The Short Position


  • Business
  • Saturday, 28 Mar 2015

New risks for MAS 

REVELATIONS about what transpired in the fatal Germanwings Airbus A320 crash that took the lives of 150 people are shocking.

Reports of the voice recorder uncovered during the final moments of the flight point to a deliberate attempt by the co-pilot to end his and the lives of the people on board.

Airlines are now scrambling to make sure that there are at least two people in the cockpit at all times to ensure a repeat of the doomed Germanwings flight 4U9525 does not happen again.

As investigations start to discover the reason behind the co-pilot flying the plane into the mountains of the French Alps, the disaster brings into focus the crucial role pilots and crew in an airplane play in the safety of a flight.

For Malaysia Airlines (MAS), which lost two planes last year, the chilling events of the Germanwings incident cannot be downplayed. Although the airline has a rule that there must be two people in the cockpit at all times, the ongoing retrenchment scheme and potential paycuts the airline is undertaking introduces a new element of risk.

Regardless of how small that risk is, does MAS want to chance the possibility of an emotionally distraught engineer or pilot and cabin crew on the flight after termination letters have been posted? Termination of staff it intends to lay off is not immediate and those who will no longer be employed will still serve the airline for a few months before being let go. The proper thing to do is to relieve them of their responsibilities immediately.

The other issue is that paycuts too can inflict huge amounts of stress on people who might find it tough to make ends meet after the new pay packages are introduced. If the paycuts are large, then the financial difficulties in their lives might manifest in their work and that is something MAS needs to manage carefully. The ideal way is to let people know what their salary cuts are going to be, and those who stay with the airline will be the ones who will accept a lower remuneration.

What MAS will need to do, and it really does need to manage its risk after the events of last year, is ensure that the mental health of its employees is sound after the severance packages are dished out. It needs to delicately balance those risks against the bottomline of the airline.

Finally, the clubs make money

THE English Premier League is easily one of the most followed programmes on television. Easily, it is among the most successful commercialised sporting events in the world, attracting sponsorship in the billions.

Pay-TV operators such as Astro of Malaysia can testify to that as they are forced to fork out huge sums to win the rights to televise live the matches. And they cannot do without it because most subscribers see it as a vital component of the package of programmes offered.

But surprisingly, the top English football clubs, collectively, have not been making money in the last 16 seasons. Only in the last season straddling between 2013 and 2014 did the clubs turn in a profit, according to a report quoting a survey done by Deloitte, the accounting firm.

In the 2013-2014 season, the 20 teams competing in the English Premier League collectively made a pre-tax profit of £190mil. The last time the teams made a profit was in the 1997-98 season, where the profit was £49mil. This is according to the report by Deloitte too.

The report also stated that the return to profitability showed that the financial fair play rule applied by the sporting body in Europe governing the clubs was working out fine. Under the rules, the owners of clubs cannot be running their entities at a loss while forking out big sums to the “star” players.

This is especially the case when the owners are wealthy and can afford to incur losses at the clubs, but at the same time, make a big splash for the top stars in an effort to gain as much mileage in publicity as possible. Because of the new rules, wages were kept under the lid and this contributed to keeping operating cost well in control.

So, now we know that all the fanfare does not necessarily mean profits, especially for the English Premier League teams. The exception, of course, are big clubs such as Manchester United, which was the top performer in terms of finances in the last season.

Forced to pay service charge? 

IN a few days’ time, the goods and services tax (GST) will come into force. Some businesses are already displaying the changes consumers can expect. Take the case of OldTown White Coffee, a popular restaurant chain. On its website, OldTown says that the only change that would come under the new tax regime is “to the calculation of the service charge, whereby the 10% service charge is also now subject to a 6% GST, as a service charge is a charge for the supply of services at our shops and is therefore subject to the GST.”

The company says this is provided for under the Guide on Tax Invoice and Records Keeping as at July 20, 2014 as issued by the Royal Malaysian Customs Department.

The calculation, according to an auditor, is correct but the clarity on the GST and other charges brings to light a different set of questions.

Firstly, lots of food items are zero-rated and a uniform 6% increase in the price of foodstuff might not be right.

Then, the service charge imposed by restaurants and hotels does not go to the Government. It has been around for a long time and is often mistaken for a tax. Ideally, this charge or “tips” should be given to the employees, but some companies abuse it by keeping it for themselves and not passing it on to the workers.

How are consumers to know if the charges collected are paid to the employees of the restaurant?

Furthermore, Malaysia does not have a tipping culture, but the service charge is like forced tips regardless of the quality of the service. In this case, the option on whether to reward waiters or the establishment has to be at the discretion of the customer.

Deputy Finance Minister Datuk Ahmad Maslan in a Bernama report at the end of February said the service charge by hotels and restaurants is not compulsory, and that consumers do not have to pay the 10% service charge if the service is not good.

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