Cheaper oil will make job easier for new MAS CEO

Cheaper oil will make job easier for new MAS CEO

Shares of Malaysian Airline System Bhd (MAS) traded its last lot on the stock market after 29 years and an unpredictable future now awaits the airline as a private entity.

The counter had a storied but chequered history over that time as a listed entity, swinging from a darling stock during the golden years to a forgotten one during its last months on the stock exchange.

It was during its final months that sentiment soured with many investors expressing regret for holding the beaten-down shares.

The final trading day saw a flurry of activity with the stock being privatised at 27 sen a share closing half a sen lower to 26.5 sen with 70.91 million shares traded.

MAS made its debut on the Main Market on Dec 15, 1985 and when it does return, it will have the same three-alphabet acronym and hopefully a brighter future.

“It’s a sad day but hopefully Khazanah Nasional Bhd keeps its word in re-making the airline so that MAS will be profitable again and that there be no more rescues,’’ said an aviation expert.

As the chapter of the MAS story turns the page of it being a private entity, it will undertake much of the resuscitating steps behind closed doors. There will be no quarterly disclosures, no prying eyes and much of the manoeuvres will be done without much disclosure.

Khazanah Nasional Bhd will be the sole owner of MAS, which will be known as Malaysia Airlines Bhd, and come July 1, MAS will metamorphise into a different entity.

Just like when it broke away from Malaysia-Singapore Airlines in 1966 and became MAS in 1972.

This year has been its worst in history. Suffering two tragic events where it lost two aircraft and 537 lives, MAS suffered greater financial difficulty.

Losing money before those tragedies, MAS needed to be rescued.

Khazanah then stepped up to privatise the airline, and in the process drawing up a restructuring plan that will see the cash injection of 6 billion ringgit (US$1.72 billion) cash but at the expense of 6,000 job cuts.

Enter Mueller

The rebuilding on MAS starts with a fresh CEO, which went to turnaround expert Christoph Mueller. Mueller built his chops in rescuing airlines in Europe and by agreeing to helm MAS took on the toughest job in the industry.

His challenge of what to do certainly came in the stacks of dossiers and documents he would have scoured through before inking his contract. A teaser of the difficulties ahead came front and centre when his appointment was announced.

Xenophobia reared its ugly head in Malaysia with some quarters questioning the appointment of a foreigner as CEO of MAS.

In the search for the new CEO, names of Malaysians as prospective candidates cropped up. But none wanted the job.

Mueller’s appointment meant he was the first foreign CEO hired by MAS, which is expected to report a loss of 1.8 billion ringgit for the year 2014.

The 52-year old German is now head of Ireland’s Aer Lingus, and will join the MAS board in January.

He will take on the position of CEO in March.

Transport minister Liow Tiong Lai told StarBizWeek yesterday he has confidence that Mueller can do the job to turn MAS around, though it will be tough.

“He has the experience. He has turned two airlines around. He has the passion and competence to transform (MAS) and Mueller has given his assurance to turn around MAS,’’ Liow said.

Mueller comes with years of experience, having steered Aer Lingus back to profitability and refocused it as a network carrier using Dublin as a transatlantic hub despite facing tough competition from Ryanair.

Prior to that, he had worked on other turnaround projects, pursuing an aggressive job-cutting strategy at Sabena SA, before the Belgian flag-carrier’s 2001 bankruptcy and partial reinvention as Brussels Airlines, a report says.

It adds that before Aer Lingus, Mueller, who completed an advanced management program at Harvard Business School, was executive aviation director at TUI Travel Plc (TT/) and chief financial officer of DHL Worldwide before it was acquired by Deutsche Post AG.

Mueller will enter MAS at a time when the cost of doing business, basically jet fuel prices, is lower than a year ago.

Jet fuel makes up about 40 per cent of overall cost for an airline and MAS fuels bill costs around 6 billion ringgit a year.

Based on current jet fuel pricing of US$75 a barrel, MAS can easily save 2.4 billion ringgit from its fuel bill, says Maybank Investment Bank senior analyst Mohshin Aziz.

“Even if nothing is done to remake MAS, it will still be profitable if the current jet fuel prices continues to the end of 2015,’’ Mohshin says.

That’s the scenario given that nothing is done.

But Khazanah has in place a plan to remake MAS and that is why it hired Mueller.

The low fuel price is an advantage but it will take more than fuel cost savings to rebuild MAS. Regaining confidence within the organisation and with its customer is an even harder task. The perception issue is a major issue that Mueller has to contend with.

“Mueller must have a different plan in mind than his predecessors for him to travel half way around the world to be in Malaysia to rescue MAS. He must bring something different to the table as past plans did not work,’’ adds Mohshin.

One of the first things Mueller needs to address is the perception and confidence issue, and correct the fractured operations of MAS.

He needs to rebuild the management team and reach out to all employees at MAS. There cannot be a disconnect like in the past, as it is proven that remote control type of management has not worked.

“Everyone needs to feel they have confidence in the management team,’’ adds Mohshin.

But the bigger concern among those working in MAS is transparency. Who will it be that decides who stays or goes in the downsizing of employees?

“If you allow the existing people to decide, then we are going to see the same people driving the new MAS. Is that the game plan? It has to be an independent body deciding on that, not the heads now. The employees have gone through a lot over the years and this exercise of selection involves their livelihoods,’’ says someone in the know.

But Liow says it will be done in a very transparent manner and both Khazanah and its consultants will source for best talent for the newco.

Whether MAS is listed or not, it will remain in the public domain because it offers a service many Malaysians use.

Mueller has to be mindful of that and he has to keep the workforce motivated and rewarded so that they can help him show the results the world is expecting him to deliver.

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