It’s ‘Do Or Die For MAS’ After Slashing Costs - Labour Law Blog

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Sep 14, 2015

It’s ‘Do Or Die For MAS’ After Slashing Costs

KUALA LUMPUR: Malaysia Airlines is poised for success after shedding costs such as a controversial catering contract, and unprofitable routes, but the falling ringgit remains a challenge, according to economist Ahmad Zakie Ahmad Shariff.

Ahmad Zakie, who is chief executive of the Kelantan government’s investment arm Menteri Besar Incorporated, said he was impressed with the airline’s restructuring programme, which placed the airline on a stronger footing to compete in a cut-throat industry.

However, the airline faced a challenge in taking advantage of the drop in oil prices, as the steep plunge in the value of the ringgit on foreign exchange markets had caused “a mismatch in revenues”, which were earned mostly in ringgit, while expenses were incurred in US dollars, Ahmad said.

“I will put it simply. Any success or failure from here on is entirely on the shoulders of its current employees and can no longer be attributed to legacy issues. In other words, you are now on your own”, he said.

The airline, which remains government-owned has been placed under the ownership of a new company, Malaysian Airlines Bhd, replacing Malaysian Airline Systems Bhd. It has laid off about a third of its work force, who have been offered new employment contracts with MAB.

Among the measures taken in the past year were a new catering agreement with the contractor, Brahim’s Airline Catering Sdn Bhd.

Brahim’s agreed in March to cut 60 per cent, or RM94.04 million, from its payment from Malaysian Airline Systems Bhd, and agreed to shave 25 per cent off its final monthly bill.

Ahmad said a continuing review of some 4,000 contracts would help the airline to close the gap with its peers, whose costs are 20 per cent lower. The high cost of supplier contracts has been stated as a reason for the airline’s higher operating costs.

He said MAS’s new chief executive, Christopher Mueller, had set benchmarks against international standards and best practices, and more cost savings would accrue through more than 100 projects or initiatives to raise revenue and optimise costs.

The airline had also cut unprofitable routes, with plans to sell aircraft to reduce costs. Ahmad Zakie said these would lead to efficiencies. He said Mueller had set KPIs for the 12 divisions, each of which has to stand and grow on its own. “The leaner workforce of 13,000 starting work under the new company on Sept 1 will also help bring down operational costs,” he added.

Ahmad praised Mueller’s team for greeting passengers at KL International Airport when the airline began operations under its new parent company. “This service-oriented approach sends a strong signal Mueller wants his 13,000 staff to focus on passengers and deliver top-notch service, as passengers are the lifeblood of the airline,” Ahmad said.

“A conversion to newer, more fuel-efficient aircraft is already under way, as can be seen from the recent lease of four new Airbus A350s which will improve the overall fleet efficiency and deliver passenger comfort, an important aspect in increasing passenger loads,” said Ahmad Zakie.

He said an international aviation centre had reported that Malaysia Airlines was one of 16 airlines in Southeast Asia that had improved its profits in the first half of 2015.

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