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Thursday May 3, 2012
By B.K. SIDHU firstname.lastname@example.org
PETALING JAYA: Eight months later, the controversial share swap crafted for the benefit for the country's aviation industry had led to “an impediment” to the revival of MAS and has to be ditched.
However, both the nation's airlines Malaysia Airlines (MAS) and AirAsia Bhd will still cooperate on several areas in a bid to save cost in line with global trends.
In a statement issued yesterday, MAS parent Khazanah Nasional Bhd said it had on Monday terminated the share swap with AirAsia major shareholder Tune Air Sdn Bhd. Both Tan Sri Tony Fernandes and Datuk Kamarudin Meranun resigned from the MAS board the same day.
The collaboration pact between the airlines inked in Aug 9 last year will stay but with modifications. The parties yesterday entered into supplementary agreements to jointly explore and set up joint-venture companies to provide aircraft component maintenance support and repair services, and to set up a special-purpose vehicle (SPV) for procurement with the aim of saving cost. They will continue to explore cooperation in the area of training.
Under the earlier agreement, MAS was to be only a full-service premium carrier, while AirAsia and AirAsia X will be low-cost regional and medium-to-long-haul low-cost carriers respectively. The new collaboration terms allow the airlines to enter each other's domain if they wish to.
Khazanah managing director Tan Sri Azman Mokhtar said Khazanah “remains supportive of the compelling logic of proper collaboration between airlines so long as it complies with competition laws, but we also acknowledge the unintended and unfortunate confusion and distraction of the share swap arrangement that has become an impediment to the more important task of turning around MAS.
“As such, the share swap reversal to reinstate the original shareholding positions is done simultaneously with strengthening proper collaboration areas between the competing airlines. In addition, MAS will be further strengthened with, among others, a fleet renewal programme.”
He added that “in return for the substantial public funds that has been expended, we will need all parties including the board, management, staff, unions and other stakeholders of MAS to close ranks, improve productivity and turnaround the airline together.
“With this reset, we hope and believe that it will give all parties renewed impetus to re-focus and move forward together in the interest of MAS and in the interest of the nation,” Azman said.
Fernandes, the AirAsia chieftain, told StarBiz that “the sad part for me is that I have left something unfinished and I know both me, and Kamarudin could have done a lot to turn around MAS. But on the positive side, after 10 years of pain and after eight months, we now are very close to MAS and Khazanah and that is very positive as all our energies can be now focused to tap the amazing growth potential of Asean and Asia.”
The share swap came about when a comprehensive collaboration framework (CCF) was set up August last year to allow the three airlines MAS, AirAsia and AirAsia X to explore opportunities to co-operate and save cost and reduce competition between the airlines. Part of the deal involved Khazanah and Tune Air entering into a share swap agreement so that there will be cross-holding. Tune Air took a 20.5% stake in MAS and Khazanah 10% in AirAsia.
But with the reversal, the shares will be transferred back to the original owners and Khazanah's stake in MAS will rise from 49% to 69.5% thereby triggering the requirement to make a general offer (GO). But Khazanah said it had applied for, and got a waiver from the Securities Commission from making the GO.
After the share swap was inked, MAS saw a total board revamp and subsequent changes were made at management level. This led to a new way of doing things at the national carrier and this had somewhat created uneasiness among the employees, who became discontent as there was lack of engagement, the fear of losing jobs and the perception that the deal was not in MAS' favour.
The eight unions and employee associations at MAS brought their complaints to the attention of the Government, which had intervened to unwind the share swap.
MAS Employees Union president Alias Aziz when contacted yesterday said “the staff morale is up again and we would like to thank the Prime Minister because he listened to the grouses of the 20,000 employees of MAS and the share swap is reversed. Had he not listened we would have to continue to suffer.
“And as far as the CCF is concerned, we would study the implications on MAS. So long it benefits MAS, we will support it. Now that the share swap is terminated, we will give our full support to Tan Sri Md Nor Yusof (MAS chairman) and Ahmad Jauhari Yahya (CEO) to turn the airline around.”
Md Nor spent most of his day yesterday engaging with the unions and senior management and Ahmad Jauhari had separate sessions with his team.
“There is more confidence now, though there were distractions earlier. We met up with the heads of department and groups yesterday to explain the situation and they are more receptive now. Our approach going forward is to engage and get the team involved in the (future) planning for the airline. There will be inclusiveness in planning,” Md Nor told StarBiz.
But the bigger issue at hand is 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.
Ahmad Jauhari said “recovery of the business is our main focus along with initiatives to strengthen the balance sheet and operations via improved productivity, increasing revenue and reducing cost”.
Md Nor added that “we are looking at a few debt equity instruments and asset backed funding options. Getting financing is not too much of a problem, but what we need to do is also to generate RM1bil in cash every year to sustain our operations and that is what we have to focus on immediately.”
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.
MAS and AirAsia shares were suspended for the announcement and the shares were last traded at RM1.22 and RM3.33 respectively. Yesterday, AirAsia announced that Datuk Mohd Azman Yahya had resigned from its board.
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