Politcal fortunes and airline prosperity

It is no accident that in both these cases, politicians control the purse strings. Both have suffered for years from political interference, making it difficult for their managements to operate in anything resembling a true commercial manner. Take MAS, for instance. It was essentially bankrupt in 2005 when government brought in oil industry executive Idris Jala to perform a turnaround miracle. He did. The carrier posted 10 consecutive quarterly profits during his tenure, which ended in 2008. The trouble was, he did too good a job and was dragged off to become a Special Minister of State. Fast forward another couple of years and MAS was back in turbulent skies, where it has stayed ever since. In 2011 it reported its worst ever loss of $763 million.

However, there are signs of improvement. For the first six months of this year, it reported a net loss of $137.3 million compared with a loss of $157.6 million for the equivalent period in 2012. Revenue was up to $2.2 billion from $1.9 billion and chief executive Ahmad Jauhari Yahya says the current business plan will get it into the black by next year. Some analysts think that’s optimistic and it will continue to register losses for another three years.

Thai also seemed set for a brighter future when former Energy Minister Piyasvasti Amranand took the helm in late 2009, immediately declaring ‘I’m in charge’ and insisting he wouldn’t stand for any political interference. He lasted until last year before being axed in a move generally recognised as politically motivated. In its latest quarter ending June 30, Thai reported a net loss of $268.3 million. Jamsri Sukchoterat, head of Thai’s labour union, complains so many committees and panels have been set up to oversee the airline’s work it has become impossible for executives, including the chief executive, to make independent decisions.

The push to have MAS privatised is also coming from its biggest union, Malaysia Airlines System Employees Union (Maseu), which says it wants the carrier sold to “someone with sound aviation background and expertise”. Will MAS be sold? The answer is: not any time soon. Idris, still a government minister, says it should have been sold when he was in charge, when the share price rose from $0.92 to $1.89. It is now hovering around $0.10. He says the government should stay out of the airline business but adds MAS should not be sold at a loss: “There should be no fire sale”.

AirAsia group chief executive Tony Fernandes, who bought into MAS two years ago under a share swap arrangement that was eventually cancelled, also says the government should play the role of a facilitator to businesses rather than have direct involvement or ownership, but adds he now has no interest in buying the national carrier.

Essentially, government owners in Malaysia and Thailand have failed to see what should be blindingly clear to any observer. There’s nothing wrong with a state-owned airline as long as its management is given the authority and freedom to work commercially.

Neighbouring Singapore Airlines, also government owned, operates exactly on that principal. Carefully chosen chief executives are left alone to do their job with little or no political interference. The end result: a consistently successful airline. The same applies to the fast expanding gulf carriers, Emirates Airline, Etihad Airways and Qatar Airways.

“There’s nothing wrong with a state-owned airline as long as its management is given the authority and freedom to work commercially.”

Whether MAS is eventually sold or Thai’s Sorajak ends up keeping his job remains to be seen. What is important is that in an industry that faces enough hurdles winning profitability in the face of fierce competition, high fuel prices and rising costs, management stability and the absence of political meddling is critical. Endless rounds of restructuring, re-engineering and changes at the top add up to a recipe for further disaster.

But then, as we all know, bankrupt airlines, especially state-owned ones, never seem to go out business. They just get bailed out and continue on their merry, roller-coaster way.