Tajudins ode to MAS: Its been fun but I gotta run
The ongoing saga of Malaysia Airlines (MAS) and its outgoing executive chairman Tajudin Ramli is like a marriage that has hit the rocks. It is in fact nearing its end and while the future of one is known the other is still uncertain. What actually went wrong?
First, not everyone can run an airline as big as MAS. Never mind the lack of experience in commercial aviation (a few years in the helicopter charter business is certainly not enough), but the investor needs to have a lot of financial stamina. The global airline business is always subject to a lot of international vagaries and uncertainties.
But Prime Minister Dr Mahathir Mohamad was nevertheless intent on building Tajudin, an accountant and former merchant banker, into an exemplary bumiputra entrepreneur. Perhaps he could not be faulted for trying for there was no one else foolhardy enough to take over Malaysia Airlines and turn it into an even bigger airline than it already was.
As soon as he came on board with a 29 per cent equity stake in MAS via Naluri Sdn Bhd of which he is chairman, he changed everything, even its work and management culture. He set up many subsidiaries including one specifically for air cargo, another for food catering and yet another for duty free shopping.
But what he referred to in an interview with a national English daily as his development programmes cost a lot of money. He could not possibly have asked the existing shareholders to come up with all the money.
So he got MAS to borrow several billions of ringgit, almost all denominated in US dollars. His own company Naluri had already borrowed a lot to buy the stake in MAS, so it couldn't possibly come up with more either on its own or through additional borrowings.
Brunei offloads
Therefore, MAS is heavily indebted. According to market analysts, staff moral is low and at year-end they expect a bonus to be paid. But where is MAS going to find all that money if it is going to incur losses of between RM400 million and RM1 billion for the financial year ending March 31, 2001?
Tajudin in the interview had the audacity to say he does not have the money any more to put into MAS so he is selling out and going to concentrate only on his mobile phone and telecommunications business.
This is not a question of doing the wisest thing but that there is really no other choice left to salvage what little is left of his commercial aviation business interests.
Brunei's sale of its 80 million shares representing about 10 percent of MAS' entire equity for RM4 apiece or a total consideration of RM280 million is certainly a reflection of some of the shareholders' confidence or lack of it in the present management.
It is understood that the Brunei decision was taken purely based on business sense although the Brunei Investment Agency has indicated it will consider investing again in MAS in the future.
Plane embarrassing
The market, already alerted to a lot of possibilities concerning the MAS counter, is abuzz with rumours that Tajudin now has little say in the day-to-day management of the national airline.
An indication of this is the sacking of Ralph Gotz, Tajudin's German friend, from the post of vice president for MasKargo Sdn Bhd, one of the subsidiaries created by Tajudin.
Another indication is what later proved to be a highly-embarrassing statement made by Tajudin that three foreign airlines - SAir Group (owner of Swiss Air), KLM Royal Dutch and Qantas Airways - which were negotiating to buy Naluri's shares in MAS.
A few days after the statement was made, both SAir Group and KLM Royal Dutch said they had never intended to buy any shares in MAS in the first place.
Only the Australian airline has confirmed it is negotiating to buy some shares. This has come at a time when an announcement was made in London that British Airways is in fact interested to buy a major stake in Qantas.
Now, British Airways has already announced that it is withdrawing its services between London and Kuala Lumpur from April next year. Does this mean that by buying into Qantas which (assuming the Qantas-MAS deal is eventually finalised) in turn will have a major stake in MAS, all three airlines will enjoy unrestricted rights on the Australia-Malaysia-UK route?
Turbulent times ahead
After Brunei's sale, Tajudin cannot expect to fetch anything near the RM8 he has asked for apiece when MAS' share is traded even below RM4. Adding a premium at best, the government is expected to pay no more than RM5 million.
And if this is what the government is going to pay him then that is hardly enough to help him regain his capital investment in MAS in the first place.
Unless of course the government intends a takeover of Naluri's shares before their disposal to third parties, either local or foreign, providing a bailout for one of the high-profile Malay corporate figures.
According to informed sources, the boys in both the Ministry of Finance and the Treasury are of the strong opinion that the government's purchase of Naluri's shares must be based on a realistic valuation taking into account the airline's current revenue performance, expenditure and existing liabilities.
As a major shareholder, the government would clearly need to pump in additional funds, perhaps up to RM2 billion at least, to reduce the airline's debt exposure and improve cash flow.
Short of doing this, MAS could degenerate into Asia's new sick airline. This in the government's view can hardly justify its huge expenditure in building the state-of-the-art Kuala Lumpur International Airport in Sepang to make the country into the region's leading air passenger and cargo hub.
TONY THIEN is a freelance writer based in Kuching.
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