MAS cuts deeper in restructuring drive

Malaysia Airlines (MAS) is considering reducing its workforce as it continues to scale down its network as part of a drive to turn its business around. Chief Executive Officer Ahmad Jauhari Yahya says retrenchments are under consideration, while the MAS Employees Union has said in local press reports that senior airline official intend to cut the workforce. In the meantime, Malaysia’s flag carrier is continuing to slash unprofitable services, refocusing efforts onto its most promising markets.

17th Jan 2012


Airlines

MAS cuts deeper in restructuring drive

 

Malaysia Airlines (MAS) is considering reducing its workforce as it continues to scale down its network as part of a drive to turn its business around.

Chief Executive Officer Ahmad Jauhari Yahya says retrenchments are under consideration, while the MAS Employees Union has said in local press reports that senior airline official intend to cut the workforce. In the meantime, Malaysia’s flag carrier is continuing to slash unprofitable services, refocusing efforts onto its most promising markets.

In February, the airline will drop: twice-weekly Kuala Lumpur-Cape Town-Buenos Aires services; thrice-weekly Rome flights; four-times weekly services between Kota Kinabalu and Haneda; and four weekly Kota Kinabalu-Seoul services. In January the company abandoned its three weekly non-stop Dubai flights, two weekly Kuala Lumpur-Karachi-Dubai services, two weekly flights to Dubai and Damman, three weekly Johannesburg services, twice-weekly flights between Kota Kinabalu and Osaka, thrice-weekly Kota Kinabalu-Perth flights, daily Langkawi-Penang-Singapore services and daily Surabaya flights.

Flights from Kota Kinabalu to Haneda, Seoul, Osaka and Perth were originally supposed to be dropped in October along with Surabaya, Yogyakarta and Bandung, but the move was delayed for operational reasons. Services to Bandung and Yogyakarta will continue, to tap strong labour traffic. About 1.35 million Indonesians currently work in Malaysia, many as manual labourers or domestic helpers.

The current restructuring is the third of its kind for MAS since 2002. The airline’s Chief Executive Officer Ahmad Jauhari Yahya says the airline will continue to monitor its operations closely, adjusting its services where necessary.

“The withdrawal of the mentioned services was based on our own independent internal profitability and yield analysis,” Ahmad said.

This accounts for almost 12 per cent of the airline's capacity. The carrier estimates that the ongoing route rationalisation will improve passenger loads, increase yields and have a profit impact of US$64 million-US$97 million in 2012.

The route rationalisation is in line with the carrier's decision to focus on a hub-and-spoke type of network, with Kuala Lumpur International Airport (KLIA) as its main hub.

Ahmad says MAS will concentrate efforts on its core South-East Asian market, South Asia, Greater China and North Asia where the demand outlook is strong, fuelled by a growing middle class and increased intra-regional trade.

Starting 25 March, another daily service will be added on the Manila route using Boeing 737-800 aircraft, making the service thrice daily. At the same time, two additional flights per week will be added to Jakarta, increasing that service to six-times daily. Flights to Bangkok will increase to four a day from three, while Medan services will increase to two a day.

Weekly Phnom Penh frequencies will increase from nine to 11, then to twice-daily from 1 May, while Beijing will become a double-daily service operated by Boeing 777-200 widebody twinjets. Thrice-weekly Kuala Lumpur-Taipei-Los Angeles flights will be rerouted to operate via Tokyo, four times a week, from 23 March, and services to Taipei will be boosted from 11 weekly to twice daily, with seven flights operating via Kota Kinabalu.

Ahmad says that possible retrenchments are being reviewed, declining to elaborate. One MAS official tells Asian Aviation that long-serving staff will be offered voluntary redundancy packages, while contract staff and those undergoing training who are not yet on the airline's payroll will probably have their services terminated.

An estimated 350-400 cadet and line pilots will be among those affected. MAS currently employs 1,200 pilots.

“There is a high rate of resignations currently not seen previously in the history of the airline as staff morale is very low,” the company source says. The official cites a proposed share swap with low-cost rival AirAsia and MAS management's decision to move its headquarters from Sultan Abdul Aziz Shah Airport in Subang, 25km outside Kuala Lumpur, to KLIA, which is 70km away, as contributors to low morale. The move is expected to start in April and will be completed by July.

Publicly-listed MAS currently has a workforce of 20,100.

MAS says it operates a fleet of ten Boeing 747-400s, 17 777-200s, 14 Airbus A330-300s, 23 737-800s, 26 737-400s and three Airbus A330-200s.

The company is planning to set up a new carrier to operate domestic and regional services. Ahmad says this new unit it will be a traditional full-service airline, not a premium carrier as reported earlier. The still-unnamed carrier will operate independently of MAS’s widebody, long-haul network and is expected to be operational by July, operating single-aisle 737-800 jetliners.

Meanwhile, the MAS-AirAsia share swap has come under scrutiny from the Malaysia Competition Commission (MYCC).The two airlines have been asked to provide documents and information pertaining to the swap that was agreed in August 2011.

Under the agreement, AirAsia's parent company, Tune Air, acquired 20.5 percent of MAS, while the latter's major shareholder Khazanah Nasional Berhad acquired 10 percent of the low cost airline. Khazanah is the Malaysian government’s investment arm.

The MYCC initiated the probe after widespread criticism from several quarters. The commission, which itself started operations on 3 January, gave the carriers a deadline of 31 January to submit relevant documents.



 

Asian Aviation at a glance