Wednesday, August 10, 2011

Betrayed by the Mas - Air Asia Share Swap Gambit

Blogger Mat UMNO must have been very angry and frustrated with the latest corporate scandal involving MAS and Air Asia. I've read his 42-points article that he emailed to me and I think it is worth to be shared and recorded on this blog. May be it is a right time to clean up Khazanah and undo the damages done by it. We have not touch the doings of Khazanah at the organizations related to finance and Bank Negara yet. But I have heard a lot of stories in that industry too. Same people from previous administration; similar kind of damage to BN; could it be worse to come in the near future ........?

The MAS Air Asia Share Swap Gambit

I’m very frustrated, felt betrayed and back stabbed by the way the government handle the share swap. When it was first reported, AIR ASIA denied it…so why the 360 degrees turnaround? My wife called me this afternoon and told me about the news but I told her that it was a misprint by the media as I recall how Tony denied about the share swap a couple days ago… my surprised, the nightmare actually become reality.

Tony become the single biggest shareholder in MAS with 20.5% and Khazanah hold only 10% share in Air Asia….is this right? Many MAS staff is left wondering where is their value of loyalty to MAS after all these years? Those left MAS for Air Asia desperately wanted to come back to MAS.

In my effort to write about my anger about this share swap, I found out that I’m not the only one who has actually wrote about it but the funny thing is, these people effort did not even given the media attention…why? Gag order from the government? Why the secrecy? Has the motion been passed in Parliament? Why has it not been made know to the public?

I decided to piece together information retrieved from various blogs as it lauded what I have to say and from there, more info will be added. So please understand the below facts why I opposed to this ridiculous MAS Air Asia share swap deal.

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. It is very clear that MAS is in better position than Air Asia, so why the share swap which giving Air Asia 20.5% share in MAS?

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.? Air Asia is good on paper but in reality they can hardly make any profit. So how to show the world that they are in the “blue”?

3. 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.

4. 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?

5. 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?

6. Bear in mind that Air Asia at one point of time, they owed Malaysia Airports over RM 65 million. Has Air Asia paid this debt? These are money for the government which can be used for the benefit of rakyat!

7. 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?

8. The “Thirteen Million Ringgit Plus” question is that how the hell could Khazanah give away 20.5% of a company’s holding with bigger network, higher standard of service, three times more operating revenue, stronger assets, lesser debts, more cash and better paymaster track record to another company with lesser track record, just because they make so much net money in shorter time?

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.

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. Those MAS managers stationed overseas who are supposed to sell seats, especially the 1st class seats which would subsidize those traveling on Y Class are not doing do their jobs. They have been at these places for donkey years and where their children practically grow to adulthood there. Perhaps the sales people in MAS are corrupt people. If you don’t sell the 1st class seats, you don’t make money. You make money only if planes are in the air. If need to have the planes fly, you will need destinations. How to have destinations when it has already been cut?

12. This merger is exactly like when ECM Libra ‘took over’ Avenue Capital Resources Bhd. in a very controversial takeover laced with manipulation and failure of disclosures, where the latter is valued four times more than the former. Avenue Capital’s intangible assets amounting to RM 296 million were irregularly impaired so that the merger value gap is being narrowed. The minority shareholders were denied of the rights to a Mandatory General Offer. Mind you, ECM Libra was only RM 2 paid up capital but suddenly managed to get “private loan” from Singapore friends. Guess who was in ECM Libra, Khairy or KJ and Kalimullah.

13. 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?

14. 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 Air Asia. 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?

15. 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 Air Asia and Air Asia X. In return Khazanah would get 20% in Air Asia and 15% in Air Asia X. Of course it is rumored that CIMB is the adviser to this deal. Guess who heads CIMB? Why CIMB?

16. 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?

17. 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?

18. It is Air Asia X’s dream to be a major intercontinental carrier. Getting landing rights would be a G-to-G arrangement and national carriers usually get the first right of refusal. Now AirAsiaX is accessible to lucrative landing rights and destinations. But wait, it is not easy to get landing right unless Air Asia used existing operating carrier like MAS who has many code sharing with other major airlines and landing right. So another benefit to Air Asia?

19. Air Asia 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!

20. Malaysia Airlines did her fair share of national service and many Malaysians benefitted from this at the times where communications were poor or nonexistence. In 2005 when PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi agreed to ‘Level Four Boys’ concocted ‘Airline Rationalization Plan’, where Malaysia Airlines to run the ‘trunk route’ and feeder to the international destination where else Air Asia got the rest. This includes heavily subsidized Rural Air Service.

21. The most important element of the plan was Malaysia Airlines were prohibited to lower down its fair. MAS were not allowed to compete with Air Asia because of its different class and capabilities. Tony was quick to protest of MAS plan to start their own low cost carrier as it would not be fair to Air Asia. This comes from a man who cannibalizes the government subsidies! What does Tony know about fair play when he himself not being fair in healthy business competition.

22. My question now is what will happen to Fire Flyz? What will happen to their staff that are mainly from Sabah and Sarawak?

23. Fernandes and Dato’ Kamaruddin Meranun non independent and non-executive directors with effect on 11 August 2011. In interim, the corporation would be managed by an executive committee chaired by Tan Sri Mohd. Nor Yusof. Members are Dato’ Mohamed Azman Yahya, Danny, Fernandes and Kamaruddin. They will oversee operations until new MD is appointed. Can they be more specific when? Or they will take their sweet time plundering MAS company secrets? Will this not be conflict of interest as they too present Air Asia which is rival to MAS?

24. Why is Khazanah, which is headed by Tan Sri Datuk Azman Hj Mokhtar, was not interested to look into why MAS was left in such a state and Air Asia “is flying so high”. Isn’t it Khazanah duties to protect government interest?

25. Since Khazanah is entrusted by the Government to “hold and manage the investment”, why is Khazanah not interested to look into how and why the growth of MAS was stifled directly or indirectly by the unseen hands! Are they full of rakyat monies that they can afford to lose more monies thus making it an excuse for the “strategic” share swap? Or someone or many individuals stand to benefit from this deal? From beginning it has already very clear that many people stands to gain from this deal and those not gaining in the rakyat.

26. Tan Sri Azman is fully aware of the lucrative catering business in the airline industry in Malaysia was taken from MAS and handed over in a silver platter to LSG Sky Chef Brahim Sdn Bhd (LSG) during the Pak Lah’s administration sometimes in 2004 to service and cater for all National and most International Airlines flying to and from Kuala Lumpur. It is believed that the contractual terms are one sided and unusually long! Guess who owns LSG? Let me give you a hint, he is related closely to our flip flop PM….

27. Why is Tan Sri Azman not interested in finding ways and means to take back this lucrative business of servicing and catering for all airlines in and out of KLIA with government help in the national interest for MAS? Why when Air Asia FAKS gave up Rural Air Services (RAS) PREMATURELY, Khazanah did not demand for the return of the subsidy of RM65 million from FAKS?

28. Why Khazanah did not demand for the payment of RM35 million, which was incurred by MAS to make the 7 aircraft airworthy for RAS, from Air Asia FAKS? These are enough glaring facts for Tan Sri Azman to ponder!

29. Coming back to LSG. Who has the control stake in LSG? We all should know who is that person related to? Now Khazanah seemed to be blaming MAS management for all the problems MAS is facing. This is most unfair and irresponsible of Khazanah, a national incorporation entrusted with looking after are national wealth. Of course, MAS management is not perfect just like any other company.

30. Khazanah’s chairman, Tan Sri Azman Mokthar, should touch his heart and ask why MAS is in such a sorry state? Was it engineered or just sheer incompetence or by chance? By whichever management standard one would like to set to measure MAS performance, it falls squarely on Khazanah for failing in its national duties to address whatever problems MAS was facing at the material times. For a start, Khazanah should stop the handing over of the lucrative business of servicing and catering to LSG but it didn’t lift a finger to stop. I hope that Khazanah was not instrumental in the whole exercise of LSG’s takeover of the said business.

31. On aircraft maintenance, Air Asia will have excess to world 3rd best aircraft maintenance facilities. They no longer will need to send their aircraft to Europe for maintenance and pay on time. Air Asia will have access to MAS engineering facilities and need not pay them as they did with MAB. This will turn to profit but lost to MAS.

32. 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.

33. I dare Tan Sri Tony Fernandes or Tan Sri Datuk Azman Mokthar for that matter to say that Air Asia 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!

34. I pray that the government will step in to investigate this share swap and the airlines servicing and catering business in KLIA with the sole view to put right the anomalies in the airline industry so that we can be proud of MAS again as our national carrier and ambassador, like before when MAS was under the care of Yg Bhg Tan Sri Aziz and the like. Stop the rot before it is too late.

35. As I suspected, there must be something behind the threats to move out to Jakarta. Remember about the fiasco a couple of weeks ago where Tony again denied he is moving Air Asia HQ to Jakarta? Maybe in return to being coaxed and persuaded not to move out to Jakarta, the PM authorizes the writing off of AIR ASIA’s debts to MAB or forced MAB to take a haircut maybe even a crew cut? If so, the rakyat has lost another RM100 million or so in airport charges and tax.

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