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The New Malaysia Airlines (MAS) Chief Executive Officer Must Study How Air Asia Earned RM 16 Million In The First Quarter  Despite Offering Low Air Fares Up To RM 1.99 Per Ticket Whilst MAS Which Sells More Expensive Tickets Can  Lose RM 281 Million If It Is To Achieve Its RM 1 Billion Profit Target In 5 Years

Media Conference Statement
by Lim Guan Eng  

(Petaling Jaya, Friday): DAP congratulates MAS CEO Idris Jala as the first Sarawakian to be appointed to head MAS and hopes that Idris Jala can achieve MAS’ RM 1 billion profit target in 5 years. To do so Idris must be willing to study successful models such as how Air Asia can earn RM 16 million in the first quarter ending June 30 2005, despite offering low air fares up to RM 1.99 per ticket, whilst MAS which sells more expensive tickets can lose RM 281 million. If MAS refuses to learn such simple lessons of success from fellow Malaysians, then MAS will continue to suffer persistent losses.

In the first quarter, MAS made an operating loss of RM281 million compared to a net profit of RM109.20 million in the preceding quarter. MAS recorded an operating profit of RM27 million a year earlier. In contrast AirAsia Bhd announced net profits of RM16.12 million for the fourth quarter. For the year ended 30 June 2005, its net profits more than doubled to RM111.64 million from the RM49.07 million achieved in the previous year.

The difference in performance is not due to size where MAS which is 5 times the size of Air Asia. But also the difference in management approach between MAS CEO DAtuk Ahmad Fuad Dahlan, who has resigned, and Air Asia CEO’s Tony Fernandes. Amongst the reasons why MAS lost so much money and Air Asia earned profits is the failure of MAS to follow Air Asia in hedging against fuel costs. This failure has caused MAS' fuel expenditure for the three months ended June 30, to rise to RM1.1bil, or a 58% rise compared to last year’s RM705mil.  

To reverse MAS losses and achieve RM 1 billion profits in 5 years, MAS must increase revenue and cut costs. MAS net loss of RM280.7 million is alarming but so are the inefficiencies at MAS when operating expenditure for the quarter rose 28% to RM425 million including costs such as:

·      a penalty charge of RM22.6 million for under-performing in the domestic operations;

·     an ambiguous cost category, "others" include hull insurance, commissions paid, inflight meals, which rose RM35 million to RM138 million; and

·     consultancy fees of RM31 million.

Idris Jala should try to find out what inflight meals and commissions paid require an increase of RM 35 million to a huge RM 135 million. Is a packet of nasi lemak in MAS inflight meals costing RM 50? And the type of consultancy services given until RM 31 million is paid and yet MAS still record losses of RM 281 million?

An immediate comprehensive audit of MAS expenditure should be conducted to check any abuse of funds or inefficiencies if MAS is to return to profitability. As a first step to restore public confidence, Idris must make public such costs in the interests of accountability and transparency.



* Lim Guan Eng, DAP Secretary-General

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