Wednesday, April 25, 2007

Cabinet relieves AirAsia of rural burden

Back to you MAS, thank you. The Cabinet has agreed to let Tony Fernandes concentrate on his AirAsia Long Haul and, therefore, hand over the necessarily less lucrative domestic rural services to Firefly, the Malaysia Airlines' new subsidiary.
Chan Kong Choy, who plans to produce "two national champions", told the Press this a while ago [watch out for Bernama updates later]. I hear some 260 staff will be affected by the decision but I'm not sure if the minister mentioned this.
The Cabinet's hasty decisiveness on the matter will surely surprise many. Read my last posting here: it was only April 12 when I posted about Tony having told Chan of the "logical thing to do". AirAsia's FAX took over the rural services from Malaysia Airlines under the air route rationalisation exercise just last year.

34 comments:

kittykat46 said...

I thought the original agreement vis MAS and Air Asia on the domestic routes rationalisation contained a trade-off with Air Asia getting more access to various domestic routes on condition it also had to take up the "social burden" of rural routes. So Air Asia now gets the benefit without the original trade-off. The Cabinet is being VERY nice to Air Asia.
I do wish Air Asia well on the long-haul budget services, but it will be a challenge. Other operators have found that the Low-Cost airline model less successful on long-haul flights, because passengers DO like good service on long flights and traditional airlines already give deep discounts to tour operators anyway.

And I honestly think Air Asia's choice of A330 is a mistake. Its a solid, reliable plane, but its nearing the end of its market life. MAS has a superior plane in its Boeing 777, and it shows. Annual sales of A330 planes worldwide have dropped to low-double digits in recent years, very few airlines buy new A330's anymore.

Todi Fernandezzz said...

Is there a RM60 million subsidy somewhere in the equation? Thought government gave Tony some subsidy to fly rural? Give back, mah?

wetbenang said...

Rocky,
Yup, dear Tony smartened up and ditched his "so sial" responsibility part of the deal. Happens only in "keparat", err, corporate Malaysia.

Anonymous said...

Dear Rocky

Last year the de facto Minister of Transport, Tony Fernades, was demanding to solely operate the rural air services (RAS) for Sabah and Sarawak. Of course, Chan Kong Choy, Minsiter of Transport, gladly gave to FAX.

If RAS is not profitable then why Fax or Tony Ferdnades wanted RAS so much last year. Now they have experienced huge losses, they have decided to give to MAS so that they can relieve themselves from the burden.

I do not understand why the Minister of Transport is always eager to approve whatever FAX, Air Aisa or Tony Fernades wanted.

FAX and Air Asia are privately owned by Tony Fernandes and company. WHY MUST THE GOVERNMENT HAD TO ENTERTAIN, AIR ASIA AND TONY FERNANDEDS AS AND WHEN THEY "CRY"? If FAX and Air Asia and Tony Fernades were to make profit, I am sure that the government will not get a single Sen.

The way in which the Minsiter of Trnasport was ever so eager to respond or react to Tony Fernades and company, I can't help but to believe that the government had an interest in FAX and Air Asia.

Enough is enough. The Mr I Do Not Know PM should now step in to stop the rots in the Ministry of Transport.

Thor said...

Bro,

Dont you think the government made a quickie decision on the Air Asia proposal? Was there any comprehensive study done? Of course the MOT actually called the MAS and Air Asia bigwigs for the meeting a few days back to prepare for the Cabinet paper but to make a final decision within 2 weeks of the proposal being raised by Tony? Wow.

If only the rest of the government works this fast.

Obviously the decision was already made elsewhere.

Daily Nibbler said...

It will be interesting to see how the low budget operations work on long haul flights - at least it will not burn a hole in the pocket every time I fly long distance (with inconvenience as a trade off of course).

On the issue of MAS taking back the rural flights, I say, let it be. In fact even better if both airlines are allowed to compete on every route.

Let the consumer decide.

Anonymous said...

Rocky,I have questions for Chan Kong Choy. Did the Govt pay Fax a Subsidy for operating rural services? Was the subsidy paid much more than ever paid to MAS? Why is a private company being treated better than a Govt company? Will the Goverment ask Fax to pay back the subsidy? I think these are fair questions for Mr Chan Kong Choy to answer.

Anonymous said...

FAX hands over Rural flights to MAS? And what about the 'so-called' corporate social responsibility arrangement with Mercy Malaysia to help people in the rural areas?

Just gone like that? Or is Mercy Malaysia going to show no mercy and insist that the new operator honor the 'show-off' agreement concluded earlier by FAX?

And there are still people who believe Tony Fernandez and the 'gang' (aka those in power and who blatantly decide lopsided in favour of a public listed company at the expense of a GLC) will still care for the rakyat?

When some concerned folks write that FAX should not be allowed to return the routes, the "Tonys" have the guts to call such writers to ask "what right have you to question a minster's decision".

Question justified? Yes indeed!!!

After all, do the writers know that the "Tonys' have heavily influenced the top guns by pampering them overseas with ventures that appeals to their delights?

When overseas, no need to worry much what! Dictator or leader, that would be the time to wind down with such delights offered on a platter - free of charge with daily varieties.

Why should they care for the rakyat?

These decision makers are eternal beings - so they think - and hence can continue sinning and shortchanging the poor folks in rural and outlying areas.

Ever noticed how the braggards announced that they will start long haul low cost flights by July this year and then came back to say thet they will now commence services next year?

Funny - the mainstream media took great pains to showcase the first announcement in the front pages. Gullible media or 'ikut perintah' or 'langsung tak ada telur'.

Come on guys, these guys are cheating the rakyat outright.... Voice out against this, please!!!!

Anonymous said...

De facto Minister Tony, yes, he with the big grin gets what he wants. Every time. First he gets a bigger subsidy than MAS ever had for opearting the RAS. Then he makes all sorts of claims about air connectivity and low fares. Then he realises what a good job MAS had been doing all these years. Even having had a look at the historic figures he was surprised that even with his lower costs and 'management' savy, he just could not do what he promised. His rural air service sucked. And peope were complaining, people everywhere, in towns and rural communities in Sarawak and Sabah. Even the state YBs and Ministers started to complain. So, the de facto Minster says 'hey I'll give it back to MAS'. The government laps it up. Yes, what a great idea. And now after having the worse air network Sarawak and Sabah ever had for years, these two states are going to have to suffer another year of rationalisation. And crap service from the airlines that are so vital for these two states. Yes Tony gets what he wants.

quinn the eskimo said...

Bru

I am beginning not to like Air Asia and Tony F, as much as I wanted to cheer them on years ago.

You know their favourite phrase when the want to malign other businessmen - "rent seekers"

Guess what dude, Tony F and Air Asia are turning into big time rent seekers themselves - an LCCT terminal, another LCCT terminal coming in Penang, dictating terms to the government, rural air service take-and-give-back, taking mas' landing rights, getting the nod to fly to singapore, etc.

just because he did something good, does not mean he can get away with lots of things everytime.

check out who are TonyF partners are in Tune Hotel, etc. You should be familiar with some of the names.

soon they will be coming out wth Tune Money, something like a glorified lender for the small income earners. And guess what I am not sure if they got Bank Negara's approval yet, but anyone care to bet against them?

Dude, I applaud entrereneurship, just like I applauded Air Asia at the outset. But man, this is getting too sickening.

It is just like rewarding your kid coming home with good grades, and before you know it, he is at the back seat telling you what ro do.

ps/ i have decided that since mas is now offering cheap tickets too if i book early, i am no longer flying air asia. the service and the terminal suck. at least on mas i can be assured i will not be herded here and there waiting for a plane that is most likely to be late.

You know what Air Asia's new tag line is?

"Now everyone can fly kite, for all we care."

Anonymous said...

Bro'
Hardly a month into operation, there are already efforts to put the fire out of Firefly. That’s what I think the announcement is all about. Has the government forgotten that FAX was set up by shareholders of AirAsia to undertaken the domestic operation in Sarawak and Sabah when they were given the rural air service operations as part of the domestic aviation rationalization plan?
In one hand, we have a responsible government. FAX doesn’t want to operate the route that was given to them. Who can do it then?
The government would still have to carry the burden as part of its social responsibilities. And who would execute this for the government if not for the national carrier, MAS.
Unfortunately, it is the same government that is also screwing MAS up.
MAS is already a dumping ground for AirAsia. Now, its Firefly’s turn.

Fan of the Red Barn

Anonymous said...

guys, do you all think chan calls the shots. common, man in the street heard long time ago in the street that someone with the K is the boss. time will only tell whether the street is right on call.

BigDogDotCom said...

Kittykat 46 is right!

Tony Fernandez doesn't care about comfort and safety. He doesn't care about timing either. All he cares is money, money, money and his PR and marketing plan.

Until today, AirAsia still have yet to develop its own engineering and MRO facility, for its 60+40 aircraft.

Look how often AirAsia's a/c blown tires and ran off runaways during landings. Maybe, their records can only be matched by the CIA-heroine-running AirAmerica, back in late 60s and early 70s!

So what is wrong if Tony get a lesser superior widebody, which is hardly used anywhere?

A320s is hardly used in Asia and yet Tony picked that one,in large numbers. Maybe the consumers here have not heard how an A330 burned out midair between Montreal and Lisbon, with empty fuel tanks because leakages?

Oh yes, FAX will be flying backpackers sort of tourists, here from Europe. I am sure the nation will treasure these backpackers hippie culture, in the ten of thousands, everyweek this summer. I surely missed these bunch of lots!

Anonymous said...

Bro Rocky

With this so-called cabinet's quiclies decision in asking MAS to take up the FAX's problems i.e. to absorb all the future losses of FAX or Tony Fernandes. Why must teh Government to give special treatment to FAX and Tony Fernadess.

Are the Son-in-Law and the "muslim God and Hindu priest" inovled in FAX and Air Asia???

I am sure that Chan Kong Choy is now able to buy another apartmetn in the most expensive area in Melbournbe, Australia. Chan Kong Choy, we know you have properties in Australia and KLCC area.

You know and I know. Please do not force me to expose you. Stop sucking up to that Tony Fernades, he is bleeding our economy. Air Aisa will be "koyak' in the not very far future because it was just a con gane by Tony Fernadez with the help of the son-in-law and "Muslim Goed and the Hindu Priest".

Anonymous said...

Oh Ya! Tony Fernades and comapny must now give back the subsidy to the governfment since they have abandoned their social responsibility.

Chan Kong Choy, please stand up for your country against Tony Fernades and the son-in-law. So demand Tony Fernandes and company to pay back the governmetn subsidy for running the rural air services.

TTserong said...

Let them compete..Gov support everything Air Asia wants. Air Asia can choose where ever route they want to fly. MAS and firefly have very least choice...

Let's wait for low cost terminal in Penang ready. I bet, Air Asia will monopoly it and left Firely far behind..

jiannathewitchqueen said...

Doesn't make sense for AirAsia and FAX to operate 2 different aircraft platforms - Airbus and Boeing.

If AirAsia has an all-Boeing fleet, then it would be sensible for FAX to get the B777s.

Plus the Airbus A330 is tested and certified for operation in Australia, the UK, Europe, India and China - all markets that Tony F is targetting - and is available earlier than the B777, thus the long-haul services can be started sooner.

And since when did AirAsia (or any other public-listed company) have a social responsibility. The first responsibility is to the company's stakeholders (i.e. the shareholders) to deliver profits consistently. And to ditch what is not profitable.

Welcome to the world of free markets and red-in-the-tooth capitalism, where profits rule. Its not for the timid.

If only more Msian GLCs were run the way AirAsia is!

Anonymous said...

AirAsia and Tony success has always been a favorite case study subject for economical and management gurus and professors in higher institutions. I always argued that Tony will only survive when he lists the company in Bursa and dumps the shares because there is just too many distortions to viability from political interferences. That is why, you don't see Tony in T-shirts issuing boarding tickets anymore. Everything from here is only about political manipulations and the struggles against its. v9

mob1900 said...

I smell another PROTON and PERODUA, but with wings costs way more!

dzulman said...

Bro Bru,

My oh my what has happened to that sense of responsibility, integrity and pride of being the people's representative and a Minister of His Majesty's Government simply gone to the dogs just because to gratify the lust of Tony Hainandez.

The MOT could just make a decision within 2 weeks to overturn a decision made a year ago ( Jul 2006 ) that actually adversely affected a few hundred of experienced MAS employees.

MAS is a national carrier at one time it was the pride of the nation. Now what happened. On the behest of the so-called Minister MAS has once again to be sacrificed to the detriment of national interest and PRIDE.

It is totally ashamed and unacceptable especially when the deals, the decision and announcement made within such a short period of 2 weeks which is unprecedented in the history of the Administration.

Wow where are heading to?

jiannathewitchqueen said...

bigdogdotcom

Please don't expose your ignorance of airline matters.

AirAsia has chosen to do heavy maintenance of its B737s in Spore at at a US FAA-certified maintenance facility belonging to Spore Technologies. Nothing wrong with that. The maintenance standards are internationally certified.

As for the Airbus A320s, both Tiger Air and Jetstar Asia (Spore-based LCCs) use this aircraft for existing operations and have additional planes on order. If you think that these Spore-based LCCs are stupid, think again!

There is nothing wrong with closing down an operation or business that is not profitable.

Tony F is just doing what any right-minded businessperson would do in the circumstances. Not like Proton, for instance, throwing good money after bad.

leonides said...

Jiannathewitchqueen said "Welcome to the world of free markets and red-in-the-tooth capitalism, where profits rule. Its not for the timid."

Perhaps that was true in in the dark ages, and to an extent, in severly distorted markets such as Malaysia.
If there was proper competition allowed,then who knows we might even have our own Southwest Airline.
Now there's an airline that knows how to balance the interests of ALL stakeholders and still outperform ALL its red-in-the tooth competitors.

Anonymous said...

"There is nothing wrong with closing down an operation or business that is not profitable."

But throwing it at other people basket and hid own hand after that is not a very gentlemenly act.

The gov must let Firefly make its own decision. Just as air Asia could.

Anonymous said...

Jiannathewitchqueen, you are blinded by savvy spinning. If AA is so good why do they need more subsidy than MAS? And how can Chan Kong Choy decides to give them more subsidy when it is a private company? Why is private company treated better with public money compared to MAS a Govt Linked company.
Tony is bigger than MAS, KLIA and Sabah and Sarawak put together.Why? Ask the Minister of Transport Ton....Oops Chan Kong Choy.

Thor said...

Jiannathewithqueen,

You seem very defensive of AirAsia. Yes, they chose to do their MRO in Singapore when they can actually do it in Subang and at least support the govt initiative of creating an MRO centre.

And referring to your remarks of `welcome to the free market', you forget that Air Asia have been stripping the govt dry, like the bloodthirsty vulture it really is.

If this were really a free market, why dont we let MAS really set their own fares against Air Asia and then we see what happens. Or maybe the govt shouldnt really gave in too much to the red DEVIL.

Maybe Air Asia should have built their own LCCT. Or maybe MAB should have just let them operate at the KLIA Main Terminal and see if they can really make money. Even now they are squabbling with MAB on the terminal charges. If possible, they even want it free!

Remember the FAX-cargo debacle last year when some parts of Sarawak didn't get food supplies? Yes, that's because of FAX-Air Asia.

So stop defending the airline that's being unfair to everyone, even their customers (look at their service). They will not be as prosperous for long.

A KADIR JASIN said...

But Sdr Rocky, who will now shoulder that burden? Mas of course. But who owns Mas? The government. But who elected the government and finances it? The rakyat, the voters and the taxpayers of course.

Bravo AirAsia. It’s lobby power is once again proven -- savvy, clever, cunning, shrewd. See who they count as their friends in the power structure?

They started FAX because by doing so they hastened the transfer of many lucrative Mas routes to them. I take my songkok out to those savvy AirAsia guys. They’re good.

Once they got those lucrative domestic roots and Mas thought it was clever by setting Firefly, AirAsia activated its lobby machine and Mas finds its rear on fire again.

But those guys at Mas don’t have to worry. It’s not their money! It’s yours and mine. Though I am retired and already entitled to the label warga emas, I am still working and paying income tax in addition to my EPF contribution, though being a blogger I am supposed to be unemployed (in addition to being a disgruntled former editor and a liar).

I salute those savvy AirAsia guys. They know what they are doing. They’re creative, they take risk and they know which side of the bread to butter. May guys don’t have to worry. Somebody else pays for the bread with butter and jam thrown in. That somebody else is you and I, and the rest of the taxpayers.

So when you next fly Mas or Firefly and your feel hot, that’s because your rear is being had in the name of the national career.

Just a thought, now that we have a truly Malaysian commercial airline in the form of AirAsia, do we still need a national carrier?

What we need is healthy competition so that consumers are not taken for a ride.

Thank you.

Anonymous said...

quinn the eskimo has a great pointer. check out tOny's partners in TUne Hotel. Could the same people be, in near future, the major shareholder of Air Asia? I have the niggly feeling that this would be the case and time will prove me either right or wrong.

We all know the main personalities behind Tune Hotel and goodness gracious their considerable influence within the government.

Put one and one together, thats why Tony will get what he wants.

Lets wait for the announcement!

jiannathewitchqueen said...

The ignorance re aviation-related matters in this thread is phenomenal.

Let'see:

- after I made the point that Spore-based LCCs Jetstar Asia and Tiger Air also operate Airbus A320s, the sniping over AirAsia's decision to use the same aircraft mysteriously ceased.

- AirAsia has no obligation to set up a heavy maintenance operation at Subang or anywhere else. Like any other business-minded LCC, it outsources its fleet's heavy maintenance to qualified and certified 3rd party companies - in this case, in Spore. Why Spore? Blame the Msian govt for not putting development of the aerospace industry in Msia on priority. The Spore govt did just that, to the point that aerospace-related activities are a significant contributor to the country's economy.

- more to the point, which LCC anywhere in the world does its own heavy maintenance? In the Spore context, certainly not Jetstar Asia or Tiger Air.

- and how is AirAsia ripping off the govt? Is it being subsidised to fly domestic routes in West Msia and to Kota Kinabalu and Kuching from W Msian airports? Is it receiving subsidies to operate its flights from the LCCT at KLIA?

- if MAS is willing to take on AirAsia head-to-head, then let it go back to the govt and ask for permission to do so.

- the problem is that too many people think that "profit" is a dirty word. Maybe they have been seduced by the notion that all Msian companies should do "national service" and fulfil their 'social obligations". What a load of baloney!

jiannathewitchqueen said...

And here's something else for AirAsia-bashers to ponder.

The great Spore Airlines (SIA) - the largest airline in the world by market capitalisation, and one of the most profitable airlines in the world - claims that its underperforming its major rivals in terms of yields, margins and return on equity (from a presentation by SIA's VP for Industrial Relations to Spore's Industrial Arbitration Court recently, as reported in the Spore Business Times on Apr 25).

He compared SIA's operating numbers to 29 other airlines, including the likes of Emirates, Cathay Pacific, British Airways, Qantas and Air France-KLM. SIA's yield, operating margin and net return on equity were all inferior to the averages for the benchmark group.

He told the court that "SIA is profitable in absolute terms but this is misleading. In the past seven years, SIA has a combined negative economic value added. We have the lowest ROE and our wage costs account for 50 to 60 per cent of controllable costs. And pilot's wages account for 34 per cent of the company's wage costs, although pilots constitute only 17 per cent of the labour force."

If this is true for a world-class, well-managed airline like SIA, one shudders to think what the comparitive financial figures for MAS will be.

Any wonder that AirAsia is keeping an unremitting focus on profits and the bottom line? There is no need to apologise for this.

And, to rub it in, the SIA VP said that in an increasingly competitive landscape, SIA must let go of its "historical baggage and recompose to face new realities....Legacy structural issues...will inhibit flexibility and growth."

Gee - "let go of historical baggage". "Recompose to face new realities". I wonder if the folks at MAS (and its parent) are listening? At least, I think that someone at AirAsia (and FAX) is!

leonides said...

jiannathewitchqueen said ""let go of historical baggage". "Recompose to face new realities". Absolutely.
This is the Age of Transparency so get used to it.Sure, make your profits, any which way you can.But I also reserve the right to judge you on how you behave, and make my choices accordingly.Too much hype becomes nauseating eventually.

Anonymous said...

Jiannthewitchqueen the Iqnorant. By all means AA can make profits but not at the Rakyat expense. Its a private company no links to the Goverment unlike MAS. For your information the highest subsidy MAS got from the Govt in a year is 15 million ringgit. Tony got 60 million without even completing a year with the lousiest service level? Are you telling us its OK?
The Govt is building Low Cost a number of low cost Terminals costing close to a Billion ringgit? Who is using these Terminals? Exclusively Air Asia. The charges AA pays for these Terminals is much much lower than MAS. Why?If you can't answer. Ask Chan Kong Choy.

Anonymous said...

remember my earlier comment on quinn the eskimo pointer. now, the trailer is out. see today's star business section pull out.

now, you know why Tony always gets what he wants and our dear Chan kong choy bends backwards as much as he can without breaking his back. Well, cant be jealous if someone high up enough do get a "special loan" to buy shares.
As usual, our dear PM does not know what is happening. Or he is juts pretending?

jiannathewitchqueen said...

Yields.

Margins.

Return on equity.

What's so difficult to understand?

Or is it that some people just refuse to understand?

Which is why so many businesses (including GLCs) suffer horrendous losses.

wtf said...

i've call airasia call centre using 0387754000 for call within malaysia today. the answering voice machine just keep telling me to wait until there are available customer service officer. i've waiting until more then 10 minutes and suddenly no more connection. it is because my phone prepaid credit have been deduct from $28.19 to only 26 cent left. they stole my $27.93 just using their phone line. to make it worst, i've not yet talk to their customer service and they already charged $27.93. wtf . so anybody who wish to call their call center.... just forget it.. it is better to buy a lot of food for your stomach than be cheated like me