Wednesday, December 24, 2008

Southwest Airlines adjusts fuel-hedging strategy

View: The rise and fall of fuel prices has even caused the leader in jet fuel hedging to change their strategy and hedge only 10% for the next 4 years.
09:45 PM CST on Tuesday, December 23, 2008 By TERRY MAXON

Southwest Airlines Co. – which maintained a competitive advantage by locking in prices when fuel costs soared – has adjusted its fuel-hedging strategy as prices have fallen.

The financial maneuvering means that Southwest's fuel bill next year will be about $1.4 billion less than the Dallas-based carrier projected five months ago.

Southwest also said Tuesday that it reinforced its dropping cash balance by raising more than $700 million through aircraft sales and debt secured by airplanes.

The Dallas-based carrier has been hurt in the second half of 2008 as it held fuel hedges priced well above current market prices for crude oil. As a result, the carrier said it has slashed its fuel-hedging position for the next five years.

In a filing with the Securities and Exchange Commission, Southwest said it is now "essentially" hedged for only 10 percent of its fuel needs for 2009 through 2013.

As recently as mid-October, Southwest had hedged 75 percent of its 2009 fuel usage at the equivalent $73 a barrel of crude oil, 50 percent of 2010's needs at $90 a barrel, 40 percent of its 2011 usage at $93 a barrel and over 35 percent of 2012 fuel at about $90 a barrel.

But energy prices have been in a near free-fall in recent months, with futures prices falling below $40 a barrel. While Southwest had benefited as crude oil prices soared well over $100 a barrel earlier in 2008, it had to put up more cash to cover its hedges toward the end of the year.

Fuel hedges are investments that airlines use to protect themselves from rising fuel costs, often by locking in a price or capping the maximum they may have to pay.

A steady program of hedging had benefited Southwest for years as it had locked in lower fuel prices than most of its competitors. But 2008 marked a turnaround as its low-priced hedges were running out and new hedging had to be done at much higher prices.

While Southwest and other carriers have benefited from lower market prices for jet fuel in recent months, they also have been hurt as the value of their hedges declined.

Southwest said that as of Monday, it has had to post about $230 million in cash as collateral for its hedges. "This collateral balance would have been approximately $600 million higher had the company not taken steps during the fourth quarter to substantially modify its hedge position," Southwest said in its SEC filing.

As recently as Sept. 30, Southwest was holding $2.5 billion in collateral posted by other parties as hedges were working in Southwest's favor.

Southwest said its cash balance on Monday was $1.3 billion, compared with $2.4 billion in cash and cash equivalents on Sept. 30 and more than $4.6 billion on June 30. Including short-term investments, Southwest's Sept. 30 balance was over $3.4 billion and the June 30 balance was more than $5.8 billion.

Southwest also said Tuesday that it agreed to sell 10 of its Boeing 737-700 aircraft to a third-part lessor. The first five were sold Tuesday for $175 million and leased back for 12 years. It said it expects to sell the second five in first quarter 2009 and lease them back for 16 years.

The $1.3 billion cash balance did not include the proceeds from the sale and leasebacks.

Southwest also said that it agreed Monday to borrow $400 million, secured by a pool of 17 airplanes. The deal, expected to close Tuesday, involves three-year notes paying 10.5 percent annual interest.

Southwest also said it modified one of its fuel-hedging agreements to provide that it can use 20 airplanes as collateral if it has to post between $300 million and $700 million.

Sunday, December 21, 2008

Jet Skids Off Runway

Passengers yell: 'The plane's going to blow up!'

updated 52 minutes ago

A passenger aboard Continental Airlines Flight 1404 described a scene of panic as the plane skidded off the runway and caught fire while trying to take off at Denver International Airport on Saturday. "Everybody was trying to get off the plane," passenger Gabriel Trejos told CNN affiliate KUSA. "Everybody was yelling, 'The plane's going to blow up, the plane's going to blow up!''' At least 38 people were hospitalized, an official said.

(CNN) -- A passenger aboard Continental Airlines Flight 1404 described a scene of panic as the plane skidded off the runway while trying to take off and caught fire Saturday at Denver International Airport in Colorado.

"Everybody was trying to get off the plane," passenger Gabriel Trejos told CNN affiliate KUSA. "Everybody was yelling, 'The plane's going to blow up, the plane's going to blow up!'''

Only one of the 38 people taken to hospitals was listed in serious condition and none appeared to be burn victims, said Patrick Hynes, chief of the airport division of the Denver Fire Department. Bone fractures and bruises were the most common complaint, he said.

Trejos said when the plane hit the ground, he saw an engine on fire and seats buckling toward each other.

"It just seemed like it took forever for the plane to stop," Trejos said. "On my side of the plane I could see the engine, I noticed it was on fire. I could feel the heat coming from the window."

Airport officials said it was too soon to determine the cause of the accident or the fire.

The flight was bound for Houston, Texas, and was taking off at about 6:20 p.m.

Firefighters found the Boeing 737 on fire, with its wheels sheared off, resting in a ravine about 200 yards from the runway, Hynes said.

"They described a surreal scene when they pulled up, heavy fire on the right side of the aircraft, all chutes deployed from both sides of the aircraft, people evacuating and walking up the hillside towards them," Hynes said.

Hynes said the entire right side of the jet was on flames and "a heck of a firefight" followed.

"There was significant extension of fire into the cabin portion," he said. "There's significant fire damage inside with the luggage department described as melting and dropping down into the seats."

Hynes said fuel from the aircraft leaked for several hours after the mishap, but the fire was out.

"As far as we know, there were no fatalities and we believe no critical injuries," Denver International Airport manager of aviation Kim Day told reporters late Saturday. Video Watch airport official describe scene of accident »

Continental issued a statement late Saturday saying it was collecting information about the accident. The 112 people on the plane included five crew members.

Planes resumed takeoffs and landings at the airport after the incident, although Day said a section of the airport will remain closed into Sunday. She suggested passengers call ahead for Sunday departure times since many flights may be delayed.

A team from the National Transportation Safety Board (NTSB) was on its way to the scene to start an investigation.

Monday, December 15, 2008

Daily Taiwan-China flights begins Monday

Dec 14, 2008 Reuters
The latest step comes on Monday, when direct flights - available only at weekends the past few months - become daily. -- PHOTO: REUTERS

TAIPEI - DIRECT daily flights between China and Taiwan begin on Monday, the latest step in rapidly improving relations between the island and the mainland.

The official hostility that has marked relations for decades has been melting away since the election of Mr Ma Ying-jeou as Taiwan's president earlier this year, and direct transport links are expected to bring the two closer.

'That will mark the beginning of more frequent civil exchanges and business as the cost of transportation between the two sides will be lowered and travelling time cut,' said Mr Lo Chih-cheng of Taiwan's Soochow University.

'Hostilities between the two sides will also be tempered,' he said.

China sees Taiwan as part of its territory and has threatened to invade if the island, which split from the mainland after a civil war in 1949, ever declares formal independence.

The pro-independence rhetoric of former president Chen Shui-bian angered both China and the United States, Taiwan's leading arms supplier. But Chen has now been indicted for corruption, and Mr Ma's pro-China policies are in place.

The latest step comes on Monday, when direct flights - available only at weekends the past few months - become daily. Ships going from one to the other will no longer have to go through a third party's territorial waters.

Taiwan's transportation ministry estimates that local airlines and passengers will save around three billion Taiwan dollars (S$133.9 million) a year, and shipping companies will save around half that.

Mr George Tsai, political science professor at Chinese Culture University in Taipei, says the direct links will 'kick-start' the process of a full normalisation of relations between China and Taiwan.

'Once closer links are in place, they could hardly be stopped or retracted, no matter who becomes the next president,' Mr Lo said. 'And once that happens, Taiwan will not be able to get out of framework of 'One China'.'

The 'One China' policy regards Taiwan as part of China. It is Beijing's official policy, and Chinese authorities regularly complain when Taiwan's leaders make visits to other counrtries.

The warming ties with the mainland, however, are not without controversy in place where anti-China sentiment is still strong among many.

When Chinese envoy Mr Chen Yunlin visited Taiwan last month to sign the new transport link agreements, massive protests dogged his trip at every turn.

Violent clashes between police and protesters injured more than 110 people.

Many fear Mr Ma's race to improve relations with China is simply selling out the island to its powerful neighbour.

'The direct flights certainly have political implications,' Mr Lo said.

'Sungshan airport is for domestic flights and no foreign airlines are allowed to use it. Then why has the government opened it to Chinese air carriers?' Mr Lo said. 'To Beijing, the direct flights are domestic routes.'

Talks on direct flights had been stymied under the former pro-independence government.

Mr Lo rejects the government's claims that Taiwan has more to gain economically from the flights and says that Beijing will benefit more.

'While the flights take more Taiwan tourists and investors to China, the number of Chinese tourists travelling to Taiwan is much lower than the targeted 3,000 per day,' he said. -- AFP

Swissport may quit Changi

Dec 14, 2008 Straitstimes
UP AGAINST tough competition from entrenched players and a worsening global recession, loss-making Swissport Singapore may pull the plug on its operations at Changi Airport.

The Straits Times understands that the Swiss-based ground-handling company, which offers passenger check-in, as well as baggage and cargo services, is in talks to sell its business, possibly to rival Singapore Airport Terminal Services (Sats).

Since it started operating at Changi in 2005, Swissport has chalked up losses of more than $50 million.

Monday, December 8, 2008

LCCT international arrival hall ahead of schedule

Tuesday December 9, 2008 THESTAR


THE new international arrival hall at the Low-Cost Carrier Terminal (LCCT) at Sepang in Selangor will open for operation on Dec 15, weeks ahead of its original scheduled date.

The hall is part of the RM160mil new wing constructed under the LCCT expansion plan.

The whole wing is also expected to be fully ready for operation earlier than the original completion date of March 15 next year.

Spacious and hardly low-cost: Malaysia Airports Bhd (MAB) senior general manager for operations Datuk Azmi Murad at the new international arrival hall within the LCCT’s new RM160mil wing

According to Malaysia Airports Bhd (MAB) senior general manager (operations) Datuk Azmi Murad, the extension would add 32,000sq m of additional floor space to the existing 28,000sq m available.

“The check-in counters will be increased from 72 to 117 for a smoother passenger flow. The counters usually handle 600 passengers per hour but will soon be able to handle 2,200 passengers an hour,” Azmi told StarMetro.

“The grand total of six baggage carousels will save passengers’ time,” he said.

“With the additional floor space, we will accommodate more retail and F&B outlets, and shower and surau facilities,” Azmi said.

The expansion was implemented following the tremendous increase in passenger load at the LCCT soon after its opening in 2006.

Busy during off-peak too: The Low-Cost Carrier Terminal (LCCT) in Sepang was built for 15 million passengers initially but handles around 30,000 passengers daily with a 30% increase during holidays

By last year, the LCCT was operating beyond its originally planned capacity of 15 million passengers a year.

Azmi said the new wing could help cope with the 34% growth because once it was fully operational in March next year, the extended terminal could serve 30 million passengers a year.

Besides the AirAsia domestic flights and the AirAsia X international services to Thailand, Indonesia and Australia, the LCCT also caters for the Cebu Pacific Airways of the Philippines and the Tiger Airways of Singapore.

“We handle 30,000 passengers daily on regular days but during festivals and school holidays, there is an increase of 30% in passenger load. With the new wing, we can cater for more airlines,” Azmi said.

AirAsia X, meanwhile, is scheduled to start operating the London Stansted-Kuala Lumpur route from the LCCT in March next year.

According to LCCT-KLIA manager Raghbir Singh, measures taken to cope with the surge in travellers during peak seasons include extending the waiting area at the present terminal.

“By taking up the service road previously used by taxis, we have a 3,000sq m frontage for a bigger waiting area with 600 seats,” Raghbir said.

According to Azmi, to ease congestion at the present departure hall, passengers are only allowed to check in once their respective counters are opened. The others have to wait at the seating area.

As for public transport, eight bus companies link the LCCT to Kuala Lumpur, Klang, Shah Alam, Seremban, Malacca, Ipoh and Genting. There are also ample taxi services.

At present, the MAB is toying with the idea of a mechanical carpark because parking bays will soon be limited once the new wing is fully open.

With air fares increasingly becoming cheaper and competitive, resulting in the healthy increase in passenger load, Azmi does not discount the possibility of his company building a permanent and larger LCCT.

“Our holding company Malaysia Airports Holding Berhad (MAHB) owns 100sq km of land in Sepang. So we have enough space for a permanent terminal.

“We have a few locations in mind,” he said.

He also said if AirAsia did succeed in building its own low-cost carrier terminal, the present LCCT could be converted into a cargo warehouse or for other purposes.

Turning around a struggling airline: An interview with the CEO of Malaysia Airlines

Idris Jala led the state-controlled carrier from the brink of bankruptcy to record-breaking profits. Now he wants it to become what he calls a “five-star value carrier.”

NOVEMBER 2008 • Alex Dichter, Fredrik Lind, and Seelan Singham McKinsey Quarterly

When Idris Jala became CEO at Malaysia Airlines, his goal was to keep the carrier flying. Now he wants to create a new breed of air service. Much has happened in the intervening three years.

Malaysia Airlines, the Southeast Asian country’s national carrier, was less than four months away from running out of cash when Jala took charge, in December 2005. The state-controlled airline had been struggling for some time, but inadequate yield management, an inefficient network, and poor cost control finally brought it to its knees that year, when it posted a 1.7 billion ringgit ($500 million) loss.

Yet in 2007, the airline earned record annual profits of 851 million ringgit. Such a swing would be remarkable for any company, much less one facing the hurdles common with state ownership: a large number of stakeholders, intense public scrutiny, competing priorities, insufficient freedom to operate commercially, and a host of legacy personnel challenges. Now Jala aspires to turn Malaysia Airlines into a “five-star value carrier.”

Jala came to Malaysia Airlines with no experience in the aviation industry or state-run companies. But he had won a reputation for engineering business turnarounds during his 23 years at the oil giant Shell, whose Sri Lankan and Malaysian units he rescued from years of chronic losses. In Sri Lanka, he says, “The Shell leadership told me if I couldn’t fix it in two years, just tell them and they would shut it down. I’d be the last person to switch off the lights.”

In this interview at his office, at Sultan Abdul Aziz Shah Airport, near Kuala Lumpur, Jala discussed the lessons he brought from Shell and how he met the urgent need for change when he arrived at Malaysia Airlines.

The Quarterly: What were your first impressions when you took over Malaysia Airlines, in 2005?

Idris Jala: The company was in a financial crisis—the worst in its entire 50-year history. At the time, we just had enough cash to last three-and-a-half months.

Before I joined, I looked at ten years of financial data. When you’re brought into a problem, you should first ask what’s wrong with the profit-and-loss statement. It’s crucially important to frame the problem in the context of the P&L rather than something nebulous, like the culture, the structure, the processes, and all these other things. You must anchor everything on the profit and loss. I’m boringly consistent on that point.

Here, it was clear that there were three problems with the P&L statement. The first was a very low yield. Average fares were unable to cover the cost of running the airline. The second problem was a very inefficient network. For a long time, we were asked to fly routes that didn’t make any commercial sense. The government wanted those routes, and we flew them. The third problem was high costs linked to low productivity—too many people. In the year when I joined, costs went up by more than 50 percent.

But I didn’t need to tell anyone that there were these three problems. Every analyst report about Malaysia Airlines talked about the same problems. The question was what would we do about them.

The Quarterly: How did you begin?

Idris Jala: When most CEOs try to turn around a business, they will say let’s change the organization or the structure. Or they’ll say let’s change the culture. Or let’s change the systems and processes. They do business-process mapping or make organizational changes that take a few years to finish.

But we had three-and-a-half months to fix the problem, and if we didn’t fix it by then we’d be bankrupt—we’d have no money for salaries, no money for fuel. So I told everyone we had no time to reorganize, to rearrange the deck chairs on the Titanic.

At a board meeting on my first day, I announced our business-turnaround blueprint. I’d never worked a single day at an airline before, but looking at the P&L it didn’t take more than an hour to figure out the solution. If you have to control costs, you just go and cut the costs. If your network’s inefficient, get rid of the routes that are bleeding cash. And if you have a problem with low yield, fix the yield. What else are you going to say?

The Quarterly: Were you given free rein to tackle these problems?

Idris Jala: When the government approached me about this job, I said I would need freedom to act. Of course, they promised I would have it, but I discounted 50 percent of what they said. I wouldn’t say I have 100 percent freedom to act, but I have more than 50 percent. And, more importantly, the freedom was granted in areas really relevant to fixing the business.

For example, nobody disturbed us as we improved the yield, which often meant increasing fares. We could change flight frequencies, get rid of routes, cut costs. These were things that were virtually impossible for my predecessors to do, because they didn’t have such freedom. When I started, our headquarters was in downtown Kuala Lumpur. We sold it for 130 million ringgit, which gave us enough cash to operate for 20 more days. A lot of people, especially a few politicians and long serving Malaysia Airlines employees, said the building’s an icon—it’s our brand in the city—but we were given the freedom to act.

The Quarterly: Were there other factors that helped you push your plans forward?

Idris Jala: Once the government agreed on what needed to be done, we made our business turnaround plan available publicly. At Shell, I never needed to do that. But Malaysia Airlines is a government-linked company and the national flagship. Publishing helped us build a winning coalition not only with the government but also with other stakeholders, like the unions, the staff, and the public. Being upfront about the P&L and making it all transparent were very important to bringing the coalition together.

The Quarterly: How did this translate into action?

Idris Jala: In a business turnaround plan, you need to identify the key business activities that impact the P&L. These activities are candidates for transitional vehicles that I call laboratories. Essentially, we’d create groups of 10 to 15 people from various functions and backgrounds—all people who had a direct stake in a given activity—and tell them they had to tell us how to fix the problem or else. The people inside the labs were fully accountable. The motto behind the labs is “big results fast.” We had no interest in slow and incremental results. We focused these laboratories on routes and many other parts of the business but never, never on minor activities. If you run a lab on something that has nothing to do with key business activities, don’t be surprised when there are no results. And when you put people in labs, you had better put the best and the brightest.

It is also important to think of the laboratories as a nursery for ideas. We grow the seedlings of innovation in the nursery, and once they are big enough they are implemented. But we really keep control over them—and the CEO has to protect them—so that nobody can kill them when they are transplanted into the operating jungle of the organization.

The one item with the biggest P&L impact was yield, so we set up laboratories to examine the profitability of various routes, with a focus on yield. The members of these labs knew that if they didn’t fix a route, we’d close it and they’d have no jobs. It was as simple as that. We had a team looking at the Kuala Lumpur–Manchester route. The team couldn’t fix it. To be profitable, we needed 40 percent more passengers than we had capacity for. What would we do? Tie the passengers on the wings? After we went through a full analysis, everyone on the team knew that the route couldn’t be fixed. They all knew that they were out of a job.

In the first three months, we got rid of a lot of routes that were bleeding cash and not contributing to the P&L. Within another six months or so, we got rid of most of the ones that were unsalvageable. But we rescued a lot of routes, too. The thing that really catalyzed the new way we did these things was that there was real accountability.

Today, we have individual P&Ls for each route—by day, by month, and by flight number. Altogether 160,000 P&Ls. These are grouped into regional P&Ls, and every day at 5 pm sharp I get all these on my Blackberry. So do all the route managers.

The Quarterly: Did transplanting and protecting these innovations require organizational changes?

Idris Jala: I prefer to keep the current setup and change the responsibilities. For instance, our laboratories developed a new job—route profitability manager—that didn’t exist in our structure. Instead of adding a new player, we told people to double up on their responsibilities. The person taking on the responsibility might not be a regional manager; it could be a subordinate. But someone was now responsible for profitability on that route. The structure remained the same, but we gave people a new vocabulary, new responsibilities. Once we were sure that the new thinking works, we got rid of the transitional role. With route profitability managers, we did that after one year.

The Quarterly: Looking back, you make your effort sound very straightforward. How confident were you when you started?

Idris Jala: I gave myself a 50/50 chance of success. First, I had never worked in an airline before, and, second, I had never worked in a company that’s government linked. So there was a tremendous chance of failure, and it was very important for me to conquer that fear. My wife and I had a lot of discussions about that. If I hadn’t conquered the fear of failure, I would never have stepped out of Shell to take this job.

To conquer that kind of fear, it is important to have serious conversations with the people who matter. First of all, I’d share with them targets that are seemingly impossible, such as turning around the company within a year and making huge profits within three. Everyone said it couldn’t be done. The conversation must end with the stakeholders saying, “It’s OK to fail.” That takes out a lot of the fear before the journey begins.

But the key word is seemingly impossible. You must believe deep inside that it can be done. If the leader doesn’t believe in the journey, then it cannot begin. The leader is like someone who cuts a clearing in a very dense tropical jungle. Everyone else is under the canopy, where they can’t see the sky and it’s very depressing. The leader has to bring people over to that clearing, into the space where innovation begins. The single biggest thing a leader brings to a turnaround is hope.

The Quarterly: With the initial turnaround complete, you’ve begun a transformation program. What does that entail?

Idris Jala: We originally wanted to do the business turnaround in three years, but we completed it in two. We targeted profits of 500 million ringgit in 2008, but in 2007 our profits had already reached a record 851 million ringgit.

We’ve already talked about some of the principles embedded in any change program: the game of the impossible, anchoring everything on the P&L, and building a winning coalition. Two others that I brought from my time with Shell are discipline of action—which means that when we commit to doing something, we monitor results relentlessly and make sure it’s done—and situational leadership. At the start of a turnaround journey, a company is not a democracy. You can’t empower people or ask everybody what they think. You have to be directive, brave enough to set the course. How many generals do you need to win a battle? One. But once results begin to appear and new leaders begin to learn, you must be ready to let go and empower them.

The corporate graveyard is full of people who thought they were indispensable. After every turnaround I’ve done, my successors have gone on to earn even higher profits and greater achievements. These leaders have been developed by putting individuals in the right situations when they’re ready to take control.

The final principle is a subject people don’t talk about in the corporate world: divine intervention. More than 50 percent of what happens to you in life, and in my case probably more than 60 percent, is outside your control. It is important for everyone in an organization, particularly the top leaders, to understand that. I can’t, for example, control oil prices—the single largest thing that impacts our industry—or SARS,1 or other things like that.

If you are a spiritual person, you’d better pray. If you believe in feng shui, go consult a feng shui master. Everyone must come to realize that we only control a small component, so you do the best you can with that and relax about the rest. It gives you peace of mind. You know, when you run a really hard race, like what we did here, you put yourself under tremendous pressure—and others around you, too. You want to go home every single day knowing you’ve done your best, and if you fail it’s OK because we all recognize that you can fail. It has a calming effect on the organization.

The Quarterly: Does talking about divine intervention give people a handy excuse to fail?

Idris Jala: No, because the other five principles provide balance. When you look at our plans, there are reams and reams of detailed activities that must be completed. For example, we have a service campaign called Malaysian Hospitality—MH—which is also our airline code. We have 500 initiatives underpinning it. These are spread throughout the organization, and you can’t run away from them, because of the principle of discipline of action. If you follow all six principles, there’s no way you can run away.

The Quarterly: Have you set new impossible goals for the current phase of your transformation?

Idris Jala: Our new target is to reach profits of 2 billion to 3 billion ringgit within three years, but the more exciting aspiration is that we want to become the world’s five-star value carrier. Such a thing doesn’t exist in today’s vocabulary; what we mean is an airline that provides top-quality products and services at the most affordable prices. We want to be the Toyota of the airline industry.

Is it impossible? Yes. Can it be done? It can. The key is to find the sweet spots. There will always be trade-offs between the quality of products and services and their costs, but there are many, many sweet spots.

One example: for a time, we were serving lamb biryani on our flights to China. But customers didn’t really like it, and it was very expensive. We looked at different meals. When we starting serving fried rice with some satay chicken, which is half the cost, the customers loved it. Why were we giving them something that was expensive and that they didn’t like? But customers flying to Delhi would love lamb biryani.

You have to customize to find the sweet spot, and this is painful. The mantra for bringing down costs says you have to standardize, but standardization really requires you to migrate to the highest common cost denominator, and that’s expensive. Instead, by finding these sweet spots, we can continue playing the game of the impossible and reach our goal.

The Quarterly: In the initial transformation and this ongoing effort, how have you handled talent?

Idris Jala: I believe that everybody can contribute more than they are currently. In my old job at Shell, we turned around Shell MDS, a gas-to-liquids plant in Malaysia, and not a single person was employed from the outside. The people in the company were the same guys who had been losing money for ten years. Help is abundantly available from within, but you must channel the energy to the right business activities.

How do you do that? You make sure people have the right priorities. You say, “I know you like to do this or that, but that’s not what we are going to do now.” When you reward people for doing things differently, like linking pay increases and bonuses to their performance and contribution to the P&L, you find that they deliver results that impact the P&L. They get out from the complacency of not delivering. They discover that they can do a lot more than they ever dreamed possible.

The Quarterly: Beyond the financials, what changes have you noticed at Malaysia Airlines since your program began?

Idris Jala: Number one, this organization is now very good at rigorous analysis. When I joined, that was sadly missing. People did cursory analysis, and I mean cursory. Today, people really get into the analysis and bring back fact-based work.

Second, a cultural change has taken place. This is no longer a culture where if you don’t agree with someone, you keep quiet about it. We now have a culture where people will speak up and disagree.

Also, people are more prepared to step up. Recently, one of my general managers who is in charge of strategic procurement held a session with the top management team to generate cost-cutting ideas for next year. I didn’t even know about it. He asked me at the last minute to speak briefly at the meeting. He gave me five minutes.

The Quarterly: What would you like your legacy to be at Malaysia Airlines?

Idris Jala: I would like to see us achieve our vision of becoming a five-star value carrier. I’m inspired by creating a kind of airline that doesn’t exist today. If we can do it, it will be fascinating. This will be one of the most attractive places to work in Malaysia. In fact, we have the chance to make this one of the best places to work not just in Malaysia but in the world. That’s the legacy I hope for.

About the Authors

Alex Dichter is a principal in McKinsey’s Atlanta office, Fredrik Lind is a principal in the Singapore office, and Seelan Singham is a director in the Kuala Lumpur office.

Sunday, December 7, 2008

Malaysia Airlines Pursues Strategic Partnerships With Other Carriers

Opinion: MAS being a national carrier, is still partially influenced by the government's agenda, I wonder what will be the agreement on governance issues with potential partners

December 04, 2008 14:32 PM BERNAMA

KUALA LUMPUR, Dec 4 (Bernama) -- Malaysia Airlines (MAS) on Thursday clarified that it is pursuing strategic partnerships with a number of airlines, but stopped short of saying it was merging with any of them.

Australian newspapers have been playing up reports of Qantas in merger talks with British Airways, which included additional news that the Australian airline had merger talks with MAS earlier this year.

Responding to the reports, MAS managing director/chief executive officer, Datuk Seri Idris Jala said: "We are in talks with a number of airlines on collaborating and creating synergies for growth, ranging from joint ventures and code shares to interlining partnerships."

For example, he said, the national carrier has signed a memorandum of understanding with Qantas on joint venture on maintainance repair and overhaul.

"In our Business Transformation Plan, we have said we will pursue strategic partnerships to create additional value for MAS.

"This is in line with our vision to transform into The World's Five-Star Value Carrier," he said.

According to the Sydney Morning Herald, MAS and Qantas earlier this year started talks but were suspended because they could not agree on the merger ratio and governance issues.

Qantas was now in merger talks with British Airways and is said to have committed itself to forging a tie-up with a foreign carrier even if the planned merger falters.


Thursday, December 4, 2008

Give local cartoonists more prominence: Lat

Updated: Thursday December 4, 2008 MYT 3:59:17 PM THESTAR
IPOH: Cartoonist Datuk Mohd Nor Khalid more famously known as Lat has a wish that more local cartoonists be given the opportunity to showcase their work in the print and electronic media.

He said their work could be syndicated along the lines of their 50s era western counterparts whose caricatures are published all over Europe, the Americas and Asia.

Lat signing a replica of the first day cover bearing his cartoon at the Main Post Office in Ipoh. - Bernama photo

He named popular cartoonists Jaafar Taib, Zainal Buang Hussin and Ibrahim Anom (Ujang) as among those who should be given the honour.

Lat, who hails from Gopeng near here, told this to reporters after attending the launch of first day covers bearing his cartoons at the Main Post Office here on Thursday. Also present was Pos Malaysia Perak general manager Mohd Azizi Mohd Sanusi.

Pos Malaysia on Monday launched a stamp collection featuring his cartoons. - Bernama

Wednesday, December 3, 2008

Thai Airways lost US$560m

Dec 3, 2008
Bangkok turmoil
Thai Airways lost US$560m
Since the airports were closed and until now, Thai Airways has lost 20 billion baht, excluding the losses that might result from a dip in tourists numbers. -- PHOTO: AP
BANGKOK - THE head of flag carrier Thai Airways said on Wednesday that the airline had lost about US$560 million (S$856.7 million) because of the protest blockades at Bangkok's two main airports.

Both the main Suvarnabhumi international airport and the Don Mueang domestic hub reopened Wednesday after anti-government protesters ended their occupation, but the cost of the eight-day long movement has been huge.

'Since the airports were closed and until now, Thai Airways has lost 20 billion baht,' said Mr Narongsak Sangapong, acting president of Thai Airways.

'This amount does not include the losses that might come from fewer tourists,' he added.

A Bank of Thailand official has said that tourist arrivals could drop by 3.5 million from projected numbers next year because of the turmoil.

Airlines have been trying to get an estimated 350,000 stuck passengers out of the U-Tapao naval airport southeast of Bangkok, Chiang Mai international airport in the north, and the southern resort isle of Phuket.

Mr Narongsak said that Thai Airways had already sent home 30,000 of the 50,000 stranded passengers that it is dealing with.

He said they would hold a board meeting before deciding who to seek compensation from.

The flag carrier was already suffering from volatile fuel prices and lower passenger numbers, posting losses of 9.23 billion baht in the second quarter of 2008 - its biggest quarterly loss in a decade.

Thai Airways president Apinan Sumanaseni resigned from the board late last month, citing health reasons and ongoing disagreements with the board.

Protesters gave up their siege of Suvarnabhumi and Don Mueang after a court on Tuesday dissolved the ruling party and forced out the prime minister, one of the key demands of the demonstrators. -- AFP

Bangkok air links restored

Dec 4, 2008
Turmoil in Thailand
Bangkok air links restored
Airport officials yesterday could not confirm when full operations would resume. -- PHOTO: REUTERS

BANGKOK - BANGKOK'S international airport will resume normal operations from Friday after anti-government protesters lifted a blockade, a spokesman said as more flights left the terminal.

More than 40 flights were set to leave Suvarnabhumi Airport on Thursday morning although passengers must still check in at a downtown Bangkok conference centre for the rest of the day.

The first flights for eight days took off from the airport on Wednesday after demonstrators abandoned their vigil in the wake of a court verdict that stripped the prime minister of his post and disbanded the ruling party.

'We have set 11am (12pm, Malaysia time) as the time we will return to normal operations at Suvarnabhumi,' a spokesman for the country's airport agency told AFP.

On Thursday morning Thai Airways will operate 24 international flights while private-run Bangkok Airways is sending 18 flight plans for both domestic and international routes.

'At this moment outbound passengers still have to check in at Bitec (conference centre) or at airline offices, but inbound passengers are being fully processed through customs and immigration at Suvarnabhumi,' she said.

The smaller Don Mueang domestic airport, which was also occupied by protesters, meanwhile quickly returned to full operations on Thursday with two domestic flights departing at 6am.

'There are 56 flights taking off and landing here today, the situation has returned to normal now,' said Mr Anirut Thanomkulbutra, the airport's director. -- AFP

Monday, December 1, 2008

Air Asia London to Kuala Lumpur

Wednesday, 26 November 2008 AVIATION RECORD.COM

LONDON: AirAsia X, the low-cost, long-haul affiliate of Malaysia-based AirAsia, has announced £99 flights (AUD $261 + taxes) from Kuala Lumpur, Malaysia.

Bookings have opened this week for the five times weekly direct flights which begin in March 2009 between London's Stansted and Kuala Lumpur International Airport’s Low Cost Carrier Terminal. At just £99 each way, the route will make travel between Asia and Europe more accessible and affordable than ever. Air travel from London to Malaysia typically costs in the region of £500-£600 (approx AUD $1170 to $1400).

The KL-London route is a major step in AirAsia’s realising its international aspirations, and strengthens Kuala Lumpur as the regional aviation hub and gateway into the ASEAN (Association of Southeast Asian Nations) region.

AirAsia Group CEO Tony Fernandes said, “AirAsia X’s London-Kuala Lumpur route is the realisation of a long-held ambition to open up affordable access between Malaysia and Europe for both ASEAN and European communities. We have an incredible route network and at £99 (AUD $261), the opportunity for Australians to venture to London and Europe via the ASEAN region has never been greater.

“Being a truly ASEAN airline, we are committed to promoting tourism and travel throughout and beyond that region. This new route will benefit everyone, enabling magnificent holidays in beautiful locations, encouraging economic and tourism activity, bringing in revenue and creating job opportunities.

“AirAsia X and AirAsia boast a brand new modern fleet of Airbus aircraft fitted with leather seats and spacious cabins, diverse selections of hot meals and high quality service plus fun and friendly cabin crew. On top of that, our On Time Guarantee and the recent ‘No Fuel Surcharge’ initiative will further improve the AirAsia experience.

“As time passes, there will be more promotions and the fare could fall further – we always look to make the fare as low as possible,” he added.

The new route will be serviced by an Airbus A340 aircraft with a 286 passenger capacity including 30 premium XL seats.

To date, AirAsia X flies from Kuala Lumpur to the Gold Coast (four weekly return flights), Perth (six weekly return flights) and Melbourne (four weekly return flights) in Australia, Hangzhou (Shanghai) in China and now London, bringing the well known brand on to a global stage.

AirAsia X covers destinations which are more than four hours in flight duration from Kuala Lumpur, complementing the existing AirAsia network of over 100 destinations throughout ASEAN, China and India. Via AirAsia’s major hubs in Malaysia, Thailand and Indonesia, passengers can enjoy unparalleled access to destinations throughout Asia, including Phuket, Borneo, Bali, Angkor Wat, and Ho Chi Minh City.

AirAsia X Chief Executive Officer, Azran Osman-Rani said, “The London route is a significant achievement for us, allowing those who have always wanted to travel between Europe, ASEAN and Australia to achieve their dream, at an affordable price. We are looking to expand from five flights per week to a daily service in the near future.

“By utilising our low cost fares in our promotion from Australia to Kuala Lumpur you’re able to then travel to London from around $450-$565 total cost depending on your departure point, which is unheard of for one-way travel between Australia and London.

“We have always been enthusiastic to venture into Europe since we launched. The establishment of this route is a significant achievement for us and is a reflection of our commitment to expanding international operations. Like Kuala Lumpur’s Low Cost Carrier Terminal (LCCT) - the gateway of ASEAN - London’s Stansted has true potential to be the gateway of Europe,” Mr Osman-Rani said.

In conjunction with the launch of the London route AirAsia X is offering fares from Perth to KL from $192, Melbourne to KL from $302 and Gold Coast to KL from $291.

In just over a year AirAsia X has flown more than 400,000 passengers. Supported by the wide route network of AirAsia, it has brought new definition to low cost long-haul travel.

AirAsia X, whose shareholders include the Virgin group, has won a string of industry awards including New Airline of The Year 2008 by the Centre for Pacific Aviation (CAPA), Best Budget Airline in Asia in the recent ‘2008 Best in Travel Poll’, and Best Newcomer at the 2008 Budgie World Low Cost Airline Awards.


Winter schedule

Flights From Departure/ Arrival Flight No. Frequency

Kuala Lumpur – London 01:50 / 07:50 D7 2002 Tuesday

10:00 / 16:00 D7 2006 Wednesday, Saturday

16:30 / 22:30 D7 2008 Thursday, Sunday

Stansted – Kuala Lumpur 09:20 / 06:20 D7 2003 Tuesday

17:30 / 14:30 D7 2007 Wednesday, Saturday

00:00 / 21:00 D7 2009 Monday, Friday

Summer schedule

Flights From Departure/ Arrival Flight No. Frequency

Kuala Lumpur - Stansted 01:00 / 08:00 D7 2002 Tuesday

09:45 / 16:45 D7 2006 Wednesday, Saturday

16:00 / 23:00 D7 2008 Thursday, Sunday

Stansted - Kuala Lumpur 09:30 / 05:30 D7 2003 Tuesday

18:15 / 14:15 D7 2007 Wednesday, Saturday

00:30 / 20:30 D7 2009 Monday, Friday

Resignations have not affected KTMB, says Ong

Comment: At one point, only 25% of the locomotives were operational, that's very low level of service. Chinese suppliers have also made their presence in heavy industries (locomotive construction)

Tuesday December 2, 2008 THESTAR

Resignations have not affected KTMB, says Ong

KUALA LUMPUR: The resignations in September of KTM Bhd chairman Tan Sri Lim Ah Lek and two directors have not affected the operations of the railway company, said Transport Minister Datuk Seri Ong Tee Keat.

“Otherwise, we would not have been able to do this,” he said yesterday referring to the overhauling of locomotives and electric multiple units (EMUs) at the Sentul workshop and depot.

However, Ong declined to comment further as he said the appointments are under the Finance Ministry.

“Something is in progress. Be more patient,” he told reporters after visiting the workshop and depot.

The two independent non-executive directors who tendered their resignations are Datuk Wong Mook Leong and Dr Kader Sultan Md Ismail. There are eight board members in KTMB.

It was reported in September that Lim and some of the independent non-executive directors had resigned in protest after the Government revoked an earlier decision to appoint former Pos Malaysia Bhd chief executive officer Datuk Idrose Mohamed as the new managing director.

Former general manager of KTMB’s freight services division Abdul Radzak Abdul Malek was appointed instead, taking over from Datuk Mohd Salleh Abdullah on Sept 2.

On the overhauling of the locomotives, Ong said that only five locomotives out of 20 were operational in May.

However, a task force formed by KTMB in September to resolve the issue resulted in 18 units being overhauled and operational now.

Among the steps taken, he said, were bringing in the Chinese supplier from Dalian to carry out the work at no cost as the units were still under warranty.

Ong said the remaining two units would be ready for use by the end of the month.

On the EMUs, he said that 12 out of 20 units had been overhauled, work was on schedule and would be completed by March.