Wings of change


  • Business
  • Saturday, 14 May 2016

But Mueller says MAS will not report a profit in 2016

Malaysia Airlines Bhd (MAS) seems to be refreshing itself just as it announced a modest profit of RM14mil for the first quarter of 2016 after a slew of internal restructuring initiatives that have streamlined the airline.

Next on its plate is the need to refresh its uniforms that stewardesses wear, which is part of the plan to improve customer service, fine-tune its processes and improve productivity.

But there is an uproar among people who disagree with the uniform change move, as for them removing the iconic kebaya will hurt the airline’s legacy and identity.

However, MAS’ outgoing chief executive officer Christoph Mueller (pic), in a phone interview with StarBizWeek, says the signature kebaya of the airline will stay.

“One thing the uniform change will not see is the kebaya, which is our signature uniform element.’’

He says the idea of the uniform change came from within the employees who want a new look and feel to be in sync with the other changes at the airline. As it is, MAS has too many uniform combinations that not just confuse the customer, but it is no longer cost effective to maintain so many designs.

Streamlining the design will help in passenger orientation.

Constant changes to offer the best-in-class is what global airlines are doing to lure customers to fly with them and MAS want to emulate that, so that it can regain its share of the market. But this will cost money. MAS product offerings have for years been said to be stale and a fresher and breezier look is preferred.

But the question is of timing, as many feel it is not right to spend money on uniforms when there are so many other things that need to be taken stock of at the airline, says an airline industry executive.

“Do they really need to spend so much money? Why don’t they use that money to reward their employees who could do with that motivation,’’ the executive adds.

MAS’ iconic kebaya is said to be designed by ITM students but the design of the new uniform will be done by fashion designer Farah Khan.

Meuller declined to say how much it would cost the airline to change the uniforms. All the changes MAS have embarked on are part and parcel of the airline trying to re-brand itself and bring it back to profitability.

There are over 220 initiatives in place to turn the once ailing airline around, and they are at various stages of implementation. The progress may be there but the job is far from over and MAS will not be able to report profit for full year even though it had a modest profit for its first quarter this year.

This is also despite the fact that passenger loads are improving and forward bookings from July onwards to the end of the year are looking positive.

“We will not make a profit for full year 2016, that will be two years ahead of our projections. It was a good first quarter, but we do expect a weak second quarter, though the third and fourth quarters might be a bit stronger. Fortunately the loss for full year might be slightly lower than what we had budgeted,’’ Mueller said, but declined to elaborate.

MAS reported a RM450mil loss in January to March last year.

It also slashed 6,000 jobs to bring its workforce to 14,000 people and renegotiated most of its contracts with over 20,000 vendors to bring down the cost of procurement.

“On the cost side, I believe the painful things are already behind us,’’ Mueller says.

Cost is down by 32% and MAS’ payroll, often said to be inflated in the past, is lower, but Mueller does not want to share details.

“We made real good inroads in payroll cost and were lucky on the fuel cost as it has been very low in the first quarter. But the most pressing issue on the cost side is really our vendor cost.

“We have not been smart buyers in the past and I have identified many goods and services that we purchased was 20% to 25% above market rates and that is basically where our attention should be, to bring down all this cost,’’ he adds.

Apart from bringing cost down, he wants “every stone unturned and every touch point reviewed” to improve customer services so that MAS is able to regain its glory of the past. He also expects fares to drop further but it will be based on sectors, seasons, demand and competition.

Asked who will be the best candidate to take over from him since he is leaving the airline in September, Mueller says “I am not involved in the discussions, it’s a matter for the board and shareholders to decide.’’

Names such as MAS executive director Peter Bellew and Datuk Seri Shahril Mokhtar, the CEO of Mass Rapid Transit Corp, have been bandied about as possible replacement. Asked if there was an internal candidate, Mueller said it would certainly be good for continuity of the turnaround plan.

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