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Saturday, 13 August 2011

Rashdan: MAS off to a good start

The same team that crafted and undertook the widespread asset unbundling (WAU) exercise a decade ago to bail out the then debt-ridden Malaysia Airlines (MAS) on the brink of bankruptcy is back on board. And on Tuesday, MAS tied up with its once arch rival AirAsia founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun. This marks yet another fresh start for MAS which has seen more than its fair share of restructuring, turnaround and transformation plans in the past decade.

The idea for the collaboration is to get MAS to do what it's best at being a focused full premium service carrier. The newly-set up executive committee led by new MAS chairman Tan Sri Md Nor Yusof met for the first time on Thursday. It plans to scrutinise every single document, contract, strategy, profit and cost centre to weed out the weak areas and bolster the airline's financial status.

StarBizWeek's B.K. SIDHU met up with MAS' newly-appointed executive director Mohammed Rashdan Yusof (pic), who says the team is off to a good start. Below are excerpts of the interview:

SBW: What is the biggest problem facing MAS?

Rashdan: If you look at its operating statistics, the airline's cost is one of the best versus other full service carriers. Its cost per ASK is competitive but the RASK (revenue per available seat km) is suffering. It (lacks) the ability to charge on a global basis, and this in turn is connected to our products. What we need is quality. We need a product which is highly competitive, the likes of the Middle Eastern airlines, and not Singapore Airlines alone. They are formidable competitors and we need to be at least at par or better.

Our strength clearly lies in our service the golden girls, the golden touch, the Malaysian touch, Malaysian hospitality. Hopefully people will pay what it's worth and we can raise yields and RASK. We want to bring back the golden days that is how we made money and that is how we want to continue to make money. It is a simple strategy. We need to get back to that.

Do you agree that share swap does not address the fundamental need to manage revenue?

RASK is about revenue quality. In the past, the airline did a lot of global sales. We had revenue but now we want high quality revenue such as high yields and high RASK. People will only pay high yields and RASK if the product and service is good. So we will continue to maintain our competitive edge in services, both cabin and ground crew and also our inflight products. The good thing now is that we will no longer be distracted or detracted.

The A380 aircraft is coming in May. That will be a class of its own. Tony and Kamarudin have a fantastic relationship with Airbus and we can do a lot of things with them on our side. They are a clear asset ... the way they negotiate for engines, spare parts and even planes and their cost savings culture. We could use all of that expertise at MAS.

Do you have the buy-in from the employees?

We met the union leaders and to my sweet surprise they are fully behind us. They understand that if we succeed, so will they. The rest is about execution and the new team will not let them down.

Where will immediate savings come from?

At our very first exco meeting, we identified savings in procurement. I can't tell you where as we have not told our suppliers yet. They are capital expenditures and are large.

We have looked at the detailed study done by Bain & Co and the figure is up to RM1.2bil cost savings jointly.

The immediate areas will be training, (the whole gamut of) procurement from aircraft, spares, engines to simulators. As for funding, we can look at new ways of financing our aircraft purchase. In training, both of us have simulators and facilities. We will look at how we can share and have best practices.

What is the cash situation at MAS?

It is manageable and we have in excess of RM1.6bil. Obviously we have very large deliveries in the pipeline in terms of aircraft and these are for replacement of the aging B747 aircraft which have a high fuel burn. But with the new B737 and the A380 coming in, we immediately move to a higher productivity platform. If we use these new aircraft for our thick trunk routes, and promise improvement of product, which we assure you will be second to none in the region, surely people will pay more for it.

(That will lead to) fuel ASK improvement, and yield and RASK improvements. If we are able to demonstrate that and generate positive cashflow, the financing will surely come.

There has been much criticism over WAU, which you were also part of. Your comment.

WAU was successful in that it saved the airline from the brink of bankruptcy in 2001/2002. It gave the then MD Tan Sri Md Nor Yusof a platform to put into place operational restructuring, which he did. If you look back at the share price chart right up to his last day, it peaked during his tenure and shareholder revenues increased. So it is up to MAS to continue the good work he has done. Md Nor did financial restructuring and the managers (his successor) should have followed through.

Now his return as chairman is more meaningful as he understands the industry well.

In your opinion, what is the biggest challenge that could derail these big plans?

The biggest risk is if we take our eyes off the ball on how difficult this is to execute. It is not an easy ride.

The global economic outlook points to a double dip. Will this throw a spanner in the works on your plans?

Economic cycles come and go. But when the cycle is going up, you better be sure you are there to milk it. That comes in well with our aircraft deliveries. The future is for our taking. We just have to make sure we have the capacity to deploy and take advantage of it. Of course, we will face fierce competition from the usual suspects Garuda, China carriers that have identified Asia as their playground, the Middle Eastern carriers and Qantas, Jetstar ... Why on earth should we retract when Asia is the playground?

To compete with SIA or Emirates, you need connectivity, frequency and comfort. How do you stack up?

We are seriously looking at launching the premium segment for short-haul carrier and that will serve us a strong feeder network. We already have the resources from Firefly jet services and that resources can be directed for full services proposition. It takes only months to realise this.

Three years from now, will we have to hear the story again of why MAS failed?

Three years from now, the only airline you will want to fly is MAS.

ORIGINAL POST > http://biz.thestar.com.my/news/story.asp?file=/2011/8/13/business/9292984&sec=business


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