Will the Fernandes Midas Touch Rub Off on Malaysia Airlines?
Asian air transport rebel Tony Fernandes, chief executive of low-cost pioneer AirAsia, will soon join the industry establishment, assuming his planned acquisition of a 20.5-percent stake in failing flag carrier Malaysian Airline System (MAS) proceeds. Last week, his Tune Group agreed to become a significant minority shareholder in MAS in return for Malaysia’s sovereign wealth fund Khazanah Nasional taking a 10-percent holding in AirAsia. Tune itself–which also holds interests in hotels, financial services and cellphones–owns 23.6-percent of AirAsia, which like MAS is a listed public company.
As things stand, Fernandes does not expect to join the MAS management team, but the Malaysian government will surely hope that some of his Midas touch will rub off on an airline widely seen as too old-school for today’s fast-changing market conditions. MAS, which operates as Malaysia Airlines, lost $79 million in the first quarter of 2011, and few expect much of an improvement in the second quarter. The MAS workforce has long proved impervious to reforms aimed at rationalizing the airline’s cost structure and making it more competitive in the face of profitable rivals such as AirAsia. Now overseeing a fleet of some 100 aircraft and sitting on an $18 billion order for 200 Airbus A320s, Fernandes in barely 10 years has turned AirAsia from a debt-ridden laughing stock with just two aircraft into a veritable poster child for the huge potential of the vast continent’s air transport industry.
In other Asian airline news, Tiger Airways remains on a less sure footing, following its clearance by Australia’s Civil Aviation Safety Authority to resume limited operations in the country for the rest of August. Now allowed to operate just 18 flights per day, Tiger found itself grounded in July due to serious safety breaches. The Singapore-based airline group’s Australian subsidiary remains subject to special conditions relating to pilot training, rostering, fatigue management and amendments to its operations manual, and will require further approval to increase its schedule at a future date. It has been losing some $2 million per day since last month’s grounding.