MAS is Haunted by Ghostbusters

When Idris Jala was appointed as the CEO of Malaysian Airline (MAS) in September, I wrote an article congratulating him of the appointment to such high office. While congratulating Idris, I reminded him and the board of directors of the words of the inspiring words of Peter Drucker:

"Good organizational system does not by itself ensures success;
But poor organizational structure makes success impossible, no matter how good the manager is."

It was historical knowledge that the sickness of MAS is not just the weakness of the person who helm this institution and certainly the massive losses are not the result of plying the unprofitable domestic routes and high fuel cost, as the emphirical financial results of AirAsia proved otherwise.

On Tuesday (20th Dec 2005), Idris briefed members of the Senators Club on the true situation in MAS. Malaysia Airline System Bhd (MAS) needs RM3 billion for its operational restructuring as well as to become profitable.

Idris told the Senate that the proposed restructuring would include the sales of MAS building and other assets which could raise up to RM1.5 billion. MAS would still need to raise another RM1.5 billion of borrowings. It was also admitted that MAS did buy an art (painting) for RM1.5 million from a Columbian artist and paying another RM1.3 million for consultancy service.

Idris felt compelled to do so because of charges of extravagance against the senior management of the airline, namely the purchase of three paintings for RM1.5 million. Idris was forthright because it was meant to be a confidential briefing.

However, the next day, several senators spoke about the meeting and voiced their unhappiness with the plan to sell the MAS building in Jalan Sultan Ismail to pare down the debt.

The Senate were more interested in whether he was going to sell the three paintings. The Senate wants those who approved the purchase of the paintings or indulged in any other extravagance to be held fully accountable and be penalized.

Brendan Pareira in his article had made the same comments:

THREE weeks into his job at Malaysia Airlines and Idris Jala is learning one reality: That everyone has a view about how to run the national carrier. Politicians and members of the Upper House of Commons all have "great ideas" how to stanch the bleeding at MAS.

In Brendan's words, Idris does not have the luxury of investigating why three paintings were purchased before he assumed the hot chair. He had also to asnwer why the executive chairman had excessive travel privileges.

In October, Idris Jala, reveals his future plan and philosophy of turnaround management for MAS. Idris Jala plans to tap into talent inhouse at MAS using the same five “ingredients” he used to turn around Shell MDS (M) Sdn Bhd.

In my subsequent article, I did sounded a few words of caution :

"The culture and political environment in MAS is distinctively different between the two corporations. In Shell, Idris did not have to face political interferences and patronages. Shell need not worry about the political oligarchy and other moronic personalities who will once too often, inpregnate some form of interests in MAS's business decisions and management.

MAS main problem has always being its overall cost uncompetitiveness, cronyistic procurement system, political rent-seeking, weak & unmeritocratic management system, political influence and interference in its decision-making process, UMNO-putraism, et cet tra.

The management system is derailed by the fact that cronies had been air-lifted up the hierarchy based on their politically alignment to the oligarchy and include those that are "competent" in curry flavouring and ball-carriers.

To revamp the organization and put in back to health, Idris had the onerous tasks of shaking out the excesses, cutting cost drastically and trimming the unproductive manpower to a level of cost competitiveness and possibly outsourcing certain aspects of the business portfolios. Idris should look at its neighbour airline system to understand how others could make it happen and stay profitable.

In essence, Idris Jala must dictate change and ensure a radical and timely turnaround. The change would surely cause great pain all-round, and the changes must include: removing the dead-woods and politically influencial nuggets, trimming the oversized manpower; reorganization of the strategic portfolios; strategic redesign of the planning, implementation and control of each business unit to ensure that it is profit-centered managed; and revamping the dark-house of the procurement system. It would also be necessary to implementation an effective performance measurement and reward system, a system that measures productivity, efficiencies and capabilities based on competencies and efforts, and a fair and just reward system to motivate the entire workforce.

Inherent in Change will be chaos and at such, Idris have to manage chaos and complexities.

Idris must have the "finese and fitness" to handle delicately the problems of political interferences and political mudslinging. Idris must not bow to them. He must not be afraid to expose those corrupt perpetrators and include those political masters who constantly sneaked into the system to burgle the cheese.

Idris can count on the Prime Minister's support. Yesterday, PM Abdullah Badawi said the decision by MAS to sell the building in KL must be made by its management. As Idris had been appointed the managing director, the Prime Minister is on the opinion that Idris must be given time to carry out his work.

“I do not want to intervene in this issue because we have given the power to the management. It will be difficult if we comment. He knows what he should do and everything is being done for the good of MAS,” Pak Lah said.

MAS needed RM3 billion to restructure. Will Idris get it?

Well, EPF may be called upon to rescue MAS or alternatively, Petronas may be called upon to invest into MAS.

The senators had suggested that Hassan Merican, the Chairman and CEO of Petronas be appointed as the executive Chairman replacing Munir Majid. Is this the right decision and will it work?

God bless the aircrafts!!!!


Read my earlier articles below:

Sarawak Boleh

Idris Jala Insight to Turnaround Management