Ailing Malaysia Airlines readies for drastic overhaul

[webfact]

Ailing Malaysia Airlines readies for drastic overhaul
By KELVIN CHAN and EILEEN NG

KUALA LUMPUR, Malaysia (AP) — After a year of calamity, Malaysia Airlines is shrinking to survive.

The disappearance of Flight 370 one year ago, combined with the downing of Flight 17 over a rebel held area of eastern Ukraine four months later, brought the already financially struggling flag carrier to its knees.

The government, which owned most of the airline, took 100 percent ownership and removed it from the Malaysian stock exchange last year. The airline is now aiming to return to profitability by 2017 with a drastic $1.7 billion overhaul that includes cutting nearly a third of its staff.

Key to the plan is a new CEO, Christoph Mueller, a turnaround specialist who led a successful revival of Ireland's Aer Lingus. His new bosses hope he'll be able to pull off a similar feat at Malaysia Airlines though analysts say success is far from guaranteed because of the political baggage of being a state-owned company. At least four other major restructurings of Malaysia Airlines since 2001 have failed.

"There's no doubt that it's got more challenges than many, because you're dealing with a company that's in a poor financial state, you've got the political interference, the backlash of the incidents," said John Strickland, director of JLS, an airline industry consulting company.

The challenge of the restructuring is compounded by rapid changes in the aviation industry in Asia, where low cost carriers are proliferating to serve the growing ranks of middle class consumers.

The disasters that brought Malaysia Airlines to the brink of financial collapse served to underline the weakness of it and other full-service carriers in the region. They face stiff competition from a wave of budget upstarts including Malaysia's AirAsia, Indonesia's Lion Air, Tigerair and Scoot from Singapore, and Qantas offshoot Jetstar.

Even Malaysia Airlines has its own low-cost offshoot, Firefly. Mueller may be keen to use it as a testing ground for new ideas, given his track record at Aer Lingus, where he responded to competition from no-frills airline Ryanair by mimicking as many of its practices as possible.

The changes, which blurred the distinction between Lingus and Ryanair, include shortened airplane turnaround times at the gate and charging for seat selection, checked bags and food and drinks.

Aer Lingus' net profit since its 2006 stock flotation has wobbled between modest profits and losses as the company took financial hits for strikes, shutdowns, mass cancellations and pension gap payoffs in order to avoid more strikes.

The result is that he's turned an airline that was near death into an attractive takeover target for Ryanair and British Airways parent IAG simply by getting it through a period of massive upheaval.

A similar outcome might be in store at Malaysia Airlines. Khazanah Nasional, the Malaysia sovereign investment fund that owns the airline, said it may consider selling some or all of its stake to private investors after relisting shares within a planned three to five years.

Aer Lingus and Khazanah Nasional declined interview requests for Mueller, who started his new job on Sunday.

In a quarterly update released Monday, Khazanah said the overhaul of Malaysia Airlines is on track. The airline is preparing to cut 6,000 of its 20,000 employees. It's also planning to expand seats on Asian routes by 5 percent but is reviewing European and Mideast routes with a view to ending some.

The company said it also won a temporary 25 percent reduction on its monthly catering bill as it renegotiates its supplier contract.

The cuts are vital to stem the losses at the airline. In its last financial result as a listed company, the airline reported that third quarter losses widened 53 percent from a year earlier to $170.3 million. That brought its loss in the first nine months of last year to $368 million.

Asian aviation experts have urged changes at the airline but say there is a risk it could shrink too much as it battles to compete with the low-cost crowd.

They say there's still room for legacy carriers in Asia, though they need to concentrate on routes and destinations where they can make money, mainly to capital cities and business and finance hubs.

"In Asia, you've still got a lot of low-income countries where price is a major factor," said Andrew Herdman, director-general of the Association of Asia-Pacific Airlines. "It's a challenge for full-service carriers in Asia to restructure and be more efficient to narrow that productivity and cost gap with budget carriers."

Herdman said a "pure no-frills model is not the answer" for airlines trying to compete. The bulk of their revenue still comes from medium and long-haul fares and airlines need two to three classes tailored to the needs of different types of passengers.

An unexpected helping hand for the airline has come from the collapse in the price of oil over the past year.

Mohshin Aziz, aviation analyst at Maybank Kim Eng Securities, said the airline's jet fuel bill, which last year amounted to 6.3 billion ringgit ($1.7 billion), will be cut in half this year, which alone will help it return to profitability.

But he also worried it might reduce the pressure for change.

Mohshin said he sees a "zombie" future for the airline which will be "alive but barely."

"They will just be in this perpetual bureaucratic tug of war between the employees, the government and the management."
____

Chan reported from Hong Kong. Shawn Pogatchnik in Dublin contributed to this report.


-- (c) Associated Press 2015-03-04

[96tehtarp]

"They will just be in this perpetual bureaucratic tug of war between the employees, the government and the management."

With all of the above mentioned troubles MAS has made a good move with the appointment of their new CEO, Christoph Mueller. THAI has not one foreigner in management at their head offices.

I wish Malaysian Airlines the very best success in their turnaround effort.

[Xircal]

I think the first thing the new CEO needs to tackle is the ambiguity found on MAS site pertaining to booking flights.

For example, a flight between Amsterdam and Phuket via Kuala Lumpur on June 1 and return on June 22 would cost €175.

But then, surcharges to the value of €395,96 are added to the bill. However, there's a complete lack of information as to what these surcharges comprise of.

In the Terms and Conditions specific to the chosen flight, there's a reference to "Surcharges", but nothing which explains how the above figure has been calculated. There's only a vague reference to a €50 surcharge each way if the flight departs on a Friday or Saturday. My chosen dates in the screenshot were for an outbound flight on a Monday and a return on a Sunday.

I don't like that lack of clarity and that's one of the things which needs to be addressed to instil confidence in the airline again in my opinion.

[Anthony5]

I think the first thing the new CEO needs to tackle is the ambiguity found on MAS site pertaining to booking flights.

For example, a flight between Amsterdam and Phuket via Kuala Lumpur on June 1 and return on June 22 would cost €175.

But then, surcharges to the value of €395,96 are added to the bill. However, there's a complete lack of information as to what these surcharges comprise of.

In the Terms and Conditions specific to the chosen flight, there's a reference to "Surcharges", but nothing which explains how the above figure has been calculated. There's only a vague reference to a €50 surcharge each way if the flight departs on a Friday or Saturday. My chosen dates in the screenshot were for an outbound flight on a Monday and a return on a Sunday.

I don't like that lack of clarity and that's one of the things which needs to be addressed to instil confidence in the airline again in my opinion.

Isn't this the same with all other airlines, and at that price I don't think you will find many other choices.

[Xircal]

I think the first thing the new CEO needs to tackle is the ambiguity found on MAS site pertaining to booking flights.

For example, a flight between Amsterdam and Phuket via Kuala Lumpur on June 1 and return on June 22 would cost €175.

But then, surcharges to the value of €395,96 are added to the bill. However, there's a complete lack of information as to what these surcharges comprise of.

In the Terms and Conditions specific to the chosen flight, there's a reference to "Surcharges", but nothing which explains how the above figure has been calculated. There's only a vague reference to a €50 surcharge each way if the flight departs on a Friday or Saturday. My chosen dates in the screenshot were for an outbound flight on a Monday and a return on a Sunday.

I don't like that lack of clarity and that's one of the things which needs to be addressed to instil confidence in the airline again in my opinion.

Isn't this the same with all other airlines, and at that price I don't think you will find many other choices.

Well, according to EU law all elements of a given ticket price must be clearly specified and the total price dislayed before the passenger commits to the booking. http://ec.europa.eu/consumers/enforcement/docs/airline_charges_report.pdf

Seeing that the new CEO is a German national, he should be aware of that fact.

[steve187]

Malaysia air is a good airline, and they are trying to do there best after the disasters of 2014, they have called in an expert to help, other failing airlines should follow their lead.

[Johnny S]

Does anyone really fly with them anymore ... ? Just remember that these authorities will never reveal info about any accidents, just like with MH370

[sunshine51]

I think the first thing the new CEO needs to tackle is the ambiguity found on MAS site pertaining to booking flights.

For example, a flight between Amsterdam and Phuket via Kuala Lumpur on June 1 and return on June 22 would cost €175.

But then, surcharges to the value of €395,96 are added to the bill. However, there's a complete lack of information as to what these surcharges comprise of.

In the Terms and Conditions specific to the chosen flight, there's a reference to "Surcharges", but nothing which explains how the above figure has been calculated. There's only a vague reference to a €50 surcharge each way if the flight departs on a Friday or Saturday. My chosen dates in the screenshot were for an outbound flight on a Monday and a return on a Sunday.

I don't like that lack of clarity and that's one of the things which needs to be addressed to instil confidence in the airline again in my opinion.

On a personal note I reckon Mr. Mueller will leave ambiguous ticket info for last of the last of his doings

to sort out MAS. There's much more important matters that need immediate attention...like getting rid of

top heavy dead weight management along with non productive routes and maybe cancelling MAS old orders

for new Airbus 380's. Plus since MAS is a "privately owned government entity"...he also has to deal with

politico's down there who are not very forthcoming in/with anything....ref...the MH370 fiasco confrences.

I wouldn't want his job.

[Lupatria]

"There's no doubt that it's got more challenges than many, because you're dealing with a company that's in a poor financial state, you've got the political interference, the backlash of the incidents," said John Strickland, director of JLS, an airline industry consulting company.

Time to find sponsors to get him to hold a lecture at Thai Airways.

[Dustdevil]

You never know with airlines. With a Western CEO at the helm, MAS may become more efficient, but he'll still have to deal with one of the world's most incompetent, pig-headed, fascist governments.

[Dustdevil]

"There's no doubt that it's got more challenges than many, because you're dealing with a company that's in a poor financial state, you've got the political interference, the backlash of the incidents," said John Strickland, director of JLS, an airline industry consulting company.

Time to find sponsors to get him to hold a lecture at Thai Airways.

I'll still take Thai Air or Thai ANYTHING over Malaysian anything!

[Dustdevil]

Imagine if, after the incredibly incompetent and opaque handling (and who knows what cause) of the MH370 disaster, you had put me, or my drinking buddy John, or maybe Scarlett Johansson in charge of MAS. Any one of us would have said "All right--we've had one disaster that cost us hundreds of lives and all we could do was stonewall and lie about it. In future, let's do some very basic due diligence to prevent another 'accident.' The first thing we'll do is avoid war zones. First on our list is Ukraine. American Airlines and others avoid this area; maybe we should too."

You think MAS would have thought of that? Not with that government in charge. They were too busy putting political opponents in prison for sodomy.

[Dustdevil]

Does anyone really fly with them anymore ... ? Just remember that these authorities will never reveal info about any accidents, just like with MH370

Whenever they **** up, which is daily, they just talk about the shameful American treatment of Native Americans in the 19th Century, or the international Jewish conspiracy for which the West is a proxy warrior. (Mahathir has said both things many times in speeches.)

[realenglish1]

The problem does not really come from airlines charging too much so much as all the hidden taxes and airport fees you have to pay

On a great many routes the fees are higher than the actual cost of the flight

So start blaming the governments more than the airlines People just think they can do nothing from government add ons that has just allow

your government to charge outrageous fees

[Xircal]

I noticed today on the airlinequality.com site that MAS's five star rating is listed as being 'Under review" now which isn't a good sign: http://www.airlinequality.com/Forum/mas.htm

Incidentally, I read a report concerning the transport of lithium-ion betteries being banned by a couple of US carriers due to fire hazard. In that respect, MH370 was also reported to have been carrying 440lb of those which adds yet another twist to the mystery of the flight's disappearance: http://www.bbc.com/news/technology-31709198

[Chivas]

They need an overhaul in the Passenger Experience at least certainly at Econony Level.....

My flight from KL to Heathrow in January on their A380 goes down as my worst experience ever on an Airline a list that amongst others includes Aeroflot, Biman, Uzbekistan, Polish, Tarom and Balkan which kinda puts it into perspective how bad it was

[steve187]

They need an overhaul in the Passenger Experience at least certainly at Econony Level.....

My flight from KL to Heathrow in January on their A380 goes down as my worst experience ever on an Airline a list that amongst others includes Aeroflot, Biman, Uzbekistan, Polish, Tarom and Balkan which kinda puts it into perspective how bad it was

last time i flew A380 Kul/lhr the service was very good as was the food.

on a cost saving note i would have thought one of the kul/lhr flights will get cut, i would think the 2 x A380 daily will take some filling, better to have one flight full, than 2 flights with empty seats. the slots at lhr would be worth some money, either rented out or sold.

[stevieb892]

Costas

Just what was so appalling?

[stevieb892]

Sorry I meant

Chivas

[trogers]

I think the first thing the new CEO needs to tackle is the ambiguity found on MAS site pertaining to booking flights.

For example, a flight between Amsterdam and Phuket via Kuala Lumpur on June 1 and return on June 22 would cost 175.

But then, surcharges to the value of 395,96 are added to the bill. However, there's a complete lack of information as to what these surcharges comprise of.

In the Terms and Conditions specific to the chosen flight, there's a reference to "Surcharges", but nothing which explains how the above figure has been calculated. There's only a vague reference to a 50 surcharge each way if the flight departs on a Friday or Saturday. My chosen dates in the screenshot were for an outbound flight on a Monday and a return on a Sunday.

I don't like that lack of clarity and that's one of the things which needs to be addressed to instil confidence in the airline again in my opinion.

On a personal note I reckon Mr. Mueller will leave ambiguous ticket info for last of the last of his doings

to sort out MAS. There's much more important matters that need immediate attention...like getting rid of

top heavy dead weight management along with non productive routes and maybe cancelling MAS old orders

for new Airbus 380's. Plus since MAS is a "privately owned government entity"...he also has to deal with

politico's down there who are not very forthcoming in/with anything....ref...the MH370 fiasco confrences.

I wouldn't want his job.

Look for deadweight not just at the top. Nepotism over decades means throughout rank and file. See the children of so called Hi-So in Thai as an example.