New broom to sweep Malaysia Airlines clean
With the prospect of losing a USD20 billion aircraft deal in Iran looming ever closely, Boeing appears poised to forfeit another one following the installation of a new government in Malaysia, Southeast Asia’s fourth biggest economy.
On Sep. 12, 2017, Malaysia’s ex-premier Najib Razak confidently told US president Donald Trump that Malaysia Airlines (MAS) would acquire eight B787-9 Dreamliners and eight B737 MAX jets. Those aircraft have a list price of USD3.06 billion before discount.
During election hustings the past fortnight Mahathir Mohamad, Malaysia’s newly elected 93-year old leader, made a mockery of Najib’s trip to Washington and the subsequent promise to buy Boeing planes. It is understood Mahathir will instruct officials in his administration to review the MoU signed between Boeing and MAS. The MoU, which isn’t binding, will “almost certainly be scrapped,” according to an insider.
This was our analysis when the Boeing-MAS accord was inked.
Malaysia’s national flag carrier is about to see a radical removal of many of its key officials in the coming weeks, including directors on its board, as Mahathir wastes little time in overhauling the country’s government-linked companies (GLCs) and crucially, its sovereign wealth fund, Khazanah Nasional.
Khazanah Nasional is the parent of MAS. In 2014 it delisted the airline after decades of losses and summarily sacked 6,000 workers. The then government also enacted MAS Act 2014, ostensibly to facilitate the rehabilitation of the airline but seen by many of its workers as being unjust.
MAS’ board of directors is led by Md Nor Yusof, chairman of the airline and Malaysia Aviation Group. He was the managing director of the carrier from Feb. 2001 to Mar. 2004 and subsequently sat on Khazanah’s board from Apr. 1, 2006 (no, this isn’t a joke).
MAS’ board comprises 13 directors (including CEO Izham Ismail), several of whom are from Khazanah and a mish mash of corporate figures, including one who is known to be a very close ally of former premier Najib. Why a loss-making airline such as MAS needs 13 directors is beyond us, given that just next door, Singapore Airlines does perfectly well with only eight.
Mahathir has been critical of Khazanah’s management of MAS for a long time. He sarcastically remarked that Malaysians were “too stupid” to run an airline when Khazanah appointed German expat Christoph Mueller as the company’s first foreign CEO. Ironically Mueller lasted barely a year, resigning from the carrier due to “personal reasons”.
Read Mahathir’s caustic comments about Khazanah’s decision to assume full control of MAS here.
Mahathir has a sharp grasp of the aviation business and recognizes its importance to Malaysia. He started the Langkawi International Maritime & Aerospace (LIMA) exhibition in 1991 when he was the country’s fourth premier.
And let’s not forget that it was Mahathir the doctor who had a hand in the birth of AirAsia; he had the foresight and wisdom when he gave Tony Fernandes approval to buy the two aircraft from DRB-Hicom for a token MYR1 (USD0.25).
He was also instrumental in getting Boeing to set up a joint venture plant in his home state of Kedah with carbon fiber maker Hexcel in 2002, producing aileron composites for the 737 aircraft.
It’s unclear the extent to which Malaysia’s new leader will go to rid MAS and its stakeholder of its incompetent executives and dead wood. People close to Mahathir – once described by Australian premier Paul Keating as a “recalcitrant” – say he will leave no stone unturned.
What is clear is that for many directors within MAS and Khazanah, their days are numbered.