MAS has to hard sell to capture more passengers


  • Business
  • Saturday, 01 Mar 2003

BY B.K. SIDHU

AT Malaysia Airlines’ (MAS) latest briefing, managing director Datuk Md Nor Yusof decided to promote three scenic spots the carrier flies to instead of jumping straight into a financial presentation. 

He cajoled journalists and analysts attending the briefing to go on holiday to some destinations MAS is currently offering special discounts on. 

It was refreshing to see the top executive of a company as large as MAS wear the hat of a salesman during an important presentation.  

This is normally not done, but is something any CEO of a company should be doing.  

As the person most responsible for the daily running of a company, CEOs should also double as the company's best salesmen.  

After all, it is their job to see that their product is sold, besides running the company effectively.  

The plug on the airline's services is something followers of MAS should get used to from now.  

The airline has changed from one that has a swollen book of assets and liabilities to an asset light carrier with no huge debts, no huge interest expense to worry about, nor the burden of dragging along big loss-making segments.  

Nor does MAS have to burden itself with huge expenses in buying new planes.  

MAS took its new form after a major restructure that saw the government, via Penerbangan Malaysia Bhd (PMB), ending up as major shareholder, with 69% equity.  

It now operates and manages international routes, with aircraft leased from PMB. MAS also operate the domestic operations for the government for a fee. 

MAS' third quarter results, released this week, will set a benchmark for the company from here on.  

Investors know what MAS' operating profits look like under the new structure, and will judge the airline's performance on how it improves upon such numbers in the future.  

The airline is set to post a full-year profit for its 2003 financial year, amounting to RM94mil, after six years of losses. 

MAS' most important asset now is people, and their role is to ensure the company's profits are maximised. The more people travel, the more revenue, and profit, will MAS generate. 

Maybe there was some purpose in Md Nor's promotion of MAS destinations to journalists and analysts. 

There were no shots of London, Paris or New York. He showed photos of picturesque destinations in Malaysia, and talked about a package MAS is offering for travel to Bali. 

People may ask why is MAS promoting such places? If tourist arrivals are any basis to judge and weigh potential markets, then the national carrier appears to be getting its strategy right.  

MAS wants to increase flights to various destinations in Asean, the Orient and the Indian sub-continent. These are among the fastest growing markets in air travel. 

According to data from Tourism Malaysia, tourist arrivals from China increased by 23%, or close to 100,000 visitors, to 517,423 for the first 11 months of 2002 compared with the corresponding period in 2001.  

Tourist arrivals from India were up 27.5% to 169,693; arrivals from Southern Asia totalled 225,329, up from 197,505 in 2001.  

Arrivals from West Asia increased by 14% to 125,087, and Asean, by 5% to 8.8 million. Such growth numbers are appetising for airlines these days given a fresh threat to the industry worldwide.  

A potential war in Iraq will set the airline industry back, and the effects are already being felt. 

Sky-rocketing jet fuel prices threaten a dent on profits; avoiding a war zone means additional cost to any airline. 

A one US cent rise in a gallon of jet fuel is estimated to cost airlines globally US$600mil a year. For MAS it would be RM20mil.  

Increasing flights to high growth destinations is how MAS plans to raise revenue by RM800mil for its 2004 financial year, but it is not the only airline to realise where the pot of money is. 

Other players, such as Singapore Airlines, Qantas Airways and Cathay Pacific Airways are also eyeing the same markets. On top of that, low cost carrier, AIRASIA is planning to go regional. 

The mere talk of AirAsia going regional has SIA and SilkAir in jitters. Slashing of airfares is not something any airline wants to engage in, but the prospects of that happening to tap these lucrative routes is something many may have to contemplate, even though there are economic uncertainties due to the threat of war. 

The challenge for MAS now is very clear. It is a service-based airline, and will need to pay close attention to its operations to grow profits. It will face rising competition and has to push its seats in skies others are eyeing. 

That is why Md Nor himself, a former banker, appears to be putting aside his calculator and polishing his persuasion skills. 


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