Mas Assignment

Introduction

When Idris Jala was brought in to save MAS, he did what any simple minded businessman would do as a simple way out; sell its assets to get the balance sheet in order. Never in MAS history have it ever tried to improve its business dealings and activities.

The Malaysia Airline System (MAS) reported a loss of over RM1.3 billion for the Financial Year 2005. It was unacceptable to many parties such as the stakeholders and the government especially the announcement was made at the same time as some of MAS regional competitors reported strong profits in the same year. The airlines was expected to cut up to 5,000 jobs and spend a maximum of 850 million ringgit (US$236 million) in compensation packages as part its plan to return to profitability, making it one of the country's biggest corporate retrenchment exercise.

The retrenchment was a measure to reduce cost due to crippling fuel prices and lower load factors. The carrier was also battling a cash shortage, overstaffing and an inefficient and unprofitable route network. According to the Managing Director, Datuk Seri Idris Jala 60% of MAS routes were unprofitable. For instance, the pricing of the KL -Manchester route was so dysfunctional that it had to be 140% full just to break even. Thus, the three-year turnaround plan calls for extensive cost-cutting and axing of unprofitable routes aimed at achieving profits of 500 million ringgit in 2008, which would be an all-time record for the carrier.

The Financial Crisis

Despite all the notable achievements and excellence in services, MAS faces major financial problems. By the year 2002, MAS struggled under a debt load of RM 9.2 billion. During the first half of 2001, losses nearly doubled in the first six months of 2001 with the Kuala Lumpur-based carrier reporting it was RM 772.79 million (USD$203.3 million) in the red. For the financial year ended 31 March, 2001, MAS reported a pre-tax loss of RM 1.303 billion. This was the fourth consecutive year MAS...