Will the MAS-AirAsia CCF work?

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Will the MAS-AirAsia CCF work?

Will the MAS-AirAsia CCF work?

Friday, May 4, 2012
  • MAS2020
Will MAS benefit from the modified comprehensive collaborative framework with AirAsia now that the "share swap" between the two companies has been terminated?

KUALA LUMPUR: Bloggers have been buzzing about the cancellation of the “share swap” deal between Malaysia Airlines (MAS) and AirAsia, and giving plenty of feedback on which direction the remaining comprehensive collaborative framework (CCF) should go.


Khazanah Nasional Bhd announced on May 2 that it had terminated the eight-month-old share swap with Tune Air Sdn Bhd (top shareholder in AirAsia) the day before. The move was followed by the resignations of both Tan Sri Tony Fernandes and Datuk Kamarudin Meranun as directors of MAS.


The two companies’ comprehensive collaborative framework (CCF), however, which was implemented last August, will remain in place and will see them working together, albeit in ways that differ from the original agreement.


Bloggers’ opinions on the cancellation of the share swap agreement and the renegotiation of the CCF were mixed, ranging from cautious optimism to warnings that the new CCF is bad for MAS.

 

AirAsia Bailout


Syed Akbar Ali wrote in his blog OutSyed the Box that the new CCF is anything but mutually beneficial, and that Tony Fernandes and Kamarudin Meranun can now “take MAS to the cleaners without having to be sitting on the Board of MAS and without having to deal with the unions”.


Syed said the joint ventures that would be formed as part of the CCF agreement would only benefit AirAsia.

 

“MAS will eventually rescue Air Asia by buying Air Asia's 200 Airbuses which have nowhere to fly.

 

“MAS must provide engineering, ground support services, cargo services, catering and training services for Air Asia which does not even own a screwdriver to maintain their aircraft. It is money out of MAS' pocket into Air Asia's pocket - now through the clever and devious mechanism of ‘JV’.”


“Here is my advice to the MAS employees and the MAS unions,” Syed said. “Peaceful assembly and peaceful protest is now cool in Malaysia.  Everyone is doing it. You must all get together and protest peacefully against this plunder of MAS  ever since the Khazanah  idiots got into the picture.  Walk out and walk to save MAS.”


Syed said that in addition to changing the entire Board of Directors of MAS and removing certain people from Khazanah Nasional, MAS should cut ties with AirAsia.


“Insist that all share swaps, collaboration, communication and contact with Air Asia be terminated. They go their way. Leave MAS alone.  Ask them to pay cash for all your services. No cash, you go in the trash,” he said.


Syed said he was not feeling optimistic about the chances of such changes being implemented, however, saying “...in the final analysis I think MAS is screwed.  Unless the MAS employees really do something about this.”


Wangsa Maju Member of Parliament Wee Choo Keong wrote in his blog on May 1 that the share swap deal created “glaring conflict of interest” and was “lop-sided” and that MAS “never benefitted at all”.


Initially, Wee said the CCF could be positive if certain conditions are met.


“The CCF can go on provided AA is not given priority, AA pay for whatever services rendered by MAS based on market price, all agreements must be transparent and terms strictly adhered to, no special treatment given to AA or AAX and more importantly CCF must not stifle competition between MAS and AA/AAX.


“The situation of ‘MAS gives ALL and AirAsia takes ALL’ should not be allowed,” he added.


However, on May 3 Wee questioned the motives of certain key figures in MAS and said the company’s employees “...should start a campaign to throw them out of MAS and tear the said CCF agreement to pieces. The new secret CCF has hidden agendas.”


“The cooperation under the new secret CCF appears to be that MAS had to buy aircraft from someone who has purchased 300 airbus in 2011,” he said. “The engineering, ground support services and cargo services are very much more superior than AirAsia or AirAsia X. The cooperation should be for AirAsia and AAX to pay for services rendered by MAS based on market rates and to make payment on time. If this is the case then there was no need to sign a new CCF in secret like what Tan Sri AzmanMokhtar and Tan Sri Tony Fernandes did over the MAS-AirAsia share swap.”


Datuk Ahirudin Attan, also known as Rocky, was less sceptical of the deal but nonetheless expressed only cautious optimism.


While he acknowledged the reported elation of MAS employees, who he said “see the announcement as a big Workers' Day gift to them from the government”, Rocky questioned whether or not the new CCF agreement will work.


“Ahmad Jo, the man brought in to turn MAS around following the swap, has a great opportunity to show what he has in terms of transformation plans for the national carrier.


“He must put the interest of MAS and the flag before everything else above Air Asia's. Above Air Asia X's. Easier said than done,” Rocky said.


Blogger Big Dog has written more positively about the CCF. He wrote on April 25 that MAS and AirAsia should learn to work together, and the CCF provides them with ample opportunity to do so. “Especially when they are serving different products for different markets,” he said.


“The combination of the revenue for both airlines is in the neighbourhood of RM 20 billion per annum,” he wrote. “As has been said before, a lot of components of how the two companies running their different business models for different markets could be shared and synergised.”


“Like it or not, Malaysia Airlines and Air Asia must rationalize their operations and obtain an optimum level and cost to operate, to remain competitive in their own markets,” he said. “The CCF provides a lot of room for savings and cost rationalization.”


In contrast with the less-than-optimistic views of the CCF expressed by Syed and Wee, Big Dog said on May 1 that it could benefit MAS.


“Definitely, Malaysia Airlines stands to gain the most as it has the mature facilities and advantage. An example is the Malaysia Airlines engineering facility, which could cater to the maintenance, repair and overhaul (MRO) needs for both airlines. The combined fleet of over 200 aircraft could provide the MRO facility to be more competitive and more importantly, efficient.


“Several detractors of the ‘share-swap’ deal also saw the benefit of the CCF,” Big Dog pointed out. “This announcement is a good Labour Day gift for them.”