Tuesday, 9 December 2014

Khazanah Konsultants’ Know-how

Khazanah Konsultants’ Know-how

Khazanah Nasional Bhd.’s hush-hush plan about the restructuring of the national carrier into a New Co is getting un-nerving to many who are watching the development closely. It is not about the intent but Khazanah’s track record on Malaysia Airlines.

On 29 August 2014 Khazanah announced that Malaysia Airlines Bhd would be listed and a New Co. be formed to take over the asset, operations and liabilities by 1 July 2015, with a 12 point ‘MAS Recovery Plan’.

Two weeks ago, Minister in Prime Minister’s Department in-charge of Economic Planning Unit Dato’ Seri Abdul Wahid Omar presented the Malaysia Airlines Bhd. Bill 2014.
The Star story:
Published: Wednesday November 26, 2014 MYT 1:03:00 PM
Updated: Wednesday November 26, 2014 MYT 3:08:45 PM

Bill to allow new operator to take over Malaysia Airlines tabled for first reading

KUALA LUMPUR: A Bill which seeks to provide for the establishment of a new entity to replace Malaysian Airline System Bhd as the national carrier has been tabled in Parliament for its first reading. 
The Bill further seeks to appoint an administrator with the powers to administer and manage Malaysian Airline System Bhd and its owned as well as partially-owned subsidiary companies. 
Among others, the Bill provides that the corporation by the name Malaysia Airlines Bhd shall have as its main objective, the operating of the national carrier of Malaysia, and shall carry on other businesses as its board of directors sees fit.
The Bill, if passed, will apply for a period of five years from the date of coming its coming into effect or until the listing of shares of the company on Bursa Malaysia, whichever is earlier. 
The proposed law, known as the Malaysian Airline System Bhd (Administration) Bill 2014, was tabled by Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar in the Dewan Rakyat on Wednesday. 
The Bill seeks to ensure the continuity of the essential air services by the company as the national carrier and the provision of uninterrupted connectivity to and from and within Malaysia by the national carrier.
Two days ago German airline-turn-around-manager Chistoph R Mueller was announced as the CEO of the NewCo. It was the first time in the 42 years history of Malaysia Airlines System since began operation on 1 October 1972 which resulted from the separation of Malaysia-Singapore Airlines that a foreigner heads the national carrier.
Deputy Prime Minister Tun Dr Ismail Abdul Rahman at the officiation of Malaysia Airlines System 1 Oct 1972
Deputy Prime Minister Tun Dr Ismail Abdul Rahman at the officiation of Malaysia Airlines System 1 Oct 1972
What is alarming is the steps that Khazanah are making towards revolving the spirally corporate conundrum, which started from their own bad and further bad decisions.

The idea of de-listing Malaysia Airlines Bhd. and taking it private as an avenue towards recovery by the rationalisation of assets,operations, routes, staffing, liabilities and legacy issues and hopefully, the transformation came about after the two tragedy of MH370 on 8 March and MH17on 17 July.

The disappearance and shooting down of two B777-200s, one over South Indian Ocean and the later in Eastern Ukraine brought walls crashing on the national carrier which accumulated losses already in RM billions.

That opened the opportunity to the ‘McKinsey Minded’ streams of Cambridge alumnus operational directors within Khazanah to quickly moot a typical ‘McKinsey’ plan of corporate recovery, which include slaughtering, skinning, deboning and eventually mincing the one time sacred cow in the skies of many Malaysians .

It is something not peculiar for Malaysia Airlines since Khazanah Managing Director Tan Sri Azman Mokhtar and former comrades-in-arms both in Khazanah and Binafikir Mohd. Rashdan “Danny” Yusof did something similar 12 years ago. They advised then Economic Adviser to Prime Minister Tan Sri Nor Mohamed Yackop to cut the national carrier into pieces, hive off some businesses and sell away assets in the Wide Asset Unbundling (WAU) program.

It stopped the bleeding to death but gave the national a totally different problem to deal with. Malaysia Airlines now had to lease their operating assets such as aircrafts and part of the leasing agreement is to ‘make good’ of assets leased upon return. That cost more than a bit of money since paying off leasing is undoubtedly higher than hire-purchase since the lessor incorporate the leasing profit in the cost born by the carrier. There is also the issue of investing more money to ‘make good’ against scrap value realisable for disposing off assets
When former Shell-man Idris Jala was brought in to restructure the national carrier. his plan did make a change.

In 2005, the Malaysian government elected him as CEO of Malaysia Airlines due to massive losses of the company. In February 2006, he announced the airline’s business turnaround plan from a 9-month loss of USD400 million in 2005 to achieving a record profit of USD260 million in 2007 until September 2009.

In May 2008, Idris appeared on national television announcing the airline’s first ever ‘zero fare’ for domestic and a selection of international flights, a move that raised his spat between him and AirAsia’s loud-mouth boss, Tony Fernandes to a new level.

Idris left in 2009 when Prime Minister Dato’ Sri Mohd. Najib Tun Razak brought him into the PM’s Department as the Executive Director of economic transformation unit PEMANDU, with a ministerial status. In his place,  CFO Tengku Dato’ Azmil assumed the CEO post of the national carrier.
Tengku Azmil carried out most of Idris’s plans which include rebuilding of Malaysia Airlines’ own fleet starting with B737-800s, the new A330-300s and the A380-800s. The A380s were supposed to replace the ageing and fuel guzzling B747-400, which have been in service with the national carrier since 20 years earlier.

Tengku Azmil was not giving the right opportunity to explore the full potential of Malaysia Airlines (mostly from the restrictions imposed by MOF and MOT, which some are believed to be spill over when AirAsia had the ‘open sky reign’ during PM ‘Flip-Flop’ Abdullah Ahmad Badawi’s premiership and the dreaded years under the ‘Level Four Boys’).

In a surprise corporate maneuvre in early August 2011, one Sunday Tengku Azmil was told by his Khazanah bosses to pack up and leave within 24 years. The unthinkable had happened.
Those who areresponsible and should pay this RM10 million fine for Malaysia Airlines
Those who areresponsible and should pay this RM10 million fine for Malaysia Airlines
Khazanah hastily agreed to a ‘share-swap’ with Tune Air brokered by CIMB where 20% of Malaysia Airlines holding are swapped with 10% of AirAsia and Tony Fernandes is to come into Malaysia Airlines and take over the national carrier.

Fernandes and co almost devoured the national carrier for their own gluttony on the excuse of “Rationalising the airlines” as the affluent amongst Malaysians vehemently oppose the ‘share-swap’, where it brought no benefits to Malaysia Airlines what so ever.

The ‘share-swap’ short lived for only ten-and-a-half months before Prime Minister Najib announced the reversal.

What is interesting this round of decapitating and systematic and structurally dismembering the national carrier is that Khazanah opted the ‘Consultants’ module’ again.

Five or six consultants have been appointed and awarded jobs to do the job, of preparation for the “MAS Recovery Plan” as well as coming up with the ’12 point plan’. What is interesting is that it is almost proven that non amongst the partners, managers and worse of all, the young kuchirats whisking in and out freely within the national carrier have any relevant experience of working with and/for an airline before.

They have established themselves almost permanently parked and calling the shots as part of the ‘Restructuring Management Office’ within the corporate HQ of Malaysia Airlines.

Their modus operandi is very funny. They understand very little of the operations of an airline, let alone Malaysia Airlines. However, they do not present themselves to each operating unit to understand or even do a technical audit of the work and the operation program.

Instead, they go around in other departments asking what they thought of the department or operational function that they intend to understand and restructure.

What is alarming is this arm-chair consultancy is very ‘BBA-final-year-classroom-coursework’, in attitude, aptitude and functionality. Some of these consultants map out their NewCo on a large sheet of paper and brought some of the senior management and technical professionals for consultancy and interview.

In one of these sessions, one senior technical professional made a damning simple comment after three hours of consultancy, “I don’t really care what you people are doing and what this ‘New Co.’ is all about. My question is, I don’t see any of you people mention the sentence ‘Application of an airline license'”.

Shocked and in great awe, flabbergasted.

None of these consultants actually realised that they need to apply for an Airline Operation Certificate (AOC) from the DCA for a company to be allowed to operate as an airline and carry commercial goods and passengers.

There on, we don’t actually have much faith of where this New Co. will go and what it plans are, as the national carrier able to carry the Jalur Gemilang on its tail across probably six continents (when Malaysia Airlines was at its peak) as an extension of the nation’s economic, trade and foreign policy.

At the same time, maintaining profitability, good cash position and the high spirit of proud Malaysian workforce in a very unique MNC.

It actually has been proven before by a team of Malaysian entrepreneurs, airline professionals and managers and proud workforce. The fact this failed then it was not because of poor planning, mad management or sloppy operation. It was the affect of the 1997-8 Asian Financial Crisis (AFC 978).

Nor Mohamed Yackop once as the Economic Adviser to the Prime Minister killed these people with the might of the Danaharta, when they defaulted on the NPL which was an effect of the AFC 978. Today, he is still the Deputy Chairman of the holding corporation of the sovereign wealth fund which has this habit of hiring consultants, especially the Mat Sallehs.

Probably Khazanah in their ‘McKinsey Minded’ euphoria of doing the right thing in the dawn of the dynamism of the new age should also consider having a Mat Salleh run Khazanah Holdings Bhd. and not just stop at the New Co. which is in the process of systematically killing Malaysia Airlines.

Malaysia Airlines went through a series of management, asset-liability and operational transformation the past twelve years. What is constant, are the Khazanah decision makers. It is the time for change, for Khazanah.

source : bigdogdotcom

No comments: