Getting it right basically - MAS

by **Cals** Mon 13 Jan 2014, 02:10

Published: Saturday January 11, 2014 MYT 12:00:00 AM
Updated: Saturday January 11, 2014 MYT 6:52:34 AM
Getting it right basically

STARBIZWEEK: You are committed to the turnaround exercise, to get the airline fixed once and for all, but after so many restructuring/turnarounds which lasted over a decade, the airline remains in the red, will this work?
AHMAD JAUHARI YAHYA: To me, it is about doing the basics right. And they are all about making sure we have an effective network, efficient fleet, productive workforce and efficient cost structure to support our operations.

Were the basics wrong then?
The weakness was to get more output and deal with the cost structure, and also when we say we need to get the basics rights, we are saying the product must be good, productivity levels should be at the same level with the industry and hopefully we can price ourselves more competitively.

Isn’t that a huge challenge?
It is, especially when you have not done it for 10 years (to price ourselves competitively). To me, you can always come up with a lot of glitz and gizmos, but (to see results) hard work needs to prevail.

What makes you so sure what you are doing is right?
I am not sure, but what we know is we have to generate sufficient revenue and cut cost. That is business, and generating revenue is about selling as many seats as we can and that is why our load factor has gone up. No doubt we have taken a hit on yields, but it is all about building revenue. We just have to make sure our cost does not accelerate while we push for more flights and capacity. Some airlines rely on ancillary income to boost revenue, we also intend to do that, but the basics are about selling seats and covering cost.
At the same time, there needs to be a strong level of product appeal and for that we need to build a reputation so that we can have some level of pricing power in a competitive market place. That will take time even though MAS cabin crew has won many awards for service. The market is extremely competitive and the airline space is one space that no amount of tariff barriers is going to help in a globally competitive environment. So we really need to build on our reputation and we have to be globally competitive.

What has changed since you started restructuring the airline?
There is a lot more awareness in terms of the need to do more, to redefine new processes to be efficient. We re-looked at the whole commercial organisation, there is awareness to ensure we are market competitive, either to be equal or better than our peers. We also have done some organisational structure tweaking by putting the people in the right jobs.
All major procurement contracts have been renegotiated and in a way everything that can be renegotiated has been or is being renegotiated.
We believe in one thing, customers deserve the best, it is just that we need to deliver in the cost effective way, and though we have not reached that level, we also cannot compromise on quality or else it will be difficult to call ourselves a premier carrier. We just need to control the cost.

Productivity
You talked so much about raising productivity levels but since your entry there has been resistance, there is a disconnect here?
It is factionalism, people think they are doing good and they think they have a solution, but do they? No.... everyone can talk, but where is the workable solution?

You are now trying to talk more to your unions and people, is that showing results?
There has to be a level of realisation and not just talking, we just have to do more, produce more, reduce cost, sell more, and at the right price. Like I said, we are getting back to basics I don’t want any international consultant telling me that with all the power point charts.
Everyone has to do a part as turning MAS around is no longer the work of one man but that of 20,000 people.

But you have one whole commercial unit comprising expatriates?
But they are not consultants, however, we also need new ways of doing things. The commercial department has been revamped, the network rationalised, reviewed how pricing is done and how tickets are being sold.
The engineering department has been cleaned up to ensure the maintenance of airplanes is done at a cost effective level. The pilots are flying more, we are sweating our assets more and our planes are flying 11 to 12 hours daily from eight to nine previously.

Often it has been said, MAS is overstaffed, is a reduction on the cards?
It depends on how you look at it. In terms of pilots and cabin crew, they have flight time limitations on how many hours they can fly. Every airline will have the same level but maybe the work rules are different in MAS as there are unions. But it is very clear that AirAsia and Malindo Air have no unions but we compete in a unionised environment. We are trying to achieve the best level of productivity in a competitive environment, and the people complaining are all part of the union, perhaps protecting their own turf.
We just have to get a set of work practices in line with what is best in the industry. Some airlines outsource their front end services and engineering works but we do most of them and that is why the headcount gets big. There cannot be a direct comparison but we are pushing very hard to make sure whoever we have will do the best and produce the best output. In some areas, we are seriously under-staffed, such as the call centre which was malfunctioning about two years ago but now there is at least a fighting chance of people calling our call centre and actually getting through. What we did is we just added 200 people to the call centre as you just cannot have one guy handling 200 calls. Just like flying, check-in, serving the cabin, call centre, we cannot automate some processes. Though we like more people to self check-in but many do turn up at the counters and we still have to serve them.
The only other thing we need to look at is the back office, we can consolidate some areas there. But essentially, it is about getting maximum output from 20,000 people. As for retrenchment, I don’t want to speculate.

Unions have a big say in what you do, what you drink, eat, and apparently there are moves to get you out again?
The board and shareholders will ultimately decide.

Will engineering and maintenance be sold off?
It is too early to say. We will only decide once we have stabilised the operations.

Privatising MAS, what is your view?
Don’t ask me, ask the shareholders.

On hindsight, could you have done things differently to turn MAS around and achieved results faster?
I do not believe, given the constraints and given the fact that we need to preserve the airline, and also preserve the work force, we could have done any better.
But by end of this year we should be a better airline... though we have to manage the competitive environment.
Do you think this will be the final restructuring exercise for MAS and you would have uncovered everything?
The word restructuring is a very fancy management word, but I don’t think there is such thing as final restructuring. Companies evolve all the time and even if we have done what is needed, we will not stop doing what we need to do better. In life, there is no such thing as final solution but we will not be re-doing what has been done. We will further enhance as we move forward.

The end result
This question has been asked many times over - when will MAS be profitable again after being in the red for so long?
The timeline we said earlier is to at least break even in 2014. The recovery is not going to be quick.

Why did you not opt for the Japan Airlines’ style of closure for one day and restart?
Everyone has their own recovery model and MAS decided to have a more gradual and sustainable recovery model by harnessing the assets and the people that we have.

Sustainable recovery... it has been proven time and again over the past decade that whatever seems to have been done is not sustainable?
That is what I am saying, this is not a one-off thing and it will be a gradual and hopefully a sustainable recovery. Ultimately it is a national airline (there are other things to consider).

Your gut feeling – can MAS ever regain its shine?
It will be different this time around because we have to operate at the efficiency and productivity levels that are comparable to the best in the industry. We have to offer products and services at par with the best and at the same time customers that fly with us must feel they have a unique value proposition. So it is a combination of all that, there is no one single factor.

Bigger, better fleet
Is there a plan for fleet replacement?
We have not invested in capacity building and only invested in replacement over many years. We need to replace and built on new capacity for growth. This has not been done for many years.
We need to start planning for capacity push and take advantage of the growth in this region. We have to plan ahead to remain relevant. We have to look at where we are going to fly in the future, where is the inter-connectivity and feeder traffic, say the next 5 to 10 years and beyond.
Since we are a network carrier and not a point-to-point carrier, we need to look at aircraft type that works for us. For example, if someone from India wants to go to Australia, he needs to go via Kuala Lumpur because we simply cannot fly straight from India to Australia due to regulations. If the network works, then the airline will work.

When will you decide?
We started the evaluation process for our future fleet six months ago and will make a decision by the first-quarter of this year.

One world
I’ts been more than 10 months since MAS became a oneworld member, any monetary gain?
There is incremental revenue as a result of increase in interlining traffic and it will grow over time as that has been the experience of other airlines. It is a slow ramp up and it gets pretty solid as we go into the second and third year.