Analysts back Khazanah appointment of Mueller to revive Malaysia Airlines

Mueller(inset), the CEO of Ireland

PETALING JAYA: Analysts have backed Khazanah Nasional Bhd’s decision to appoint Christoph Mueller to revive Malaysia Airlines Bhd despite the move drawing flak from politicians.

They said that Mueller’s track record in reviving an airline was paramount in the decision to hire him.

Furthermore, they pointed to one of Mueller’s key performance indicators, which was grooming a local successor.

Last Friday, the sovereign fund announced the appointment of Mueller as the future chief executive officer of Malaysia Airlines.

One of the reasons to hire Mueller was his track record in turning around an airline.

Mueller, the chief executive officer of Ireland’s national carrier Aer Lingus Group plc since 2009, turned around the loss-making airline within a year. This was despite the intense competition from budget airline Ryanair Holdings Plc, coupled with the soft market conditions in Europe.

He also was involved in other turnaround projects, which included an aggressive job-cutting strategy at Sabena SA, prior to the Belgian airline’s bankruptcy and partial reinvention as Belgium Airlines.

“He is a turnaround specialist, so he does know what needs to be done for Malaysia Airlines. Being a foreigner, his decisions will be based on common rationale rather than emotions. It would be an independent view,” an analyst said.

The analyst added that Mueller should be given full flexibility and support by shareholders and creditors in his decisions. “Otherwise, it would be another case of management mishap,” the analyst said.

In a statement issued on Dec 5, 2014, Khazanah said Mueller had two important tasks: to lead the turnaround of the country’s national carrier and to build local succession.

In terms of grooming a local successor, analysts said this would probably only come about when the airline had resolved its issues.

“I think that will come once Malaysia Airlines is successfully turned around. It is critical for Malaysia Airlines to be handled by a turnaround specialist for now. Passing it to a non-experienced person could be disastrous,” an analyst said.

Kenanga Research analyst Adrian Ng said Mueller would have a good start at MAS due to the reduction in its workforce as well as partial removal of the airline’s legacy issues.

“He’s got a good start, but turning Malaysia Airlines around won’t be an easy job because the aviation landscape has changed a lot in the past few years. His experience is still yet to be tested in Malaysia,” he said.

The focus would be on how Mueller strategised and leveraged on Malaysia Airlines’ current routes, he added.

Although Malaysia Airlines had the Oneworld alliance to leverage on, he said it needed to review its routes, especially the short-haul routes.

“Mueller has a good background in aviation and the major roadblock in Malaysia Airlines has been removed. Now that they have agreed to downsize, it’s easier. He’s got most of the biggest headache cleared, but moving forward it will be tough due to growing competition from the regional airlines.

“At the end of the day, they need to get the work done,” Ng said.

Another analyst said it was not just Mueller’s capability that was needed to turn around the national carrier. “Handling Malaysia Airlines would require him to face a lot of unspoken political undercurrents. It is not easy steering a company like Malaysia Airlines with so many vested interests.

“He may have to make non-populist moves, which might be hard to do in a company like Malaysia Airlines. The airline has been through about half a dozen restructuring exercises in the past 12 years and changed chief executives five times, so I’m not confident.”

Khazanah’s RM6bil five-year 12-point restructuring plan entails the cutting of 6,000 jobs and delisting the airline, which has been set for Dec 15, 2014, among others.

Mueller’s contract with Aer Lingus ends on May 1, 2015, but Khazanah is in discussions for him to assume his new post earlier than that.

According to a Bloomberg report, it might take Mueller six to nine months to familiarise himself with the company and culture before he can take any action. This may lead to loss of time, which in turn could affect Malaysia Airlines’ market offering and positioning.

“It’s got to be one of the biggest challenges in the airline business today,” John Strickland, an aviation specialist at JLS Consulting Ltd, said in a report. “It’s a job that needs a tough nerve, patience and a few deep breaths to take it forward. They’ve got to get back to a point of credibility and respect.”

The report said Mueller would embark on one of the toughest jobs in aviation, turning around an airline that has lost two jets and 537 lives this year.

It said he would need to restore confidence in the airline while cutting 6,000 jobs.

“While Mueller does not have a track record in Asia, he’s the right man for the challenge,” the report quoted Sudeep Ghai, managing partner at Athena Aviation LLP in the United Kingdom, as saying.

Meanwhile, Bernama reported Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar as saying that Khazanah had the right to appoint Mueller as CEO-designate as it was injecting the RM6bil investment to revive the national carrier.

Speaking after the launch of the Celcom 1Malaysia Training Scheme in Kuala Lumpur, he said the 12-point MAS Recovery Plan outlined by the Khazanah, the carrier’s major investor, clearly indicated the need for talents with the necessary skills to help return Malaysia Airlines to profitability.

“We leave it to Khazanah to pick the best talent that they think will be able to spearhead the turnaround of Malaysia Airlines. After all, in terms of accountability, the responsibility to make this a success has been given to Khazanah,” Wahid said.

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