MAS Air Asia Truth Behind The Share Swap

In days after the MAS AA share swap, no media attention was given…no explanation was given by the government on their rationality. There were few attempts by Star to publish the beauty of MAS AA deal but I decided not to read as I don’t want to vomit!

Few bloggers and I must say, very few bloggers tried to highlight the issue but not much impact. BN bloggers are more interested in the JAIS church raid. Dewan Pernigaaan Bumiputra Melayu made few remarks but their remarks sounded more like “lip service”, this goes the same with Malaysia Airline Union.

The MAS union president who is rumored to be corrupted with annual cleaning services contract, Alias Aziz, made not much noise and practically no action at all. Is he really concern about the fate of his members or more of his pocket?

Maybe in my earlier posting, you would not understand what are the impacts this MAS AA share swap deal can have on you. In this posting, I’ll try my best to tell you in layman word how this rotten deal is about and why I strongly oppose it. En. Alis Aziz, as a president you should understand the impacts as you have been with MAS for very long and has seen how Tajuddin plunder MAS wealth and made all the staff poor…remember during Tan Sri Aziz time, all MAS employees have bonus every year, they can go travelling and stayed in MAS property in London…

Since Tajuddin times, all this has lost….then Idris Jala made it more worse, he sold MAS property and declare it as profit, what a con artiste. Now the saga will happen all over again. Why are you letting this to happen?

It is bad enough the government played out MAS employees and the rakyat, but you as the union president should act or you are not worthy to be the MAS Union President. Remember, you have 22,000 members which have responsibility and commitment.

Below is the reason I seriously oppose MAS AA share swap:

1.    As of the 1st Quarter of 2011, Air Asia paid up capital stands RM 2.76 billion and debts amounted to 7.7 billion with cash balances amounting to 1.7billion compared to Malaysia Airlines is an asset backed corporation. The paid up stands at RM 3.384 billion, where it is represented with a fixed asset value of RM 8.4 billion. The net asset is at RM 6.962 billion, where cash constitute RM 2.086 billion. Air Asia in debt of RM 7.7 billion! How could a company with debt of RM 7.7 billion get 20.5% of MAS share? Why? MAS should be taking over Air Asia not the other way around! MAS should control Air Asia, not Air Asia control MAS! Can you see how corrupted this deal is?

2.    Air Asia shares ended yesterday at RM2.35, up by 17 sen. It was among the top ten biggest gainers of the day. In contrast, MAS ended flat at RM2.27 but still with the asset and paid up capital, MAS remains stronger than Air Asia. So again I asked why Air Asia got 20.5% in MAS and through Khazanah, MAS got only 10% in Air Asia? What is the value of AA 20.5% and Khazanah 10% in AA? Khazanah said there is no money transferred on the share swap, BUT wait! They still can sell the share they got….well, according to Khazanah, both party cannot sell their swap share for the next 30 month! Means after 30 month, they can sell it. 30 month is about 2 year plus, that is not very long right? It should give Tony enough time to plunder, hack, abuse and rob MAS.

3.    My another question, how can we believe or trust what Khazanah and Tony said when they already LIED about the share swap deal? If Air Asia cannot sell for the next 30 month, they can always use it as collateral to get money from other financial institution, let me see, who can make such deal? Well since CIMB brokered the share swap, I’m sure Nazir Najib would have vultures lining up to take up MAS share that is now belong to Air Asia….wait! That vulture can be AK too.

4.    In August 2010. AIR ASIA announced a deferment of their proposed aircraft purchases but sometime in June 2011 they reversed their decision and proceeded to place an order for an additional 200 new aircrafts at the Paris Air Show. As of 31 March 2011, based on data from their 1st Quarter report, AIR ASIA’s capital commitments stood at RM 19 billion. With the above announcement, an additional RM 54 billion will be added as Capital Commitments. RM54 billion? Where the hell Air Asia going to get such money when their annual turnover only about RM1.1 billion? Who can they ask from? They already have Rafidah Aziz as their directors…let see if she can make a deal with the government, WA LA! Share swap is born…or shall I say BAIL OUT! But AA is not GLC Company? Not a problem, just give Khazanah 10% of AA share and Khazanah give 20.5% MAS share. Good deal? Hell yeah! Now Air Asia is a GLC company too so government can give rakyat money to bail AA out or AA can use its 20.5% share to raise fund as what Tony says, “We can make more money”.

5.    The proposed purchase of roughly 75 billion will be spread over a 15 year period ending 2026. In other words AIR ASIA has to ratchet up its earnings to an average of 5 billion per annum to meet its future dues. From 2006 to 2010, AIR ASIA’s revenue grew by 10 fold from 110 million to roughly 1.1billion, an average growth of RM 200 million per annum. Still not enough to cover Air Asia future debt commitment, so what Air Asia will do?

6.    Its cash trove raised 6 fold from approximately 300 million to 1.7 billion but its debts skyrocketed from 1.05 billion in 2006 to 7.7 billion in 2010, an increase of 700% in 4 years’ time. One gets the ghastly feeling that this is a debt burden that is spiraling out of control. Tony brilliant business plan is actually putting Air Asia in the red mark, so what will he need to do?

7.    Bear in mind that Air Asia at one point of time, they owed Malaysia Airports over RM 65 million. Now has increase to RM 110 million, there is also rumor that AA wants to swallow MAB, and is it true? We will know soon enough. Has Air Asia paid this debt? Hell NO! Air Asia has not paid!  These are money for the government which can be used for the benefit of rakyat!

8.    Malaysia Airlines’ annual operating turnover is RM 12.98 billion versus Air Asia’s RM 3.948 billion. That is three times more sales for year 2010. Malaysia Airlines’ operating revenue from airline operation is at RM 11.649 billion against Air Asia’s RM 2.839 billion. Can you see now why Air Asia desperately wants MAS? Can you see how Air Asia will get their cash required to cover their future debt commitment? Air Asia will use MAS facilities and staff in order to cut their expenses. MAS will bear the operational burden which will make Air Asia profitable because low operating cost. Air Asia sales will be more because now MAS will be more restricted to do marketing and their route will be cut in order to allow Air Asia X to take over. This exercise will ensure Air Asia to grow and rake in the profit. MAS will be left to pick up Air Asia debt just like what Tajuddin Ramli did!

9.    For the second quarter ended June 2010, Air Asia posted a net income of RM198.93 million, while MAS suffered a net loss of RM532.73 million. So why MAS lost? Simple, the governments are putting MAS into an early grave by suffocating the management team with all sort of restriction! MAS management team too contributed to the operational loss by over spending and did not make any effort by investing serious marketing exposure like Air Asia did. This does not help to when they cut high revenue international sectors like Spain, Stockholm, Munich etc. Khazanah took the opportunity to have share swap with a company that is in debt for RM 7.7 billion? Why? Why asks a company that is burden with debt to manage MAS? Tan Sri Azman Mokhtar must be stupid or senile in allowing this share swap to happen! With MAS asset, cash and government back up, I’m sure they can afford to hire a more professional team to bring MAS out from losing! I offer myself for this position; I can guarantee Khazanah that MAS can be profitable within the next 2 quarter. Don’t believe me? Try me then!

10. Inside information too reported that whenever MAS formulate marketing plan to boost sales but that “plan” somehow or rather are being leaked out to Air Asia. MAS senior general manager for sales and marketing Datuk Bernard Francis gave a 24-hour resignation notice. Why? MAS are plague with moles that worked for Tony that feeds him information about MAS movement? Corporate espionage at its best! Tan Sri Dr. Mohamed Munir Abdul Majid has resigned from his post as chairman and director of the airline too early this month despite being eligible to be elected again…why? I say it good riddance as he spends MAS money like his own but why resign?

11. The MAS and AIR ASIA share swap is full of irregularities and manipulation. The deal was done without the public knowing it and doubt even the Parliament knows about it too. You have to remember that Khazanah is a GLC company and by being GLC, they must protect the interest of the government thus rakyat as it is our money being invested in Khazanah but does the public have a say about the share swap? NO…even the BN politicians have no clues what is going on. Only handful of bloggers and independent MP managed to get the scent of this one sided deal. Again, why the secrecy?

12. The culprit who is thought to be behind this is Rashdan “Danny” Yusoff and Datuk Omar Ong. Rashdan, who was then a partner in Binafikir Consulting which offered the ‘Wide Asset Unbundling’ (WAU) scheme to rescue Malaysia Airlines a few years ago, is now a Director of Malaysia Airlines. Omar recently was appointed to the BOD of AirAsia. Previously, Omar Ong was rejected by the public to head Petronas. Najib back down and appointed someone else as the Petronas CEO. Ong also was one of the level 4 boys during the Pak Lah administration and we all know that Khairy controls level 4. So is this to compensate Ong? Why?

13. It is expected that the outcome of this, would be share swap deal where Khazanah Nasional Bhd. relinquish 17% of its holding to Tune Air, the parent company of AirAsia and AirAsia X.  In return Khazanah would get 20% in AirAsia and 15% in AirAsia X. Of course it is rumored that CIMB is the adviser to this deal. Guess who heads CIMB? Why CIMB?

14. The clear winner of this deal is Tony Fernandes. As a single largest shareholder in Tune Air, he would earn a seat in Malaysia Airlines Bhd. He would have a say in how, what, where and how much of Malaysia Airlines’ strategic business decision. With Omar on his BOD and being so close to Prime Minister Dato’ Seri Mohd. Najib Tun Razak, all strategic decision involving air travel and airline business would be unequivocally favorable to Fernandes’s side. It is very ironic that Tony used to fly MAS for free before Air Asia X existed. When the European routes being cut down by Idris Jala, Air Asia X “happily” took over the lucrative routes, do I smell conspiracy in cannibalizing MAS?

15. Now let’s ask a stupid question? Can a CEO of your rival company be given a chance to take up position in your company and asked to manage your company at the same time? Isn’t there a conflict of interest here? Or is Fernandes being prepared to take over MAS itself? We all know who from Air Asia are in MAS board of directors, regardless as an executive or not BUT whom from MAS sits in Air Asia board of directors? The way I see it, Tony can run MAS remotely but no one from MAS or Khazanah would have a clue what AA is doing.

16. It is AirAsia X’s dream to be a major intercontinental carrier. But operational cost and getting landing rights would be a nightmare and will cut into AA profit, so this share swap will be beneficial to Air Asia as they can now use MAS routes, staff and station. What does MAS gets? MAS will get to pick up the debt left by Air Asia!

17. AirAsia could now expect to get a national carrier status. A private company with no loyalties to the country and its people will get such title, why? Tony has proven this by abandoning the rural routes. Fernandes took those routes to build up Air Asia’s capacity and also the numbers. The heavy subsidy was proven beneficial to his business model too. The moment the numbers went up substantially, Fernandes gave back the RAS away and Government insisted that Malaysia Airlines took the service back again, for the sake of Sabahans and Sarawakians. So who absorbed the lost? MAS off course!

18. My question now is what will happen to Fire Flyz? Tony has a growing fear of Fire Flyz because FF has the capabilities to overcome AA business. Given a chance and level playing field, FF can put AA out of business in 5 years’ time! With the corporate “takeover” of MAS, Tony now can kill off FF once and for all thus eliminating future competition when AA will leave MAS carcass.

19. Our next focus will be the fate of MAS staff. There are 22,000 of them which were left in the dark. What will happen to them? During Idris Jala “era”, he provided VSS for the staff but guess who paid for it? It was Khazanah! MAS did not pay anything. Idris use this advantage to declare “operational” profit. So will Tony do the same? Will Tony offer or force VSS to the staff? How will the staff benefit effected? Will their hospitalization benefit being cut? Will their traveling privilege taken away? Will there be any annual salary increment? Yearly bonus? Or will the staff be laid off? Since the MAS union is useless, who can help the 22,000 staff? Tony will not be as forgiving as his main objective is to plunder MAS asset, revenue, service and staff. MAS staff will face a new slave driver! If they don’t like it, they can leave. This is the scenario!

20. On aircraft maintenance, Air Asia will have excess to world 3^rd best aircraft maintenance facilities. MAS engineering facilities and expertise are to the extent that they can make profit every month. If not mistaken, MAS Engineering Sdn Bhd posted hundreds of million in profits annually. Actually the engineering entity is one of MAS profitable subsidiary because they are in the business of maintaining and airlines all over the world would send their aircraft to MAS for repairs and maintenance. MAS have the capabilities to dissemble or strip down an aircraft and put it all back together. Major aircraft and engine manufacturers such as Boeing, Airbus, Fokker, Rolls Royce, Pratt & Whitney

21. I am aggrieved that MAS, our national carrier, has been “dianaktirikan” by certain quarters. Please take note that most; if not all, low cost airlines in America, India and last year Oasis in Hong Kong have collapsed. Their national government did not lift a finger to provide financial helps or for that matter to provide them with special rights to owe airport taxes with a discount upon settlement. Quite rightly so because they are public listed companies and should be treated like one. Surely we cannot expect our government to be a financial ambulance for public listed companies! But this does not happen in Malaysia where ex politicians with high portfolio being recruited by Air Asia.

22. I dare Tan Sri Tony Fernandes or Tan Sri Datuk Azman Mokthar for that matter to say that AirAsia has been better managed with great business plans with NO direct or indirect government help and the others collapsed low cost airlines did not have the same criteria. Hence, the share swap was made in the national interest! Tony and the gang has failed in their business and now looking for major bail out. A company that was bought with RM1.00, (YES! Air Asia was bought with RM1.00 from Sime Darby.) now controlled MAS that is worth more than RM 3 billion.

23. There is no way for the government to change or stop the deal without paying money to AA for breaching a contract. I guess this is all planned out perfectly as they did deals under secrecy and to make sure AA will be bail out no matter what, they need to sign the agreement as fast as possible. If the rakyat make noise and demand the agreement to be null and void, AA can then ask for compensation which can be hundreds of millions. AA can sue Khazanah for “loss of future income” and many more. This then can be justified for Khazanah to give AA the rakyat’s money. At the end, the rakyat got screwed again.

Most of us don’t realize the implication of such deal. As I said, there is no synergy at all between these two entities. What MAS need was:

1.    Freedom from the government to do their business. No interference in managing MAS operation and business planning.

2.    MAS organization restructuring, which include of reviving MAS inflight kitchen. MAS inflight kitchen was one of the best in the world too.

3.    Great marketing team and advertisement exposure. No one realize but since AA come into the market, MAS have not done a lot of publicity, why? They have the budget but I guess their hands were tied by someone above in order to give AA that edge in branding and exposure.

It does not take much for MAS to turn around their fate while AA will need major help. This is what I don’t understand, MAS losing streak can be turn around but Khazanah refuse to take such action. Khazanah choose to help Air Asia by giving AA 20.5% and rights to run MAS…why? Is this another corruption to the highest level?

If I’m the MAS employee union, I would organize nationwide strike! If they management and government don’t want to listen, STRIKE IS THE BEST VOICE!