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MGG: Malaysian Airlines' Bumpy Flight After A Crony Bails Out
By M.G.G. Pillai

6/10/2001 1:46 pm Sat

Malaysian Airlines is on the skids. It was privatised a few years ago to a crony, Tan Sri Tajuddin Ramli, who promptly rationalised its operations so that he would make more money for himself at the expense of the Malaysian people. Then he persuaded his mentor, the now-invisible former finance minister, Tun Daim Zainuddin, to buy his shares back at RM8 a share, double what it cost then, and he made RM900 million for destroying the airline.

The furore over the purchase had Tun Daim assuring that it was a good buy, and worth double what the government paid to repurchase the Sultan of Brunei's stake, and worth at least RM16 a share. He need not have bought them. The government's golden share with its 51 per cent of the votes could have done the trick without enriching the business man for his failure. But cronies must never be out of pocket. So Tan Sri Tajuddin cocked a snook at Malaysians and laughed all the way to the bank.

We now know the government lied. The new managing director of the airline, Dato' Mohamed Nor Yusof, told senior management on 25 September, after cancelling a press conference, that MAS was all but bankrupt for the last four years, that if a loan was not repaid by that evening, it would have to shut down. That was paid at the nick of time, to postpone the inevitable to next year. He now tells reporters and market analysts that there is no silver lining yet at the end of the rainbow. He cut routes, staff, plans. He did not talk of it, but negotiations with several foreign airlines indicate that one would take it over.

KLM is the favourite, but they come in to bail out MAS, not to make it an efficient airline. The staff must not be touched, and KLM must carry the excess baggage, and turn in a profit as MAS management could not. At no time did the government want MAs to be money making. So, it is overstaffed with a high percentage of staff there for the sinecure. Its inefficiences beggar belief. The transport minister, Dato' Seri Ling Liong Sik, insists MAS is in the front rank of global aviation and tourism. Unfortunately for him there is not enough salt in the world that one must take before one can believe it.

The inefficiency and the featherbedding must take its toll. The latest results, for the year ending 31 March 2001, showed that it lost RM1.3 billion last year, and it had borrowings of RM9.1 billion, most of which accumulated when Tan Sri Tajuddin Ramli was brought in to show how he could turn the airline into deeper debt. MAS ordered new aircraft more than it needed, and in the next seven months, could take delivery of five new widebodied aircraft costing RM2.28 billion it does not have. Dato' Seri Nor says MAS needs funds immediately to pay for the aircraft and for the RM1.6 billion loan it took for its move from Subang to the new Kuala Lumpur International Airport. He does not know, it seems, where that money will come from.

Last month, MAS sold RM800 million worth of redeemable convertible preference shares to Intelek Perkasa Bhd, a government-backed company set up to buy the shares from Tan Sri Tajuddin Ramli. This, of course, is in addition to the RM1.8 billion it paid when it bought Tan Sri Tajuddin out. The September 11 troubles in the United States hits MAS also, its insurance premiums nearly doubling to RM110 million All round costs have gone up, and to rescue it, the featherbedding is continued unabated but passengers now have to pay more for internal travel for less: to cut cost, food and drink is no more served on most local flights.

One must have this surreal makebelief when one looks at a government-run or crony-run public company. They are given lucrative contracts and enough money to make them millionaires before they start, and then encouraged to go happily in debt, with the government representatives sleeping on their job. This was justified on the curious latter day premise that government should not be in business. So everything in sight was privatised not on due diligence but to enrich the cronies, who later sold it back to the government for a final profit.

Tan Sri Tajuddin Ramli, for instance, ran a piddling helicopter company ferrying oil men to the oilfields of the South China Sea. That made it possible for him to given the badly run MAS. He could, because the unwritten rule was that the government would bend over backwards to ensure he and his ilk is not out of pocket.

That MAS comes out into the open with the frankness Dato' Mohamed Nor exudes is deliberate. The Prime Minister, Dato' Seri Mahathir Mohamed, wants to shift as much blame on his invisible finance minister as he can. So the government goes after those linked to him, and several live in fear for that ubiquitous knock on the door; the one they most fear is from the corporatised Income Tax department. Renong's Tan Sri Halim Saad showed how he could borrow nearly RM30 billion running the North South Highway into debt that cannot be paid in generations. The other cronies line up to hand their unrepayable debts of several billion each. Nothing is more frightening than the financial crunch that must come combined with the government supreme indifference at this financial and fiscal crunch facing it. The government insists it is flush with cash and funds. That is as true as the lie Tun Daim told Parliament.

M.G.G. Pillai