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BN White Elephant # 10 :: MAS Black Hole


MAS was in good shape in 80s under Aziz and a strong contender against Singapore Airlines.

The MAS success story made a turn in 90s after Aziz retired from MAS. Mahathir ordered RM 1.79 billion cash bailout for Tajudin in 2001 and MOF spent RM9.5 billion to buy back MAS fixed assets.

Third bailout by writing off RM840 million.

Insofar, Malaysian taxpayers have paid RM 12.13 billion to rescue MAS from bankruptcy since 2000.

With the black hole created by MAS, at least another RM 10 billion public funds are needed to make MAS floating again in the sky.

It’s better to shut down MAS and let AirAsia or any private airline to run international routes.

Number of BN White Elephant Project monitored : 10

MAS bailouts with public funds : RM 12.13 billion

Total accumulated cost or losses : RM 54.418 billion  or RM 54418 million

MAS posts biggest-ever loss in its history


PETALING JAYA: National carrier Malaysia Airlines Bhd (MAS) posted a shocking RM2.52bil net loss for its financial year ended Dec 31, 2011 the biggest-ever loss in its corporate history led by higher expenses, despite revenue rising 2% to RM13.9bil.

In comparison, the airline reported a net profit of RM234mil for the whole of 2010 and chalked up sales of RM13.58bil.

The RM2.5bil figure for 2011 includes a RM1.09bil provision, essentially a non-cash item, to reflect the state of health at the airline.

“The company is in crisis. The accounts for 2011 recognises provisions and escalating operational costs which, although painful, gives us a holistic snapshot of the organisation,” group chief executive officer Ahmad Jauhari Yahya said at the briefing of its results yesterday.

Ahmad says MAS is in crisis and that the accounts for 2011 recognises provisions and escalating operational costs which gives a holistic snapshot of the organisation. On the right is Rashdan.

“With full knowledge of our actual position, we will be better prepared to move forward,” he said.

The non-cash items include RM179mil of stock obsolescence (mostly spares for the B737 aircraft), RM602mil for re-delivery of aircraft (it will return 52 of its leased aircraft and will incur some cost in making sure they are in pre-delivery condition), and RM314mil impairment of freighter aircraft (adjusting the freighters to current market value).

For the full year, the airline’s loss per share was 75.52 sen versus earnings per share of 7.25 sen in 2010.

For the fourth quarter, MAS reported a net loss of RM1.28bil and sales of RM3.67bil. But a year earlier, it had reported a net profit of RM225mil and sales of RM3.66bil.

“If you filter all the accounts off the non-cash items, it is a decent performance by MAS given the challenges it is facing,” said an analyst with Maybank Investment Bank.

He believes that the numbers are slightly better than analysts’ estimates.

By stripping out the RM1.09bil provisioning from the net loss of RM2.52bil, the actual loss incurred by the airline for 2011 is RM1.43bil. For the first three quarters of 2011, the airline incurred a net loss of RM1.24bil and with the stripping out of the RM1.09bil, the actual net loss for the fourth quarter is only RM184mil. However, when added with some additional items it should be a net loss of RM231mil for the quarter.

Ahmad said that group expenditure had gone up by 21% mainly due to higher fuel costs. MAS’ fuel bill for 2011 swelled by 33%, or RM1.46bil, to RM5.85bil from RM4.38bil a year earlier. Jet fuel prices have risen from US$95 a barrel at the end of 2010 to US$133 at end-2011. Currently, it is hovering around the US$137US$138 per barrel range.

For 2011, MAS saw a 6% improvement in passenger revenue, while yields were up 4% to 24.7 sen per revenue passenger kilometre. But the improvement, according to Ahmad, was insufficient to offset the rising costs, especially fuel.

Bearing in mind that it only has RM1.1bil in cash reserves, and in view of the big number of aircraft deliveries it has to take, MAS is in dire need of more cash.

Ahmad said the next task was to strengthen the balance sheet or else it would be difficult for the airline to get financing for its new deliveries.

“The bottom-line group losses for 2011 underscore the need for MAS to adopt strong measures to stop the bleeding, and they include staff redeployment, increasing productivity and efficiency, relentless cost control and making further route review,” he said, adding that thus far the airline had implemented 9% route cuts.

In order to strengthen the balance sheet to boost cash reserves and funding capacity, he needs another 60 days to come up with a plan.

“The plan includes, but not limited to, debt and/equity market options. Khazanah Nasional Bhd and Tune Air, the two largest shareholders, are supportive of these initiatives,” he said.

His deputy Mohammed Rashdan Yusof did not rule out the possibility of a cash call and the selling of non-core assets to raise cash.

Ahmad also disclosed that talks with Qantas were under way but declined to reveal the scope of the talks. MAS will be joining the oneworld alliance by November this year.

Despite the huge losses and funding requirement, Ahmad remains positive on the outlook for the airline, saying “if we follow our business plan, we should be in the black (this year).”

The comment board with Facebook account.
nkkhoo says:

MAS employee number is at least 5 times than AirAsia although the turnover is more or less in par.

Libra says:

Too bad Air Asia is no longer offering the value to the customers.

Randy says:

SIA Can, MAS Cannot?





nkkhoo says:

Lee Kuan Yew told SIA management from day one, no bailout from the government if they screw up SIA.

Idris was playing accounting magic, he did nothing solid to change MAS structure. He is smart to leave MAS earlier before the under carpet rubbishes are exposed.

Tim says:

If mahathir ‘rescued’ MAS by paying RM8 for the RM3.50 MAS share then, perhaps Najib can emulate the practice to ‘rescue’ MAS the same way, by first finding another Tajudin Ramli?


still got some picasso paintings (ask munir majid)which MAS can sell off to buy fuel.

niceguy says:

(BTW is it my browser or something else as I don’t see the “Recent Posts” column on the left side as it used to be.)

nkkhoo says:

Recent post was disabled weeks ago. Nothing wrong with your browser.

niceguy says:

Yes, sell Malaysia Airlines and recoup some money and be done with it.

Having a national airline flying the national flag is an archaic concept.