Tough turnaround for Malaysia Airlines

  • Business
  • Thursday, 07 May 2015

PETALING JAYA: Malaysia Airlines’ (MAS) new chief executive officer (CEO), Christoph Mueller (pic), in his first message to 20,000 employees has warned of massive cost cuts, as the chilling truth is that the airline’s cost has been 20% above that of its competitors.

He also pointed out that this year would be more challenging than anticipated. The strong US dollar has hurt its operations, and as a result, MAS has not fully benefited from the lower jet fuel prices.

For now, demand for the airline’s services in key markets is still sluggish despite MAS offering high discounts on its ticket prices.

He also said that MAS’ payroll cost was too high.

“We cannot turn the airline around by fixing the revenue side alone. The contrary is the case. The reason for our precarious situation is mainly our uncompetitive cost levels. We share this problem with almost all legacy carriers around the world, and new low-cost carriers are attacking us,’’ he said in the three-page email dated May 5 to all employees, a copy of which was obtained by StarBiz.

In order to grow, Mueller pointed out that “sometimes we have to retreat and regroup before growing again. That is the ultimate target, we want to grow again in the last phase of the restructuring”.

Mueller took over as managing director/group CEO on May 1 from Ahmad Jauhari Yahya. He will engineer the migration of the current MAS to the new company, MAS Bhd, which will take over the airline’s operations on Sept 1.

Just five days into the job, Mueller quickly engaged with the airline’s employees. He had earlier met up with MAS’ powerful unions.

Job uncertainty is a major concern within the airline, as employees are eager to find out if they will still have jobs after June 1. They also want to know what the new terms and conditions are going to be if they are rehired for the new MAS, and for those not hired, they want to know the quantum of compensation they will get.

Mueller did provide clues on the many issues in his email minus the exact details.

The other salient points of his message were:

> Corporate procurement is to be on better terms and conditions,

> MAS is to be smaller in size and will outsource certain functions,

> Employees are to receive their termination and appointment letters at their home address around June 1,

> MAS is suffering badly from a damaged brand in important overseas markets,

> Employees are to get new contract conditions benchmarked against competitors,

> Staff training to create future leaders,

> Broken relationships between the staff and management, unions and management, and even between departments are to be fixed,

> Some personnel were still working in silos, and

> The need to pay attention to details in the service delivery.

Mueller has to come up with a business plan but would need to assess the market and rebuild on MAS’ strengths. He said the plan needed to show results as Khazanah Nasional Bhd, which owns MAS, would only inject funds if there was proof of the airline presenting a plan that could show profit.

His vision for the new airline is one which is safe, on-time and friendly. Since it will be a new airline, he is looking at a uniform change, a new common building to work in, new processes and teamwork system-wide.

Mueller clearly mentioned that he needed the support of each and every one of the employees to take the new MAS forward, and that although it would be a tough journey, “it will be rewarding in the end”.

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