The cash plan


  • Business
  • Tuesday, 28 Feb 2006

We will adopt a cash rationing policy and delay or ban discretionary expenses. Our cash situation would be monitored daily and we would look into ways to generate more cash. 

This would done be via disposal of assets to raise RM800mil to RM1bil; raise RM800mil to RM1bil from sale and leaseback of aircraft and engines. Over the past two months, we have raised RM490mil to RM540mil. Of this RM158mil was generated from the travel fair; we would impose excess baggage that can raise RM80mil a year, tactical pricing to raise RM80mil, fuel surcharge (redefined as per industry practice) RM30mil per annum; impose administrative fee which can generate RM150mil, all these actions can give us RM490mil to RM540mil. 

The action plan for cost improvement: 

  • Cut budget by 20% across the board 

  • Terminate unprofitable routes via secondary hubs 

  • Reduce station cuts 

  • Stop corporate advertising, focus on tactical advertising 

  • Suspend discretionary training 

  • Postpone capital expenditure  

  • Freeze recruitment  

  • Take action on malpractices via whistle blower policy 

  • Remove non-performing suppliers, contractors and agents 

  • Restructure domestic operations vis-à-vis with the government 

    Yields a problem 

    We have an old passenger reservation system (Kommas) but our network has grown by more than 100% yet we are still maintaining the old computer system. That is why there is a lack of control of the 65,000 travel agents in 30 countries that we have. So we need to manage inventory and that is why we intend to change the system and improve on automation and this process will take two years. We would concentrate more on Internet booking and direct sales.  

    Profit Plan 

    We currently fly to 10 European destinations and we do not dominate the routes. We believe we can serve Europe better with a hub-and-spoke system as done by many airlines. If we re-energise the network we will have in a mix of hub-and-spoke and point-to-point system. KL International Airport (KLIA) will be the only hub in Malaysia and we would increase flights and frequencies on chosen routes.  

    This does not necessarily mean we would cut routes but divert to KLIA hub. 

    Domestic Operations 

    The government is reviewing the domestic aviation policy and what the country needs. We would like a free hand (if we are to manage the domestic operations by January 1, 2007). We would also push to increase domestic airfares by 10% and this will give us an additional RM135mil as the last overall review was done 13 years ago. On top of that, the fuel surcharge can earn us RM85mil. We would impose administrative fee to raise RM130m, even AirAsia imposes that, we would review domestic pricing and impose tighter fare rules to compete with the low cost carriers. 

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