‘MAS-AirAsia share swap spells doom’

PKR's Rafizi Ramli calls the deal a “short-sighted” and “haphazard” endeavour
that will see the airline industry suffering dire consequences.

PETALING JAYA: PKR has predicted that the recently announced share swap deal between Malaysia Airlines (MAS) and AirAsia will spawn a bleak future for the country’s airline industry.

The rival carriers will swap shares in a partnership that will see Tune Air taking a 20.5% stake in MAS while state investment arm Khazanah Nasional will own 10% in AirAsia.

The new alliance will also see MAS focusing on the premium market and leaving domestic routes to the budget carrier.

However, PKR views this development as short-sighted and a prelude to even bigger problems in the future.

According to the party’s strategic director Mohd Rafizi Ramli, the first sign of bad news is the indication that Government Linked Companies (GLC’s) transformation programmes are failing.

He pointed out that this is the third business turnaround plan heaped on MAS and is tantamount to an admission by Khazanah and the government that the previous two have failed.

“Is this an early premonition that the GLC transformation programmes are also failing since MAS’ turnaround is considered a key indicator of its deliverables?” he asked.

“Prime Minister Najib Tun Razak’s administration has increasingly turned to GLCs to funnel public funds for massive projects.

“In fact, 77% of investment in the Economic Transformation Plan (ETP) is being funded by GLCs thus the latest ongoings in MAS is the clearest sign that this much touted economic transformation has also failed,” he added.

Air transport policy needed

Rafizi pointed out that the only reason such a questionable deal has been allowed to transpire is due to the absence of an air transport policy in Malaysia.

And that, he added, has led to the country’s air transport industry continuing to operate on the basis of right connections with the political elite.

“The only way that Tony Fernandes managed to take over AirAsia in 2001 was to knock on (former premier) Dr Mahathir (Mohamad’s) door,” he said.

“If any company wants to launch a new airline today, it will not find any processes or procedures to guide it,” he added.

“In the absence of a specific and holistic national air transport policy it is unlikely that a new player can enter the market to challenge AirAsia’s dictates of the industry. Unless it offers something to politicians in power or if it has direct connections with the prime minister.

“So this is not an issue of MAS’ incompetency or AirAsia’s good business model but a question of an urgently needed national air transport policy,” he stressed.

Predicament for MAHB

Rafizi then highlighted the predicament that this share swap has created for Malaysia Airport Holdings Berhad (MAHB) which he noted has a “less than cordial” relationship with AirAsia.

“With AirAsia being the single domestic player means MAHB only has one customer and the leverage has shifted to the airlines.

“AirAsia now has the power to renegotiate and compel MAHB to accept terms that might be unfavourable to the latter and the public,” he said.

Furthermore, Rafizi added, MAS’ new board of directors will include AirAsia founders, Fernandes and Kamarudin Meranun, which will almost certainly pose a conflict of interest.

“Fernandes and Kamarudin cannot say they wear different hats and that their decisions on MAS are 100% independent of AirAsia’s interests.

“The two airlines are bitter rivals and any decision would to a certain extent be at the expense of MAS and to the advantage of AirAsia,” he said.

“In most countries, this sort of deal would never have stood the scrutiny of corporate governance. What MAS urgently requires now is a strong leadership with depth of knowledge in the air transport industry,” he added.

Taken from Free Malaysia Today

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Warning of monopoly in aviation amid AirAsia-MAS deal

Aug 8: PAS's Kuala Selangor member of parliament Dr Dzulkefly Ahmad has raised concern over the government’s decision to allow Malaysia Airlines Berhad to embark on a 20 percent share swap deal with budget airlines AirAsia.

“We understand, MAS will be in the red this year if nothing drastic is done. But this is not a solution, in fact the people and the consumers will lose out. This is not only my view but also others,” the head of PAS Research Centre told Harakahdaily.

According to reports, AirAsia headed by Tony Fernandez (right) struck a deal with MAS for a share-swap plan enabling Fernandez to control 20 percent of stakes in the national carrier.

Both stocks were suspended today pending an announcement tomorrow.

"He (Fernandes) will be laughing all the way to the bank," said Dzulkefly, referring to the price ratio of the swap with AirAsia closing at RM3.95 a unit and MAS at RM1.60, as of August 5 .

Dzulkefly warned of the absence of any competition that benefits consumers now that the share-swap will result in both companies “taking care” of each other's interests.

“This might be a win-win situation for them, but can it guarantee that the people will win?” he asked.

Dzulkefly noted that MAS was in trouble until it was taken over by Idris Jala, who was then asked to vacate the position to assume a ministerial post in the Prime Minister’s Department.

Dzulkefly (left) however said Idris did not do anything to bring about a turnaround for the ailing company.

"We know for a fact that Idris's job in MAS was not accomplished. Far from a complete turnaround, he just reorganised assets with 'creative accounting', the so called widespread assets unbundling exercise. On paper, it made MAS look good and profitable," he added, and said with such a performance, what would happen to the government's Pemandu currently headed by Idris was anybody's guess.

Avoiding Competition Act?

While MAS could do well with someone like Fernandez at its top, Dzulkefly asserted that it should not be through a deal which would only place the country's aviation industry into the same unfortunate plight of other sectors, such as rice, flour and sugar which were controlled by those close to the ruling party.

“We face sugar, rice, flour and oil problems because the permits given to these crony companies resulted in their prices soaring.

"This happens because Bernas is the one price determiner for rice, especially for imported rice. Just imagine if others were allowed to import rice, its price will be based on market power and ultimately benefit the people, not victimise them,” explained Dzulkefly.

“Will the aviation industry see this kind of monopoly?” he asked.

Dzulkefly also said the latest deal ran in contrary to the Competition Act 2011 passed by Parliament to restrict monopolistic practices in Malaysia.

"I think it is actually against the the Competition Act. The act only comes into effect next year. Are they trying to circumvent it?" he asked again.

 Taken from Harakah

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