Flight International - January 13, 2015

flightglobal.com 13-19 January 2015 | Flight International | 15

Lavi unit heads for

operational debut

DEFENCE P

Some feel that the six A380s MAS operates are too large to be profitable

With a damaged image, weak finances and structural problems, MAS is in deep trouble. Can Christoph Mueller save it?

Mending a broken airline

APPOINTMENT GREG WALDRON SINGAPORE

Both rivals have better cost

structures, and no qualms about

competing on price.

On the international front

MAS is pitted against fast-grow-

ing, long-haul, low-cost player

AirAsia X, which benefits from

tight connectivity with AirAsia. It

also must contend with the three

‘super connector’ Gulf carriers,

and regional players Singapore

Airlines and Thai Airways.

The expert consensus is that

Mueller is the best man for the

job, but some question whether

even his acumen and leadership

skills will be up to the task.

MAS has long had an ex-

tremely close relationship with

the Malaysian government and

political interests. Throughout

its history, it has been regarded

as an important player in pro-

moting Malaysia, both at home

and aboard. Like other legacy

carriers, it has struggled for prof-

itability, if not outright rele-

vance, in an era characterised by

deregulated markets and nimble,

aggressive low-cost rivals.

NEWS FOCUS

C

hristoph Mueller will
assume the toughest job in
the airline business when he
takes over as chief executive of
Malaysia Airlines (MAS) later
this year. Taking the reins of a
troubled carrier is familiar territo-
ry for the German, who engi-
neered the turnaround of Ireland’s
Aer Lingus. In a 2011 Airline
Business interview, he said that
when he took charge of the flag
carrier in 2009, it resembled a pa-
tient in an emergency room,
haemorrhaging cash. He may well
feel a sense of déjà vu when he for-
mally steps into the MAS role.
Mueller will not have to
contend with public shareholders
and analysts following MAS’s de-
listing on the last day of 2014, but
this is arguably the only problem
not on his plate. Even before his
appointment in December, his
mission was clear, after sovereign
wealth fund Khazanah Nasional
outlined its 12-point restructuring
plan for MAS in August 2014.

DISAPPEARANCE
Salient elements of the plan in-
clude cutting the workforce by
30% from 20,000 staff in August
(a process already underway),
moving the company’s headquar-
ters, and focusing more on re-
gional routes. Profitability is to be
achieved within three years – no
small feat given that MAS’s third
quarter results, released on 28
November, revealed net losses
had widened to some 576 million
ringgit ($163 million).
MAS’s 2014 results were
weighed down by the disappear-
ance of MH370 in March and
shooting down of MH17 over
Ukraine in July, resulting in the
loss of 537 lives.
All of the changes need to
happen in a cut-throat market.
On domestic and regional routes,
MAS faces its traditional neme-
sis AirAsia and (to a lesser de-
gree) Lion Air’s Malindo unit.

“The key to making these

changes happen, and turning

MAS around, is getting stake-

holders on-side and getting real

political backing,” says one ob-

server familiar with the carrier.

“It’s all-too-easy for a politician

to say ‘downsize the airline’.”

He says the environment fac-

ing MAS today is far more com-

petitive than when former chief

executive Idris Jala turned the

carrier around a decade ago, be-

cause at that time AirAsia hardly

existed. Southeast Asia’s other

big turnaround in recent years,

Garuda Indonesia, occurred

when Lion Air was still a cub.

John Strickland of JLS

Consulting is cautiously opti-

mistic. “It’s a difficult job, but

not impossible,” he says.

He notes: “Mueller has a good

track record. He took Aer Lingus

from having a primarily low-cost

focus to having a business travel-

ler emphasis, at a time when Eu-

rope was suffering the effects of an

economic crisis with a strong low-

cost rival in the form of Ryanair.”

OBSOLESCENCE

Mueller also has to contend with

several structural issues. Fore-

most among these are long-haul

routes where the carrier has

boosted load factors at the

expense of yields. More urgently,

he must address obsolescence is-

sues with the carrier’s 13 Boeing

777-200ERs, which are on aver-

age 20 years old. MAS’s six Air-

bus A380s are the flagships of the

fleet, but many observers feel the

superjumbos are simply too large

for such a carrier to fill profitably.

Joanna Lu, head of advisory at

Ascend Flightglobal consultancy

in Asia, feels Mueller’s key

c hallenge will be overhauling

the MAS management culture.

“Mueller’s challenge is chang-

ing the overall work culture in

this airline, helping it know

more about the market and their

competitors, and making the

MAS team more disciplined,”

she says. “He has to re-brand the

company and convince the

world this is a totally new and

professional airline.” ■

Airbus

Mueller said Aer Lingus was like a patient in an emergency room

BillyPix