Sunday, March 30, 2014

NEXT For MAS ... Declare Bankruptcy Does Not Work !!!

Industry observers opine that the government should close MAS Bhd down and re incorporate it in the future as it is understood to be in the midst of revising its turnaround plan.

They believe MAS which is weighed down by high legacy costs, a bloated workforce and declining yields from rising competition, could emerge leaner and nimbler once it rids itself of liabilities and restructures its debt.

It is viewed that MAS can no longer exist in its current (March 2014) form. Its operating costs are too high. The best alternative to another restructuring and bailout is to shut the carrier down and rebuild it from scratch.

MAS is however is aware of the possible political backlash from it. There has to be the political will to break the carrier down and rebuild t from scratch. The other alternative is another restructuring of the airline’s debt and bailout which has so far (till March 2014) failed to prop the airline up.

However a plan should not be likened to that of Japan Airlines Co Ltd – the airline declared bankruptcy in 2010 and returned to the stock market in 2012. JAL completed a trip through bankruptcy protection and a turnaround that included shedding a third of its workers, cancelling routes and retiring older planes.

That would not work for MAS. JAL had the full backing of its government to ask Janpanses creditors to write off its debt. That would not be easy for MAS to do because the majority of its debts are held by international banks.

MAS also has a social obligation to fulfill as the national carrier.

MAS is 69% owned by Khazanah Nasional Bhd while the government retains a golden share in it.

Also considering is that MAS should consider spinning off its ancillary units, such as its maintenance, repair and overhaul and cargo operations, to better manage them and help boost profits.

But now is not the right time for MAS to spin off its units. The carrier’s WAU restructuring exercise in Nov 2002 which saw MAAS’ aircraft assets transferred to and leased back from Penerbangan Malaysia Bhd failed to tackle the root of the problem.

As much as MAS has focused on slashing costs, including closing unprofitable routes, it has also sought to close the service gap with Airasia which is wrong. A lot of airlines, when they restructure they go down the low cost road or just scale back service. This is a wrong move.

Secondly MAS needs to change its strategy of just capturing market shares, its products have improved with six brand new A380s and 737-800s and 900s. MAS should leverage this advantage and not sell cheap tickets.

MAS should focus on being a premium carrier and target a specific market segment. It cannot be like CATHAY PACIFIC or SIA because HK and Singapore are business centres and they have a high volume of high paying business travelers to fill the front seats.

MAS can find a middle ground where its cost is higher than Airasia but lower than that of Cathay Pacific.

MAs must target the right market. If not the passenger experience will become bad. MAS should focus on reducing its headcount, identify its target market and raise fares and service level for the said market which in turn will increase yields.

No comments:

Blog Archive


Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.