Wednesday, August 01, 2007

Sack Idris Jala?

Just because a few politicians were among those caught in planes which happens to be late, just because its them who actually suffered, they can call for the CEO of MAS to resign? What if they don't like their charkwayteow? Blow up the hawker?? How about standing up for the rakyat whose lives have been trampled on many times worse than just missing your appointments? Since when was "flight arrivals" the most important determinant in a CEO's career? It is important, and a reflection of the many inherent problems within MAS, but certainly not a harakiri consequence for the CEO!
I'm not a fan of Idris Jala but fair is fair, he was sent to revamp and rescue a very big shit-hole dug by the previous management (some of whom are still around in MAS). Idris' job gets harder the moment he stepped on board - look at how policies went around favouring AirAsia to the detriment of MAS, as if it wasn't hard enough for MAS already. First, give Air Asia domestic routes. Second, when FAX cannot be run profitably in Sabah and Sarawak, shift the shit to MAS.

Selling planes and buildings are not operational profits. Him doing these things is not a bad thing per se. They are not to boost profits but a better management of assets and deployment of resources. Leave him alone on these issues. Yes, Jala retrenched jobs and morale is bad, boo-hoo, MAS is a poorly run GLC thanks to the previous owner ... not due to him, ... so, what do you expect Jala to do, give the employees bonuses?? Save their jobs at all costs??? Of course there will be retrenchments! Of course, morale will dip! And your mother is still a woman! Surpised??!!

Besides the legacy problems inherited by Jala, MAS also has to contend with probably the most successful low cost airline in Air Asia directly. A luxury most other major Asian airlines need not face. Plus the fact that other Asian LCCs are generally less successful when compared to Air Asia.

Let's look at some real figures:

Cargo Load Factor 2004 / 2006

Singapore Airlines 64% / 63%

Emirates 65% / 65.8%

Thai Airways 54.8% / 54%

Lufthansa 67% / 67.7%

MAS 67% / 67.7%

Passenger Load Factor 2004 / 2006

Singapore Airlines 73.3% / 75.6%

Emirates 73.4% / 76%

Thai Airways 72.5% / 75.4%

Lufthansa 74% / 75.2%

Cathay Pacific 77.3% / 79.5%

MAS 67.6% / 69.8%

Cargo side, things are about on par with regional competition. The problem is the passenger load factor. The improvements are there, so, it may be too early to sack Jala. Jala has acknowledged that he will not look at capacity and network routes enhancement over the immediate future - good, cause those are not the real immediate problems. What has Jala been doing for the past 1.5 years? Mainly on yield improvements. He may have missed out on the "operational cohesiveness" portion of things which results in delays and scheduling inefficiencies. - maybe his strengths are not in those areas. But in terms of yield enhancement programs and other cost cutting measures, Jala's strategy looks OK (tighter procurement procedures; improving third part cost structures; renegotiating leasing rates on some planes; increase net based sales).

New code sharing likelihood with one of the top 3 China based airlines will enahced regional feeder traffic and linkups, without having to fork out princely sums to obtain minority stakes in other carriers (the strategy employed by many regional carriers). Jala has already laid out a proper succession plan as he does not plan to stay too long anyway. There is still some ways to go to bridge the gap with regional carriers, but MAS is the only one moving from a loss-making business model to at least a profitable business model. The rescue mission is still a long way off but at least the patient is out of ICU - that will mean something for the share price.

MAS should make a net profit of RM415m in 2007 and an even better RM900m in 2008. That translates to an EPS of 33 sen and 72 sen respectively. Consider this, all these have been achieved during an era of flying side by side with Asia's most successful LCC, and with recent government policies favouring the LCC??!! Most research houses see a 6-12 month target price of at least RM7.00 for MAS (current share price at RM5.20), and you want to sack the CEO??!! If performance is measured equitably, maybe some of those politicians could be sacked much earlier than Jala for inefficiencies. Report card for Jala, so far: 65/100, could do better but not bad considering the shit all along up the hill trek.


yusuf said...

whats your view on the bloodbath? strictly a hedge fund affair which will be contained by the derivatives ie LTCM or explode on our faces?

Salvatore_Dali said...

if you were to check the top 20 sectors within the S&P500, you will find that 2 out of 3 sectors are already in oversold territory... they will recover back to the median ... just a couple of hedge funds failing,i think there's one which is worth US$16bn losing 25% of its value... sure somejitters but we must ask ourselves, what is spooking the it anything NEW.if yes, then be scared, if NOT, its just the vagaries of the mkt...

TK said...

Sack the fella who raise the kris to create fear & the fella who always said those constrution problem is not his responsibility first. Sack the 2 that not qualify to be a YB for talking nonsence about women in Parliament also.

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