Business

Friday June 22, 2012

MAS should revisit low-cost model

Friday Reflections - By B.K. Sidhu


THIS year again the number of shareholders that showed up at Malaysia Airlines (MAS) AGM were aplenty.

Some just lingered in the lobby area at the MAS Academy in Kelana Jaya instead of attending the AGM on the second floor.

A lady in her sixties said: “I am already late so I rather just sit in the lobby and wait for lunch.''

Another said: “I am here for the goodie bag and lunch but they don't give us free tickets, and they have forgotten about giving us dividends.” This year MAS rewarded shareholders with a muffin, a can drink, a notebook and a car stick in their goodie bag.

The side attraction at the lobby was the sale of branded perfumes, some up to 50% discount. But the bigger attraction many of the media had been waiting for was for the arrival of Wee Choo Keong (Member of Parliament) as a proxy at the AGM but obviously he did not show up because Parliament was in session. Wee has been very vocal in Parliament and on his blog over the MAS/AirAsia share swap and purportedly seen to be in support of MAS unions and associations in what they claim is their fight to save the airline that they are so passionate about. It was partly due to the objections from the unions and some politicians that the share swap was reversed recently.

That aside, there were other shareholders who listened intently to what MAS board had to say. It was also during yesterday's AGM the renewed business plan was unveiled.

Meeting the press: (from left)UMW executive director Azmin Yusoff, Asmat, Syed Hisham and executive director Dr Wafi Nazrin Abdul Hamid with a copy of the group’s annual report.

Those in the know of the first business plan announced previously said “the only difference from the December plan is that MAS will take one year longer to be profitable.''

Still there were some shareholders who came prepared, and were furiously taking on the directors to task with their questions. The AGM is the only time shareholders can ask whatever they want for they have a vested interest in the company.

Among others, the shareholders queried on the executive director's fees of RM3.7mil which they say was high when there were no dividends for the shareholders; why the board composition was lacking airline people; MAS had too many staff; MAS fares were too high to be competitive.

One MAS ex-employee felt the airline has an identity crisis with no corporate image, and a shareholder even suggested that MAS should consider giving out free seats to be popular. That is what many of the low-cost carriers do.

At the AGM, MAS also admitted that corporate travel had decreased as people go for AirAsia and this could, perhaps, be an indication for MAS to revisit its strategy. Its new plan is to focus on the regional market as there is where the growth. It also wants to sweat its assets and increase productivity levels to tap the market but it should also look at what its peers in the region are doing in terms of capturing growth from the different segments of the market and not relying purely on premium travel.

Most of the regional premium carriers have low-cost units but MAS dismantled Firefly's jet operations last year. Yesterday, there were also reports suggesting that the Government should issue more licences for low-cost airlines because people are beginning to see competition lacking in the local market space.

Later at a press conference, MAS said it had not discounted the thought of having low-cost operations but it was not its priority. For now, it believes that the focus is to earn more and spend less.

Whether or not MAS should revive the Firefly jet operations remains its prerogative, but whatever it does, it has to listen to market demands; listen to its investors, shareholders, the employees, and it is about seizing the opportunities that come its way. Or else the airline will only have itself to be blamed if it has to undergo restructurings, one after another.

● Deputy news editor B.K. Sidhu likes to see MAS profitable again but the challenge is really in the execution of the new plan. Can it do it?

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