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It's do or die for MAS now, says economist

The new Malaysia Airlines which took off on Sept 1 is all dressed up for success after unloading a long list of excess baggage but it's now a "do or die" situation for the national carrier, an economist said today.

Against the backdrop of a new era of massive inter-continental and regional competition, in which only the very fittest would survive, Ahmad Zakie Ahmad Shariff expressed confidence the new MAS could be reinstated to its former glory, being no longer the old flabby airline and with its new chief executive officer (CEO) pushing for global operational standards.

Ahmad Zakie, who is CEO of Menteri Besar Incorporated Kelantan, said he was impressed with the comprehensive restructuring carried out by Khazanah Nasional Bhd under the newly born Malaysia Airlines Bhd (MAB) over the past one year, parts of which were on-going, for the airline to compete on a much stronger footing in a 'cut throat industry'.

"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, MAB you are now on your own", he said.

The restructuring over the past one year, among others, saw MAB and Brahim’s Airline Catering Sdn Bhd (Brahim’s) entering into a new catering agreement, which was benchmarked against international standards and best practices, a significant milestone in the national airline's journey to renegotiate its supplier contracts, which have long been blamed for its high cost structure.

Brahim’s had in early March agreed to shave off 60 percent from its payment from the old MAS, Malaysian Airline Systems Bhd, amounting to RM94.04 million as well as a 25 per cent reduction in its final monthly bill.

Cutting costs

With Brahim’s already successfully paving the way for the renegotiation of all contracts, it is anticipated the on-going review of some 4,000 contracts will help close the gap of the 20 percent higher operational costs with its peers.

In addition, the national airline has cut unprofitable routes, with plans to sell aircraft to reduce costs.

More cost savings are coming to MAB with more than 100 projects or initiatives identified to improve revenue and optimise costs.

Ahmad Zakie said these would lead to efficiencies in MAB that could be measured by Key Performance Indicators (KPIs) which Christoph Muellerv( photo ), MAB’s CEO, had set for the 12 divisions, each of which has to stand and grow on its own for MAB to function as a financially strong, commercially driven entity.

“And the leaner workforce of 13,000 starting work at MAB on Sept 1 will also help bring down operational costs,” he added.

Khazanah Nasional said in its latest progress report following the transition of the old MAS to MAB that one year after it was mooted, the restructuring has shown sustained progress in all key areas under the five-year 12-point plan.

Recently when MAB commenced operations, Mueller together with his team greeted passengers at KLIA, showcasing a good engagement initiative and signalling the airline sees itself as a service-driven business and not merely a provider of transportation.

"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.

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

The CAPA (Centre for Aviation) reported that Malaysia Airlines was one of the 16 publicly traded airlines in Southeast Asia that improved its profit in the first half of 2015 and this, he said, augured well for the first year restructuring initiatives.

“However, fresh financial challenges threaten MAB's profitability, as the drop in oil prices do not directly translate to savings by Malaysia Airlines, given the steep plunge in the ringgit causes a mismatch in revenues earned mostly in ringgit, while expenses are incurred in US dollars," said the economist.

- Bernama

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