In this issue we have stories on two very interesting developments – one that comes as little surprise and the other quite unexpected. I am of course speaking of the news that Malaysia Airlines (MAS) will be delisted from the country’s stock exchange and undergo what is said to be a massive overhaul and the other news from neighbouring Thailand where the military junta has declared Thai Airways (THAI) is to undergo a similarly substantial restructuring.
Certainly both are in desperate need of an overhaul – Malaysia Airlines was in desperate need of real and meaningful restructuring well before the tragic and pitiful double disaster struck leaving it now bleeding US$ 2 million a day according to analysts and similarly Thai Airways has been in need of a similiar indepth housecleaning for quite a number of years. It is a shame it has come to such drastic action for both and a far greater shame that both processes had to come about as a result of dramatic events – fatal accidents on one hand and what was effectively a military coup d’état on the other.
On the Malaysian side there has been much criticism over the fact that the MAS’ main shareholder, state-investment company Khazanah, will be leading the restructuring. Many ask whether a restructuring this time around would be any different, considering that so many of the previous restructuring exercises had failed.
MAS has undertaken at least half a dozen such exercises over a 12 year period and changed chief executives five times. Among the carrier’s biggest problems are US$4 billion of debt accumulated since 2002, unprofitable routes and bloated staff numbers.
Analysts say Khazanah needs, at a minimum, to bring in a dynamic and entirely new management team, trim its 19,500 employees in the face of union resistance and scrap major routes if MAS is to survive.
On the other hand there is Thai Airways, which suffers similar problems as MAS including being dogged by political interference, but with even greater human resource bloat. Thailand’s new military rulers surprised most industry watchers when they singled out the country’s troubled national carrier as the first state enterprise to undergo reform after seizing power in May from a government accused of corruption.
The airline is said to be making losses on all of its routes of which international destinations account for 92 per cent of revenue, with Asia being the largest revenue contributor at 70 per cent, followed by Europe. THAI is also challenged on domestic routes, having lost market share to budget carriers such as Nok Airways and Thai AirAsia. The proverbial straw that broke the camel’s back appears to be the net loss of THB 7.65 billion (US$239.6 million) in 2Q2014. The group’s operating loss more than doubled to THB 6.4 billion in the quarter resulting the company’s operating margin slipping from -6.2 per cent to an unfathomable -14.9 per cent.
There may well be better chance for THAI to succeed in its restructuring as there appears to exist not just strong determination to make painful cuts, but a militarily firm hand behind the cuts that brooks no dissent.
Included in the measures are plans to cut flights to some European cities while increasing flights to Asian destinations such as China and Japan alongside staff cuts – a full one quarter of its full-time employees by 2018 including 1,500 this year – as well as cutting overtime shifts.
Only time will tell how extensive and how effective both carriers’ restructuring is, but the hope is certainly that the both once-proud carriers will return to the forefront as the top-notch carriers they once were.
