Heads I Win, Tails You Lose!
By Masterwordsmith
The poor performance of MAS in the last two quarters was a matter of concern to many. Then came the explosive announcement that Malaysia Airlines and AirAsia will swap shares in a deal which will see Tan Sri Tony Fernandes become the single biggest shareholder. The deal was apparently stealthily sealed after negotiations that stretched for about a year.
Many are alarmed over this development which poses serious concerns that Air Asia can dominate MAS thereby reducing competition between the two to the detriment of end-users. In the long run, this could lead to a virtual monopoly of the domestic airline industry. In such a scenario, we will be exposed to the risks and concerns associated with such a monopoly bearing in mind that other cronies and political power brokers could be lurking in the shadows.
Is there a conflict of interest notwithstanding his purported ‘non-executive’ position since the swap is accompanied by effective participation of Tony Fernandez and his nominees in the board of MAS? Have corporate governance rules been violated? Surely they have a framework of laws and guidelines for economic efficiency and ensure a firm’s responsibility towards its investors and stakeholders. However, considering the level of secrecy in which this was discussed, we must question the level of transparency in the decision-making of a national issue. In fact, the Securities Commission must investigate if there any irregularities exist.
Remember back in the old days when Telekoms Malaysia monopolised the industry and service was atrocious? Only when the industry was opened to competition did we see service improve (at least some improvement). In the UK, gas and electricity is extremely competitive. Even foreign companies operate in the UK. In Malaysia we only have Gas Malaysia and TNB. That is why service is bad and expensive. In the UK, dozens of companies need to fight for the business.
Competition is good news for the consumer. And that is why many countries have anti-monopoly laws to protect the consumers.
In the US, the MAS-Air Asia deal would be blocked and citizens like you and me can go to court to file a class action suit to get the court to prevent such monopolistic mergers.
When Singapore joined Malaysia in 1963, it shared Malaysia’s common currency. Later on, Singapore was expelled, became independent in 1965 and lost its monetary union. In 1967 Singapore established a Board of Commissioners of Currency and released its own notes called the orchid. The orchid is now known as the dollar (SGD). Today, the exchange rate is RM2.5: SIN$1.
Looking back, Malaysia-Singapore Airlines (MSA) came into being in 1966 as a result of a joint ownership of the airline by the governments of Malaysia and Singapore. After six years, the airline ceased operations in 1972 when both governments decided to set up their own national airlines. That was how Malaysian Airline System, now called Malaysia Airlines, and Singapore Airlines were formed.
According to a SIA report dated 28th January 2011, the third quarter of 2010-2011 operating profit WAS UP 58% to SIN$509million (RM1.27billion). And how much does MAS make?
B.K. Sidhu of The Star reported that Malaysia Airlines (MAS) NET PROFIT FELL BY 65% to RM226mil for the fourth quarter ended Dec 31, 2010 from RM640mil a year earlier due to higher cost of fuel despite carrying more passengers during the quarter. The fourth quarter is normally the most profitable quarter for most airlines. In terms of revenue, the airline reported an 8% a rise to RM3.6bil from RM3.3bil previously.
In short, the two reports show that SIA makes about MORE THAN FIVE TIMES what MAS makes and that is taking MAS accounts at ‘face value”. With a fine-toothed comb, could the figures be less or even at a loss?
So why merge MAS and Air Asia when we should be talking about the poor performance of MAS? South of the border, a premium airline is raking in money while in our own homeground, the opposite is happening!! Why can’t MAS stay afloat despite the many injections over the years? (Read Is Mas Still EMAS?)
