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AWSJ: Mahathir Taps Advisor to Oversee Sale of MAS
By Leslie Lopez
3/1/2002 12:18 am Thu
The Asian Wall Street Journal
Mahathir Taps Advisor to Oversee Sale of Malaysian Airline System
By LESLIE LOPEZ
KUALA LUMPUR, Malaysia -- Malaysian Prime Minister Mahathir Mohamad
has appointed his chief economic troubleshooter, Nor Mohamed Yackop,
to accelerate the restructuring of ailing state-controlled Malaysian
Airline System Bhd., or MAS.
Tan Sri Nor Mohamed's assignment, according to government officials,
includes speeding up sales of MAS assets and trimming the airline's
bloated work force, measures officials and bankers say have been
stalled in recent months by squabbles among MAS's directors and senior
Officials say Dr. Mahathir, fed up with the slow pace of restructuring
at the airline, summoned the MAS board for a meeting in mid-December
and named Tan Sri Nor Mohamed to oversee a rescue plan for the
airline, which is struggling under 9.2 billion ringgit ($2.42 billion)
Tan Sri Nor Mohamed couldn't be reached for comment. But his
appointment, which has yet to be made public, reflects the
increasingly important behind-the-scenes role the former central
banker is playing in Malaysia's efforts to restructure its debt-heavy
corporate sector. Tan Sri Nor Mohamed was the prime mover behind the
government's recent takeover of Renong Bhd., Malaysia's biggest
corporate debtor and former investment arm of Dr. Mahathir's ruling
Publicly listed MAS has become a headache for Dr. Mahathir's
administration. Even before the Sept. 11 terrorist attacks in the U.S.
undermined the global travel industry, MAS had been suffering from
mismanagement, declining passenger loads and higher fuel costs.
The airline's accumulated losses stood at 2.08 billion ringgit at the
end of September, against shareholders' funds -- consisting of paid-up
capital and reserves -- of 1.9 billion ringgit. U.S.
dollar-denominated loans account for almost 70% of MAS's borrowings.
"There is no immediate fear of the air-line going belly up because the
government will stand by all urgent debt obligations," says a finance
executive familiar with MAS's restructuring situation. "But the
long-term problems are serious and a big sticking plaster needs to be
slapped on the airline's wounds."
Government officials close to the restructuring plan say Tan Sri Nor
Mohamed and MAS's chief executive, Mohamed Nor Mohamed Yusof, will try
to sell the airline's food-catering division, its headquarters in
Kuala Lumpur and its big operations complex at Kuala Lumpur's new
international airport. Officials expect the sales to bring in more
than two billion ringgit. "That will free up some cash, cut [the
airline's] debt and allow us to tap the market for fresh funding," a
senior government official says.
The official adds that government funding to prop up the airline will
only be considered if MAS is unable to borrow from commercial
Some securities analysts are skeptical that the planned asset sales
can be concluded quickly, however. They cite Malaysia's sluggish
property sector and predict the government will have to inject fresh
funds into the airline soon to keep it aloft.
But a government bailout of MAS would be politically sensitive,
especially at a time when Kuala Lumpur is trying to convince foreign
portfolio investors that it is serious about restructuring its
Early last year the government paid 1.8 billion ringgit to acquire a
29% equity interest in MAS from businessman Tan Sri Tajudin Ramli, a
protege of then-Finance Minister Daim Zainuddin. That deal, which
raised the government's equity stake in the airline to almost 50%,
damaged Kuala Lumpur's already tarnished reputation with investors,
who widely viewed the purchase as a bailout of Tan Sri Tajudin. The
government paid eight ringgit a share for the MAS purchase, a premium
of almost 250% over the then-prevailing price of MAS stock on the
Kuala Lumpur Stock Exchange.
Funding isn't the only problem facing the MAS restructuring. The
airline has 21,000 employees and aviation analysts say it urgently
needs to sharply cut its annual wage bill, which accounted for almost
17% of total operational expenses in the year ended Mar. 31. But
authorizing the sizeable layoffs needed to improve efficiency could be
politically sensitive for the Mahathir administration.
Malaysia Airlines to get its man
By Alex Frew McMillan CNN Hong Kong
KUALA LUMPUR, Malaysia -- Malaysian Prime Minister Mahathir
Mohamad has reportedly picked the man to turn around the
country's flagging airline.
Mahathir has tapped his top economic reformer, Nor Mohamed
Yackop, to revamp Malaysian Airline System Bhd., according to
The Wall Street Journal.
It's another key role for Nor Mohamed, Malaysia's former central
banker and already the prime mover behind the government's taking
control of Renong Bhd., Malaysia's largest conglomerate.
Mahathir told the MAS board that he had found the man for the job
at a meeting in mid-December, the newspaper states, though the
choice has yet to be made public.
Leader looking at running again
Separately, Mahathir, 76, said Tuesday he is considering running
in Malaysia's next election, due by 2004.
The long-time premier said he would consider another candidacy
"in certain situations," to ensure the success of his coalition.
MAS, parent of Malaysia Airlines, is struggling under a debt load of
9.2 billion ringgit ($2.4 billion).
That has been compounded by the aftermath of September 11, a
slowdown in tourism due to the economy and concern about tourist
safety in Malaysia, Asia's second-largest Muslim country.
Nor Mohamed is expected to sell off some MAS assets, as well as
slash jobs. Insiders say attempts at turning the airline around have
gotten bogged down due to internal squabbling among directors and
Safest year ever for Asian airlines
Though Malaysian Airlines isn't at risk of going under, it has serious
long-term problems, experts say.
Nor Mohamed will work with CEO Mohamed Nor Mohamed Yusof to
sell the company's catering division, its Kuala Lumpur headquarters
and a large complex at KL's new international airport, the WSJ
He is expected to trim the company's 21,000 work force.
2001 was an extremely tough year for Asian airlines, like their
counterparts in Europe and the United States. But, with no
commercial-airline deaths in the air, it was also their safest.
Pilots at Hong Kong's Cathay Pacific airline begin working to rule
on Wednesday, a move they suspended in October.
They contend the company has been negotiating in bad faith in
their long-running labor dispute.