Rightways to Success: Restructuring

Friday 5 September 2014

Setting the right CEO for Malaysia Airlines (MAS)

Essentially, there is little time to shape up MAS before its competitors eat into its share of business. Khazanah should cast its net wider beyond the GLC fraternity and also look globally.

Don't compromise on setting things right for MAS. The airline needs a true blue aviation expert as new CEO

MALAYSIA Airlines (MAS) needs a true blue aviation expert as its new chief executive officer (CEO), and that is something Khazanah Nasional Bhd has to come to terms with.

The time to test the waters by hiring non-airline experts is over.

MAS is like an injured entity that needs to be operated on fast.

The national carrier needs a leader who knows the trade given the complexities of the airline business – someone who can differentiate between a full-service airline and low-cost operation.

The person must not be cajoled into believing that selling seats at the expense of yields is the best business strategy, and at the same time get the workforce to rally behind him to achieve success.

This is critical if Khazanah wants to see returns from its RM6bil investment that will go into saving MAS.

Bear in mind that Khazanah has not recovered the RM7bil investment it had already poured into the airline.

No doubt Khazanah does not want to set a new record for investing RM13bil in MAS without getting anything in return.

To recap, Khazanah had announced a 12-point plan to revive MAS. It will take it private, delist it, transfer the airline into a new company and relist it later.

It will cut 6,000 jobs, focus on regional profitable routes, and hopefully pay market prices for supplies.

To do all that and return to profit in 2017, it needs a new man at the top, someone with impeccable abilities and knowledge of the industry. The obvious choice will be someone from within the company, if there is one.

It will be hard to believe that Khazanah cannot find one person to run the show from the nearly 20,000 employees in MAS.

If that is the case, either the airline’s succession planning is non-existent or absolutely hopeless.

Airlines will normally employ from within the company or from other airlines to fill the top post.

In the case of Singapore Airlines (SIA), it has often been a home-grown candidate that has worked for 20 to 30 years with the airline.

MAS and SIA were formed from the same parent company decades ago.

SIA has become one of the best airlines globally although it grapples to keep its feet on the ground.

The current SIA CEO Goh Choon Phong came on board in 1990, worked 20 years, and became CEO in 2010.

His predecessor, Chew Choon Seng, joined SIA in 1972, and after 31 years became the CEO.

Chew took over from Malaysia-born Dr Cheong Choong Kong. Cheong was a mathematics lecturer in Universiti Malaya before he joined SIA in 1974.

After 29 years with the SIA, he was appointed CEO.

Unlike MAS, SIA has an unbroken record of profitability even through turbulent economic times.

Qantas head Alan Joyce is also a true aviation man, after his stints at Jetstar, Ansett Australia and Aer Lingus.

If no one from MAS can fit the bill, then obviously Khazanah will have to search from within the government-linked company (GLC) fraternity.

But should Khazanah make that compromise again?

Khazanah is said to be talking to several local and foreign candidates. Datuk Seri Shazally Ramly’s name has been mentioned several times although no deal has been hammered out yet.

Essentially, there is little time to shape up MAS before its competitors eat into its share of business. Khazanah should cast its net wider beyond the GLC fraternity and also look globally.

If Maxis Bhd can have Morten Lundal in its payroll, surely MAS can find someone prominent in the airline industry as its CEO, as long as it is willing to make that compromise.

Rob Fyfe, the former Air New Zealand CEO, is someone who has a proven track record in the aviation industry as are some people in SIA and even Cathay Pacific.

Khazanah must get the most capable talent to help MAS recover and for the agency to recoup its investments. Hopefully this will be the last revamp for MAS as nobody can stomach yet another restructuring three years down the road.