline closed down 2.94% at 82.5 sen yesterday, with 6.65 million shares traded.