Jeremy Torr Singapore
Moving On?
Malaysian’s MRO division is profitable. But
will that put it at the top of the ‘for sale’ list?
T
he current state of imbalance in
the Southeast Asian MRO mar-
ket is clearly illustrated by the
example of Malaysian Airlines (MAS).
Even before the disastrous losses
of MH370 and MH17, the airline had
seen three consecutive yearly losses,
capped by a spectacular RM 1.17 bil-
lion ($359 million) in 2013. As a result,
key investor Malaysian sovereign state
fund Khazanah stepped in early in
August this year, buying out existing
shareholders and imposing a signifi-
cant restructuring.
As part of this plan, the airline is to
see up to 6,000 jobs cut, subsidiary
businesses potentially sold of, and new
management put in place. The entire
company would then be restructured
by a special task force that would mold
the carrier into a slimmer, more ef-
cient airline that could return to the
stock exchange by 2019.
According to MAS’s in-house union
Malaysia Airlines System Employees
Union (Maseu), up to half of the redun-
dancies or job cuts could come from
the MRO subsidiary, Malaysian Aero-
space Engineering (MAE).
“If MAE is sold, about 3,000 em-
ployees in the division will be afected,”
claims Maseu’s president, Alias Aziz.
Whether a substantial number would
actually lose their jobs is not clear, but
it is likely that some would be let go as
the operation gets smaller. The days of
working for a fat and overweight gov-
ernment-supported carrier are likely to
be gone soon for many MAS employees.
Meanwhile, in regional neighbors
Singapore, Indonesia and Vietnam,
carriers like AirAsia, Lion Air, Tig-
erair, Scoot and Cebu Pacific are all
expanding their operations at break-
neck speed—and having to fly aircraft
overseas to find cost-effective MRO
facilities to take their bulging fleets.
As spokesman Mochamad Aviv from
Indonesian MRO GMF told Aviation
week, the local growth of MRO in Indo-
nesia is expanding at 15-20% a year. The
company is due to add a new hangar
at its Soekarno-Hatta base to house 16
narrowbody aircraft—one of the largest
in Asia, along with a new hangar at the
recently revamped Bintan MRO facil-
ity near Singapore. But Aviv notes that
planning for the manpower required for
this expansion through 2023 is already
taking considerable efort.
The paradox is that MAE has been
one of the better-managed and more
profitable subsidiaries at MAS. The di-
vision has a solid reputation for MRO
servicing not just for MAS, but on a
wide range of aircraft for major carriers
like Qantas, Gulf Air, Air France, KLM,
and several local low-cost carriers.
With some 18 bays for widebody and
narrowbody aircraft in six hangars at
three airports, MAE claims up to 100
international customers worldwide.
The division also saw a 16% jump in
income in fiscal 2013 compared to 2012,
and has slimmed down its workforce
over the last year, but the disastrous
first half of 2014 for MAS changed
things dramatically.
The losses at MAS group already
have seen MAE forced to pull out of
its Indian joint venture with GMR in
Hyderabad, set up only three years
ago. And with the pre-MH370/MH17
order of up to 100 new aircraft from
Airbus now in question, it is highly pos-
sible that potential training and skills
upgrades will also be put on hold.
However, what is bad news for the
state carriers could be good news for
the increasing number of low-cost car-
riers (LCC) springing up around the
region. Maseu’s Aziz said that several
regional carriers have expressed inter-
est in taking on ex-MAS employees,
partly due to its solid reputation and
good training record.
Which poses the question for the
MAS restructuring team whether to
retain its MRO operation at its exist-
ing bases at Subang or KLIA and lease
out the infrastructure assets such as
hangars, or to sell of the whole divi-
sion as a going concern and factor out
its maintenance to one of the other lo-
cal operators such as Haeco, ST Aero-
space, Lufthansa Philippines or even
Ameco in Beijing.
A parallel issue also will face tech-
nicians at MAE—to move to another
country where the demand for labor is
higher but wages are lower, or stay in
Malaysia and hope that local LCCs will
pick up the slack. Maseu is optimistic,
but the reality might be harsher.
“Aside from AirAsia, there are a lot
of other airlines that want workers
from MAS,” said Aziz. “They know
that MAS has quality.” Certainly, ini-
tiatives coming out of Thailand and the
Philippines indicate that both are keen
to set up local MRO centers, with the
help of overseas majors like Airbus and
Lufthansa that see the built-in demand
for skilled MRO operations in coming
years. The key question is, are those
skilled workers also the mobile ones?
But the fate of MAE and its staf, like
that of MAS, depends heavily on po-
litical winds. AirAsia and MAS/Khaza-
nah put together a share-swap deal in
2011 to help maximize productivity and
cut costs. But pressure from vested in-
terests was enough to push Khazanah
into backtracking and scrapping the
deal just one year later.
As Malaysian Prime Minister Najib
Razak recently said: “We have to look
at it from all angles. It’s not a private
company, so there are certain reper-
cussions in what you want to do.” c
MRO Edition MRO ASIA
MRO10 AVIATION WEEK & SPACE TECHNOLOGY MRO EDITION NOVEMBER 3/10, 2014 AviationWeek.com/mro
MAS Engineering operates 18 bays
in six hangars at three airports.
MAS ENGINEERING
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