Friction with MAS owner seen as a reason behind CEO's exit

GIVEN Malaysia Airline's difficult past few years, it's no surprise that most Malaysians were phlegmatic about Christoph Mueller's decision to leave the floundering national carrier slightly a year into a three-year contract but wondered if gains under him would now be reversed.

What broke the camel's back is unclear but an executive said that there had been friction with the airline's shareholder Khazanah Nasional.

The National Union of Flight Attendants Malaysia (Nufam) implied as much, and alluded to politics and legacy issues as tougher challenges than restoring the airline to the black. "It's all about the legacies and politics that gets (sic) in his way," the union said in a statement.

It indicated that talk within the carrier was that Mr Mueller was sometimes bypassed and not consulted before decisions were made.

Like many others, the union did not buy into Khazanah's statement on Monday that "a change in his personal circumstances" had prompted the German's decision to step down as chief executive and managing director, although he will stay on until September.

Nufam said that Mr Mueller's resignation was unacceptable given that he had not completed the job despite axing 6,000 people or a third of the workforce. "It's upsetting to see whatever amount of money and energy that was spent to build MAS again is now stuck back in the mud."

Earlier in April, Mr Mueller, the first foreigner to head the firm, revealed that it had registered a profit for the month of February and was on track to reverse its losses by 2018.

But analysts say there's too little information to go on. "We don't know how it is doing financially or its current restructuring or future plans. And even if it made a profit, how much of it was operational, from write-backs or gains on disposals?" asked an aviation analyst.

Talk of politics plaguing the government-owned company aside, he stressed that the sector was extremely competitive and the operating environment remained challenging.

Having revived other floundering outfits including Ireland's Aer Lingus, Mr Mueller had been identified as the best candidate for the job especially in the aftermath of two aviation disasters involving MAS aircraft in 2014 which inflicted considerable reputational and financial damage.

Because of MAS's legacy issues, the task remains enormous. For instance, Mr Mueller said that he had reduced the number of MAS suppliers to 4,900 from 20,000 and is aiming to trim it further to 2,000.

But the right-sizing also included the axing of numerous routes and frequencies, as well as cutbacks in services, prompting many travellers to view MAS as a shadow of its former self.

Meal portions shrank and only last week it emerged that the full service carrier would no longer be serving alcohol on flights of less than three hours - a practice instituted in January but was not made public.

Travel agents say that despite the switch to smaller aircraft on certain routes, its business class fares are priced higher than its regional competitors that use bigger planes, prompting long-time customers to switch loyalties.

Contrary to Nufam's gloomy prognosis of the airline's future, Khazanah said that the groundwork had been laid and initiatives undertaken had produced "encouraging signs of progress".

Mr Mueller has agreed to remain as a non-executive director to see through the leadership transition and to continue contributing to the implementation of Khazanah's recovery plan for which a total of RM6 billion (S$2.08 billion) has been budgeted. Already RM1.4 billion has been spent to take the company private and another RM1.6 billion went to retrenchment and retraining costs.

As chief executive, Mr Mueller had to take the heat, but as a non-executive director, he will be part of the decision-making process and less in the limelight.

But the so-called "hard reset" that was to be done under him has again proved unsuccessful. In the past 15-20 years, none of the chief executives helming MAS - and there have been at least five - have managed to ensure its long-term sustainability or profitability.

btworld@sph.com.sg

This article was first published on April 21, 2016.
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