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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
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.