Thursday, March 02, 2006

A Tale Of Two Cities (Airlines) - JAL & MAS
Let's Compare Notes

Yesterday, Japan Airlines said that its chief executive Toshiyuki Shinmachi had agreed to step down following a management rebellion over mounting losses at Asia's biggest carrier. Shinmachi, who is also president of the group, will be replaced in June by Haruka Nishimatsu, a senior vice president in charge of financial matters, as part of a sweeping management reshuffle, JAL announced. About a dozen other senior bosses will also step down from the former state-owned carrier and its two operating companies as part of the shake-up, which was approved at an extraordinary board meeting yesterday.
Well, at MAS, we also had mounting losses for the past few quarters. There was a management change but only a few positions was involved. People who stepped down did not get grilled at all.

The reshuffle aimed to recover confidence in the company. The changes come ahead of a merger of the two main JAL operating companies, JAL International and JAL Domestic, from October 1. Shinmachi had previously rejected demands from a group of managers and the airline's largest individual shareholder to step down but will now give up control of day-to-day operations, moving to the largely symbolic post of chairman. Amid the infighting, JAL delayed the new strategy blueprint, which had been due to be announced last week. JAL's net loss tripled to 11 billion yen (US$93 million dollars) in the three months to December, in part due to a series of safety scares which have frightened passengers at a time of soaring fuel costs. Its main competitor, All Nippon Airways (ANA), in contrast reported a net profit in the nine months to December.
JAL's losses pales into insignificance when compared to MAS' losses. ANA made profits,... errr SIA, Cathay Pacific and Air Asia also made profits. Some similarity here. MAS has an appalling record in cost control. Recent figures showed that staff costs were up 12% (year-on-year 3rdQ) while operating costs surged 30%. Even handling and landing fees rose 26%. Obviously things have been running rampant for sometime for these costs to blow out - obviously no monitoring or constructive management were exercised by senior management. Looks like a very hands-off previous management.

JAL said last month it was suspending four international routes, on top of the six already axed last year, to cut costs. JAL was plagued by weak bureaucratic management and slow decision making. There is much bureaucracy and politics, which has delayed much of the company's decision making. Although JAL was privatized almost two decades ago, it still enjoys preferential treatment from the government, including favourable landing slots which has precluded proper checks and allowed red tape to flourish.
Well the preferential treatment part sounds the same in MAS. Disbanding some international routes is again the preferred way of cost cutting.

What about the previous management, why is there no censure, board of review, investigation into what caused the downfall of MAS? Surely, somebody must be interested to see if there was CBT or gross negligence on the part of management - no sound, backbenchers on holidays - that is why GLCs will always under-perform, Khazanah can lead the way to turn the tide by punishing "bad management" (if that was found to be true). When professional managers can just up and leave and leave behind a mess, with no inquisition - where is the incentive to perform? It will be the same cycle over and over again.

So, spot the differences! Actually there is one thing MAS' board and management (and also all Malaysian companies for that matter) should adopt from the Japanese corporate culture - when I was working for a Japanese broker, I saw these scenes day in, day out, it kinda lost its effect on me - but I truly believe it will make a lot of sense and will be very relevant if some of the previous board/management of MAS would hold a press conference, admit their mistakes, apologise for causing the shareholders and the general public undue stress, and for bringing shame to a government link corporation and embaressment for the nation, and then BOW DEEPLY FOR MAYBE 20 or 30 SECONDS. I think we will get the message better, and so too will other boards and senior management people in Malaysia. Although harakiri or seppuku may not yet be necessary, Khazanah should consider them as options for corporate punishment in the future. Of course, to understand harakiri or seppuku, it cannot come from "punishment meted out" but rather from a deep personal sense of regret and a need for redemption/forgiveness, and to keep personal /familial/tribal honour intact - now that's the big divide between the tale of two cities (one city lives by it, and the other has ....).

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