Tuesday, December 27, 2005

Major revamp needed at MAS

Title: Major revamp needed at MAS.
In response to my letter stating about winding up MAS and starting a new airline, a colleague wrote this;
Restructuring plans for MAS will be out in February next year, so I think we can wait for another month to see if the plans make business sense. MAS MD gave one presentation to the senators club yesterday simply to brief the senators on his plans. Personally, I thought giving presentation to senators was a waste of time as senators are not known to be experts in running the business; otherwise they would not become senators! But I think it was just a PR thing considering senators don’t have anything else to do these days.

In the mean time, this is what I will do immediately:
1. Suspend the current Chairman over the serious allegation of mismanagement and miss-spending. Appoint independent audit team to investigate this allegation, and if found to be true, lodge a police report.

2. Terminate all of the current board of directors. Appoint new independent directors and those who do not have any business dealing with MAS to replace these directors. Azman Yahaya was reported to have business dealing through his Symphone House. I will recommend the appointment of XXXXX as one of the new independent directors.

3. Review the current human capital requirements. Terminate those who are inefficient, those whose positions are not required or overlapping.

4. Review all current outsourcing contracts and existing contractual obligations.

5. Create competitive business. Split the operations of MAS into domestic and international. MAS proper should focus on international routes and domestic operations should be run by another subsidiary to be headed by another person who understands airlines business. Consider no-frills operations so that MAS can face Air Asia head on or possibly should consider shares swap with Air Asia.

MAS’ shares were traded around RM2.8 this morning. Tajuddin Ramli sold his shares for RM8 few years ago.

In my opinion his advice makes sense. Top managers were hired to steer the company toward profitability, makes decision in the best interest of the shareholders, customers and the staff as well as the country. The board of directors is there to make sure the managers do their job and prevent agency failure. Low cost carrier model for domestic operation makes sense. Air New Zealand, Qantas and Singapore Airlines also set up LCC in competition to budget airline in their market. Having LCC as subsidiary in domestic and immediate local market has the advantage of feeding MAS’s more lucrative long haul operation. Travelers wouldn’t mind going without meals and extra leg space for short distance travel. Cheap fares will tempt travelers who usually don’t travel by air. Current form of operation for international routes emphasizing on comfort and convenience would be a winning formula. I would also like to see MAS promoting more overseas holiday destinations to Malaysian market; perhaps team up with Malaysian owned hotels overseas, if possible.

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