Former prime minister Tun Dr Mahathir Mohamad has described the share swap involving Malaysia Airlines (MAS) and AirAsia as a very good idea.

He also expressed hope that the cooperation would benefit both sides.

“AirAsia can learn about the experience of MAS and MAS can learn how to reduce costs as done by AirAsia,” he said when asked to comment on the collaborative framework entered into by the airlines earlier Tuesday.

Speaking to reporters after the breaking of fast hosted by carmaker Proton here, Dr Mahathir was also asked about the impact of US economy on Malaysia.

“We have shifted from the US to China. Our trade with China has increased multiple folds.

“We have made preparations. When a slowdown hits the US economy, we have another big trade partner,” he replied.

Datuk Seri Anwar Ibrahim has questioned the latest effort to rescue the loss-making state airline, charging today that the Malaysia Airlines (MAS)-AirAsia share swap meant that Putrajaya’s previous turnaround plans had failed.

He also said the deal would create a monopoly that will burden air passengers.
“Is the government specifically admitting that the so-called successful turnaround of MAS was a mere charade? The Prime Minister must be held accountable for misleading the rakyat on this.
“More importantly, the deal raises the question as to what is the fate of the GLC Transformation Programmes that had been launched by Prime Minister Najib Razak to much fanfare and wastage of millions of the rakyat’s money,” he said in a statement, claiming that the share swap would not benefit MAS employees.
The national airline recently recorded a first-quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago.
MAS main shareholder Khazanah Nasional Bhd has defended previous efforts at reforming the national flag carrier with managing director Tan Sri Azman Mokhtar saying that the share swap was necessary to keep MAS afloat.
Anwar also raised concerns of AirAsia’s possible “monopoly” of the domestic airline industry with the recently-inked MAS-AirAsia share swap yesterday.
“The MAS-Air Asia share swap announced yesterday raises serious concerns over the dominance of Air Asia over MAS and effectively reducing competition between the two.
“This may lead to a virtual monopoly of the domestic airline industry in the long run and give rise to risks and concerns associated with monopolies, more so because of the involvement of cronies and political power brokers,” the Opposition leader said.

The opposition leader charged that Tony Fernandes’s participation in the MAS board was a possible conflict of interest. — file pic

MAS main shareholder Khazanah Nasional Bhd finalised a share swap with Tune Air Sdn Bhd yesterday which saw the state investment arm pare down its stake in the ailing state carrier by almost a third.

Under the “Comprehensive Collaboration Framework”, Tune Air, AirAsia’s main shareholder, will swap a 10 per cent stake in the no-frills airline for 20.5 per cent share in MAS.
Before the share swap, Tune Air was the biggest shareholder in AirAsia with 26.28 per cent stake while Khazanah held a total of 69.33 per cent share of MAS.
The MAS board will also see some new faces, namely Land & General Bhd founder Tan Sri Wan Azmi Wan Hamzah, former IJM chief executive Datuk Krishnan Tan, Astro chief executive Datuk Rohana Rozhan and David Lau from Shell Malaysia, who will act as independent non-executive directors.
AirAsia founder and chief executive Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have also been appointed as non-independent non-executive directors of MAS.
MAS managing director Tengku Azmil Zahruddin Raja Abdul Aziz, who stepped down will join Khazanah as an executive director effective September 12, 2011. An executive committee led by Tan Sri Mohd Nor Yusof will manage the state carrier until a new chief executive is appointed while day-to-day operations will be handled by Khazanah executive director and MAS board member, Mohd Rashdan Mohd Yusof.
Anwar charged that Fernandes’s participation in the MAS board raised the likelihood of a conflict of interest in spite of Fernandes’s “non-executive” position.
“This is clearly a violation of corporate governance rules and should not be condoned.
“This deal also raises fundamental issues of transparency because of the secrecy in which it was shrouded. In this regard, the Securities Commission must investigate the possibility of irregularities including insider trading of the shares of both entities,” added Anwar.
The collaboration agreement comes into immediate effect for a period of five years with the option of an extension for a further five years.
 We will let the boss of Khazanah say anything he wants at the moment and have his five minutes of fame. At least we are spared his newfound religiosity. Everyone would be forgiven for thinking this is the last word on the issue because the boss of Khazanah says whatever you may think of the deal between MAS-AirAsia, it is defensible. Among other things, he says, this is not a bailout of MAS.
We will take him on these issues.
The first question we want to ask: why was this deal worked out in the first place? Why AirAsia (AA)? It’s currently operating at how many times its PE? 40 times? Looking at its numbers and the fundamentals, the high PE could mean its stocks are overpriced. That may mean some boys are cooking the numbers to set up the market and make a killing. Maybe.
If the reason as Dr Mahathir says is that MAS can learn from AA on ways to cut costs, you mean those damn exercises carried out by Idris “al Dunlap” Jala weren’t enough? Why don’t we learn from Singapore Airlines or Qatar Airlines? Oh … we want to learn from our homegrown talent will be the likely answer.
I know this is a BAD deal because Dr Mahathir said so. Dr Mahathir always says something when he actually means the complete opposite.
Yeah baby, what can we learn from AA?
How about the homegrown talent’s track record then? Well, let’s see. As of the first quarter of 2011, AirAsia debts amounted to RM7.7 billion with cash balances amounting to RM1.7 billion. This part doesn’t require teaching for MAS. Its executives are renowned masters.
Let’s see further. Hmm, in August 2010, AA 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 aircraft at the Paris Air Show. No big deal, we can order as many as we want. Possibly the commission earned from the purchases dwarfs the one earned from the Scorpene submarines which are not submersible.
As of 31 March 2011, as we can see from its first quarter report, AA’s capital commitments stood at RM19 billion. With the above announcement, an additional RM54 billion will be added as Capital Commitments. The proposed Capital Commitments of roughly RM74 billion will be spread over a 15-year period ending 2026.
In other words, AA has to increase its earnings to an average of RM5 billion per annum to meet its future dues. From 2006 to 2010, AA’s revenue grew tenfold from RM110 million to roughly RM1.1 billion, an average growth of RM200 million per annum. How will it reach RM5 billion? We will see in the coming months when they rationalise all the routes and whatnot.
Its cash reserves rose six-fold from approximately RM300 million to RM1.7 billion but its debts skyrocketed from RM1.05 billion in 2006 to RM7.7 billion in 2010, an increase of 700 per cent.
Surely this looks like a debt burden that is spiralling out of control.
But spend, baby spend.
This deal is signed, sealed and delivered at an onerous and ominous time. The world economy, including that of Asia, will be into another maelstrom and air travel will invariably be hit. So what can be done?
One, AA can cancel orders but contract penalties will be onerous. AirAsia wouldn’t want to pay penalties would it? The hutang with MAB too, it dragged on for what seemed like forever. That option is no-go and why would anyone want to forfeit commissions, my man?  Also, Tony is probably thinking along what Keynes said — when you are a big borrower, the banks are scared of you. So as a big borrower Tony feels that size does matter after all — it will shield him from foreclosure as banks will be leery of bearing heavy losses! Give it to me, bebeh!
But also, a sizeable chunk of those loans are being held by Malaysian banks and in the worst-case scenario, the government and the taxpayer will have to pick up the tab to avert a financial meltdown cascading down the AA slope. So maybe what a blogger said about enriching AA on taxpayers’ money is true after all.
Let me speak to some financial whiz kids to see the deal from a different perspective. No, I am not going to dignify one commentator with an answer stating that I am a racist for writing this article. If it were that Meranun chap inking this deal, I would wallop him all the same. Who cares what race Tony belongs to? You mean I can’t criticise dear Tony because he is of a different race and if I do, it amounts to racism? FU!
Take a look at MAS, the whipping boy presently but which is instrumental to further the game being played by bossman Azman Mokhtar and gang. MAS has a paid up of RM 3.384 billion and has a fixed asset value of RM8.4 billion. Its net asset is at RM6.962 billion, where cash constitutes RM2.086 billion.
Compare that to the position of AirAsia, which we pointed out above; it has borrowings up to RM7.7 billion and its cash position is RM1.7 billion. In an earlier article, we pointed out that AirAsia has a record of being a bad debtor; it once owed Malaysia Airports over RM65 million and whenever action was taken against them, they ran to their chief counsel, then PM Pak Lah. Now of course it has Tun Mahathir on its side and the abrasive and aggressive Rafidah Aziz who can be counted to also be its enforcer.
Malaysia Airlines’s wealth is actually its network and position in the Tier-5 airline market. Malaysia Airlines’s annual operating turnover is RM12.98 billion versus AirAsia’s RM 3.948 billion. MAS’s operating revenue from airline operation is at RM11.649 billion against Air Asia’s RM2.839 billion.
This whatever you call it — merger, cooperation, or whatisitsname — is a mystery-shrouded takeover with the elements of manipulation and failure of disclosures. What is happening to the position of minority shareholders?
Khazanah is giving away 20.5 per cent of its holdings in a company with a bigger network, acclaimed higher standard of service, much bigger operating revenue, stronger assets, fewer debts, more cash and a better paymaster track record to another company with a lesser track record, but one that excels in hyped-up marketing and showing it can make a lot of net money in a shorter period of time.
Also, I find it strange to see one merchant bank acting as common adviser to this deal. Then I remembered the present capo dei capi of Khazanah is cheese compared to chalk of another earlier Khazanah boss
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