Tuesday, May 8, 2012


Pakatan Rakyat calls on the Government to disclose the fees paid to CIMB and other consultants and advisers in pursuit of the poorly thought out MAS-Air Asia "collaboration".

After 8 months and enormous damage to MAS and Firefly, the government has finally made a U-turn on the Malaysian Airline System Bhd (MAS) and Air Asia Bhd share swap exercise.While the about turn is essentially motivated by the fear of losing votes from 20 thousands strong employees of MAS and their families, the PM was perhaps genuinely oblivious of the extent of damage the tie-up would cause the national carrier. That’s indeed regrettable and truly disturbing.

Many sensible Malaysians had strongly opposed this exercise from the outset. Government-linked corporations (GLCs) Khazanah and CIMB are responsible for this ill-thought out scheme that brought previously fierce competitor Tan Sri Tony Fernandez into the fold of MAS to ‘collaborate’ to the loss of thousands of Malaysians striving to earn a living and struggling for a better life.

It is an acknowledged fact that successful airlines must have extensive flight networks in Asia as Asian economies continue to grow faster than the rest of the world, whilst building good partnerships globally. Air-Asia's success was attributed to executing good penetration strategies in these markets such as providing connectivity in major non-tradition routes in China, India, Indonesia, Thailand and Vietnam. 

This merger and the presence of Air-Asia's shareholders on the Board of Directors had invariably prevented MAS from expanding into these fast growing markets/territories and a clear case of a conflict of interest.

This exercise subsequently resulted in fewer flights, less travel options and higher ticket prices for Malaysians. MAS low-cost subsidiary Firefly was transformed in to a full-service short-haul carrier and also ceased its jet operations to Sabah and Sarawak. Parliament has been told that thousands of Johoreans have been frustrated by flight cancellations. 

Fewer flights and higher ticket prices do not just inconvenience travellers. It is bad for the entire economy. Not-for-profit research institute Research for Social Advancement (REFSA) has pointed out that:

1.   Fewer flights means less work for airline crew and airport ground personnel. Which leads to less employment and smaller incomes and less spending power;

2.      Fewer travellers also means less income and employment opportunities for taxis, hotels, caf├ęs, hawkers and all the businesses that provide the services that travellers need;

3.   Less tangible, but in the longer-run, just as importantly, high air-fares and fewer flights means fewer opportunities for people to meet, collaborate, innovate and generate economic activity. Especially hard-hit are our fellow Malaysians in Sabah and Sarawak. For example, the Sandakan-Kuala Lumpur route is now a monopoly by Air Asia .

Where there are losers, there are also winners. In this case, the winners are Air Asia, bankers and consultants. Air Asia, which previously faced competition from Firefly, is now the sole player in the domestic low-cost segment. Khazanah likely helped this along by masterminding the hasty departure of Firefly’s respected managing director Datuk Eddy Leong in November last year. He left abruptly with just over two weeks notice to join destination Resorts and Hotels, a unit of Khazanah.

GLC CIMB and other financiers must also have earned hefty fees running into millions of ringgit. We shall be asking in parliament the total amount of fees and commissions paid to bankers, consultants and advisers in the pursuit of this extremely ill-conceived exercise. 

MAS had been at the mercy of cronies and consultants for too long. Our once proud national airline has lost so much altitude since the entry of Tajudin Ramli engineered by then prime minister Dr Mahathir. Subsequently, the Widespread Asset Unbundling (WAU) exercise in 2002, the entry of Idris Jala and his Business Turnaround Plan in 2006 and this latest collaboration agreement have all failed to restore the fortunes of our national airline. In fact, the situation is worse.

Khazanah Nasional, being the major shareholder of MAS, must take responsibility for this mess. For a start, we call upon Tan Sri Azman Mokhtar and Mohammed Rashdan Yusof (better known as Danny Rashdan) of Khazanah Nasional to disengage themselves from MAS before they inflict further damage. Their earlier idea of the WAU exercise for which they were handsomely paid, didn’t actually turn-around MAS.

Ten years later, Khazanah Nasional enters into this terrible share swap arrangement to save MAS.  In the process, Danny Rashdan, who is also now a Khazanah director, was appointed to MAS’ board. Standard and Poor’s aviation analyst Shukor Yusof said, “MAS is still in a dismal position, probably even worse in terms of staff morale ”. This view is widely shared by many aviation experts. 

The government must make its position clear. MAS must be stewarded by a professional board, and run by professional managers with operating experience. Most importantly, there will be no further bail outs by the government. No more taxpayer money must be wasted, especially on consultants and bankers. 
All stakeholders must work together for the betterment of the airline and our country. 

By party representatives:

Democratic Action Party

Parti Keadilan Rakyat

Parti Islam SeMalaysia

8 MAY 2012