Malaysia Airlines and AirAsia have announced they are to terminate their share swap plans in the face of mounting political pressure, although the carriers still plan to cooperate on cost saving joint ventures, mainly on the operations side.
With political pressure on prime minister Najib Razak mounting ahead of elections, the announcement was no surprise. MAS unions, worried about potential job losses, had met Najib on a number of occasions to ask him to scupper the deal, and the opposition had make clear it sided with the unions.
By some estimates, the unions, together with extended families and dependents, accounted for around 100,000 votes.
The two carriers, meanwhile, have entered into a Supplemental Collaboration Agreement to “explore areas of mutual need to realize savings and boost efficiencies.”
These include procurement, aircraft component repairs, training, technical and operational efficiency, as well as mutually championing common industry issues.
The airlines will also continue working to further identify and evaluate opportunities to collaborate on a broad range of areas both at operational and strategic levels.
To kick this process off, AirAsia, AirAsia X and MAS have entered Memorandum of Understandings to cooperate on two initial areas – joint procurement and aircraft component, maintenance support and repair services.
“Recovery of the business is our main focus along with initiatives to strengthen the balance sheet and operations through improved productivity, increasing revenue and lowering costs. These efforts will translate into improved financial results,” said MAS Group chief executive officer Ahmad Jauhari Yahya.
“Collaboration is a game-changer in our Business Plan to build a sustainable business for the future. We will continue to drive these collaborations with AirAsia and AirAsia X as it will enable MAS to exploit potential synergies and efficiency gains. It is important to find all ways to do our business more efficiently and with lower costs.”
“By doing this well, we will be able offer improved services and products to customers as we build our brand as The Preferred Premium Carrier, and in the end, create value for shareholders.”
The collaboration initiative between the airlines on procurement will begin by exploring the potential out-sourcing of procurement activities to a mutually-owned joint venture company. Key areas in procurement to be explored could include high spend items such as fuel and oils, insurance, IT and communications.
In aircraft component maintenance support and repair services, the airlines will explore the setting up of a joint venture, including identifying its viability and structure.
“The synergistic collaboration between MAS, AirAsia and AirAsia X is a logical solution in our effort to increase efficiency and productivity as well as reduce costs. Being well-known for our warm hospitality and service is no longer enough for MAS to remain afloat and compete,” added Ahmad Jauhari.