Big cut in human resources likely at MAS

IF certain historical benchmarks are to be used, Malaysia Airlines (MAS), which has about 20,000 employees, could see up to 30% of its workforce reduced as part of a restructuring plan.

In September 2012, Japan Airlines (JAL) emerged from its bankruptcy, supported by its government and sought to re-list on the Tokyo stock exchange in what was the year’s second-largest initial public offering at US$8.5bil (RM27.3bil) after Facebook’s US$16bil offering.

That aside, the turnround saw nearly 30% or about 16,000 of its employees being laid-off alongside slashes in pensions, a disposal of 60 aircraft and more than 40 routes.

At the peak of its restructuring scheme, Indonesia’s state-owned Garuda Airlines also reportedly slashed its workforce by about 30% to bring down some of its costs.

Notably, one of Japan’s largest corporate failures, JAL has since returned to profitability as with Garuda although their recent profit figures have slumped as a result of weaker currencies and competition.

It goes without saying that MAS has a bloated workforce.

AirAsia Bhd, for example, had about 10,000 employees as at 2013.

For the financial year ended Dec 31, 2013, AirAsia made a net profit of RM364.07mil while MAS reported a net loss of RM1.17bil.

Currently, human resources make up about 14% to 15% of MAS’ total costs.

Maybank IB Research says in a recent note that MAS is “overstaffed and struggles to trim down its workforce”.

The management has mobilised some employees from departments with surplus staff to other departments which are in a deficit, the research outfit notes.

“However, there are many limitations (with) different skill sets and licensing requirements.”

It also suggests that the national airline could move towards performance-based compensation.

“MAS staff compensation is structured based on seniority. This limits the company’s appeal to attract good talent, and also to retain its current talent pool.”

A lot has been said on the ways in which staff count at MAS can be reduced, including a “golden handshake” option.

Analysts contacted by StarBizWeek, however, declined to give their views on the ongoing human resources issue at MAS.

“This issue is a little too sensitive to comment on right now,” says one senior analyst.

Still, he reckons with MAS being taken private and hence taken off the public space radar, a lot more cost-saving measures can be carried out within the company as public criticism has sometimes stood in the way of the company’s plans.

MAS is not alone in its restructuring efforts.

Many major airlines have undergone massive restructuring and emerged stronger as a result.

Apart from JAL and Garuda, some of these include American Airlines, Swissair Group and Air New Zealand.

StarBiz has reported that apart from a slash in MAS’ workforce, the airline is also planning to cut employee salaries by up to 30%.

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