Fwd: NEVER ENDING PROBLEMS AT MAS

[A Imran]

--- Hossein <bk_...@yahoo.com> wrote:

> Date: Sun, 13 Nov 2005 19:10:11 -0800 (PST)
> From: Hossein <bk_...@yahoo.com>
> Subject: NEVER ENDING PROBLEMS AT MAS
> To: aliim...@yahoo.co.uk
>
> THE NEVER ENDING PROBLEMS AT MAS
>
> An internal memo circulated by MAS Chairman and
> acting Managing Director Munir Majid has made it to
> the Press. The memo laments the ongoing problems
> faced by MAS. Recently MAS announced losses of
> RM280.0 million for the 1st quarer 2005. Well the
> second quarter losses (to be announced soon end
> November 2005) are another RM260.0 million. That is
> RM540.0 million losses in 6 months. Conservatively
> MAS can be expected to make losses totaling RM1.0
> Billion for its financial year 2005/06. MAS has
> serious problems indeed.
>
> Internal cashflow projections indicate that by
> June 2006 MAS may not have cash to pay fuel bills
> and meet operational requirements. When that happens
> what it means is that the planes will be grounded.
> But MAS has contingency plans. They plan to sell the
> MAS building in Jalan Sultan Ismail to raise cash.
> MAS hopes to sell the building for about RM350.0
> million but the very old building is only valued at
> about RM250.0 million. And you cannot sell a
> building like that in one or two days. The bigger
> question is who is going to buy the building, even
> for RM250.0 million ?
>
> Petronas already has enough unused building space
> at the Twin Towers. KTM also does not need a high
> flying building. Maybe the REITs (Real Estate
> Investment Trusts) will be asked to do national
> service ?
>
> Many things in MAS are now being set aside pending
> the arrival of the new MD Mr Jala from Shell
> Sarawak. A lot is expected of Mr Jala who sings and
> plays the guitar. Recalling his Dayak heritage, Mr
> Jala has suggested a ‘long house’ type management
> technique. This means MAS employees may soon share
> smoking a native peace pipe or worse eating lunch
> from a common bowl at the cafeteria.
>
> All of MAS’ collective agreements have expired and
> are up for renegotiation with the Union. All
> salary increments for staff have been postponed
> pending the arrival of Mr Jala. But the pilots have
> been given a salary increment of 25%, even before
> the arrival of the new MD. The Unions are
> complaining about this.
>
> What will really happen when (not if) MAS runs
> out of cash by June 2005 ? MAS will most likely go
> to the Government for emergency funds to meet
> operational costs. This is bad, really bad. MAS has
> undergone almost everything that a turnaround
> situation would warrant including restructuring,
> outsourcing, streamlining, financial reengineering
> etc. The only thing that has not been done yet at
> MAS is brain surgery on the people who run the
> airline. Perhaps this is an option the Government
> may want to consider.
>
> Another problem that MAS has to contend with is
> that the company now reports to Tan Sri Nor Mohamed
> Yakcop – the Second Finance Minister. If King Midas
> turned everything to gold with his golden touch,
> everything Nor Mohamed touched in the past went
> bust. He put Bank Negara into technical bankruptcy
> with his forex deals which caused RM17.0 billion in
> losses that are still not understood even by
> himself, let alone the average Malaysian. After
> Bank Negara, Nor Mohamed worked for Anwar Ibrahim
> who got him a job at Rashid Hussain Research. Both
> Anwar Ibrahim and Rashid Hussain went bottoms up,
> Anwar quite literally. Then Nor Mohamed became
> Chairman of Abrar which not only went bust but was
> wound up. During his tenure as Chairman, Abrar
> bought over Mun Loong Bhd which went bust and became
> a PN4 company and lost its identity completely. It
> is now known as Kamdar Singh Textiles. Then Nor
> Mohamed worked for Tan Sri Ali Abul Hassan who lost
> his job. After that Nor Mohamed worked for
> Mahathir Mohamed who also stepped down. Now Nor
> Mohamed works for Abdullah Badawi and has the
> country’s economy in his hands. Just because he is
> Finance Minister Two now, can we expect Nor Mohamed
> to have miraculously developed an ability to avoid
> disasters ? I shudder to say this but shall we wait
> and see ?
>
> The appointment of Mr Jala also shows more short
> sighted thinking. Why appoint an oilman ? The simple
> reason is because 40% of MAS’ operating costs are
> fuel bills – aviation fuel. It is hoped that Mr
> Jala’s experience as an oilman will help MAS do a
> better job in buying aviation fuel on a futures
> basis (futures contracts). The same futures markets
> that caused Bank Negara’s RM17.0 billion debacle.
> But the fuel problem is not specific to MAS alone.
> The whole industry suffers high fuel costs. MAS has
> other more serious problems which may not be in Mr
> Jala’s domain or job description.
>
> MAS suffers significant waste. For example the
> Prime Minister’s brother Ibrahim Abdullah is a
> shareholder in SkyChef – a joint venture with
> Lufthansa – which has taken over the job of MAS
> Catering. This is a very lucrative deal for SkyChef
> but a bleeder for MAS.
>
> Even if the flight to London is half full, SkyChef
> still puts on a full load of food on every flight.
> At the end of the flight the extra food is thrown
> away. MAS has to pay for that wastage. Each meal in
> a plastic tray can cost more than RM25.00. How is Mr
> Jala going to deal with that ?
>
> SkyChef has also negotiated the catering contract
> such that a full load of mineral water is put on
> all flights that adds to the airplanes weight and
> burns more fuel. When the plane returns, any
> unopened bottles of mineral water are put back on
> the flight and charged to MAS again. A neat way
> for SkyChef to milk MAS.
>
> MAS serves salads in its meals, which were made
> using lettuce grown in Cameron Highlands. Two months
> ago MAS stopped buying lettuce from Cameron
> Highlands and opted for very expensive imported
> lettuce from Australia. No one (other than certain
> folks at the Purchasing Department) seem to know the
> reason for this expensive switch.
>
> In Engineering, MAS may have three test pads to
> check out avionics – two in KL and one in Penang.
> Because all avionics are tested out in KLIA, the
> test pad in Penang is never used. Each costs over
> RM200,000 a piece.
>
> When MAS presented its quarterly results, they
> carefully avoided any mention of Professional
> Services. This means 'consultants'.
>
> MAS has employed more than 17 different
> consultants and are still employing more
> consultants. There are so many Australian and
> British consultants that the MAS office in Subang
> looks like an orang putih outfit. One consultant is
> paid RM5000 per day. Other consultants are paid in
> excess of RM2.0 million per year. Considering that
> the company’s total losses are increasing, no one
> seems to know just what is the positive impact of
> all these consultants.
>
> The latest addition to this list of consultants is
> a lady hired from Citibank Singapore who is paid
> RM60,000 per month. The headhunters who hunted her
> down were paid RM180,000. This lady is in charge of
> Services – to handle the outsourcing of MAS support
> services like IT, ticketing, administration etc.
> Outsourcing has been quite disastrous for MAS too
> because it has cost the company even more money.
>
> After outsourcing IT, response time to fix
> computer glitches at the non front line departments
> have been slowed down (two to four days). Some of
> these outsourcing contracts are also being eyed by
> companies related to Directors that sit on the Board
> of MAS. One of them is the Symphony Group that is
> controlled by Dato Azman Yahya (formerly of
> Danaharta) who is a MAS Board member.
>
> To bring the company around Munir Majid has asked
> senior executives at MAS to take voluntary pay cuts
> up to 30%. This is childish and not even foolish
> thinking. As a good example Munir says that he has
> not taken his acting MD allowance for the past
> months. MAS folks say Munir’s comments are
> justified because he is not fit to be an MD.
>
> But Munir’s financial loss is consoled by the
> fact that despite the company making so much losses,
> he has recently bought an oil painting for over
> RM1.0 million using company funds that hangs in his
> office. What have financial losses got to do with
> appreciating art ?
>
> The people who know exactly what is wrong with MAS
> are the rank and file. At meetings with the
> management they have voiced their opinions but to
> no avail. The ringgits involved in MAS are huge.
> Many hands are in the cookie jar.
>
>
>
>
>
>
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[Bala Pillai]

AI,

What do you think should be done?


cheers../bala

> Yakcop - the Second Finance Minister. If King Midas

> fuel bills - aviation fuel. It is hoped that Mr

> Jala's experience as an oilman will help MAS do a
> better job in buying aviation fuel on a futures
> basis (futures contracts). The same futures markets
> that caused Bank Negara's RM17.0 billion debacle.
> But the fuel problem is not specific to MAS alone.
> The whole industry suffers high fuel costs. MAS has
> other more serious problems which may not be in Mr
> Jala's domain or job description.
>
> MAS suffers significant waste. For example the
> Prime Minister's brother Ibrahim Abdullah is a

> shareholder in SkyChef - a joint venture with
> Lufthansa - which has taken over the job of MAS

> Catering. This is a very lucrative deal for SkyChef
> but a bleeder for MAS.
>
> Even if the flight to London is half full, SkyChef
> still puts on a full load of food on every flight.
> At the end of the flight the extra food is thrown
> away. MAS has to pay for that wastage. Each meal in
> a plastic tray can cost more than RM25.00. How is Mr
> Jala going to deal with that ?
>
> SkyChef has also negotiated the catering contract
> such that a full load of mineral water is put on
> all flights that adds to the airplanes weight and
> burns more fuel. When the plane returns, any
> unopened bottles of mineral water are put back on
> the flight and charged to MAS again. A neat way
> for SkyChef to milk MAS.
>
> MAS serves salads in its meals, which were made
> using lettuce grown in Cameron Highlands. Two months
> ago MAS stopped buying lettuce from Cameron
> Highlands and opted for very expensive imported
> lettuce from Australia. No one (other than certain
> folks at the Purchasing Department) seem to know the
> reason for this expensive switch.
>
> In Engineering, MAS may have three test pads to

> check out avionics - two in KL and one in Penang.

> Because all avionics are tested out in KLIA, the
> test pad in Penang is never used. Each costs over
> RM200,000 a piece.
>
> When MAS presented its quarterly results, they
> carefully avoided any mention of Professional
> Services. This means 'consultants'.
>
> MAS has employed more than 17 different
> consultants and are still employing more
> consultants. There are so many Australian and
> British consultants that the MAS office in Subang
> looks like an orang putih outfit. One consultant is
> paid RM5000 per day. Other consultants are paid in
> excess of RM2.0 million per year. Considering that
> the company's total losses are increasing, no one
> seems to know just what is the positive impact of
> all these consultants.
>
> The latest addition to this list of consultants is
> a lady hired from Citibank Singapore who is paid
> RM60,000 per month. The headhunters who hunted her
> down were paid RM180,000. This lady is in charge of

> Services - to handle the outsourcing of MAS support

[A Imran]

Peace Bala,

Frankly I don't know. Perhaps we should allow Tony
Fernandez to take over if he's interested. I met him
once anyway in my shop and I'm quite impressed with
him. I know Idris Jala too, and frankly I don't see
anything special in him, but I may be wrong.

A.

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