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By Professor Mak Yuen Teen

About Malaysia Airlines

Founded in 1947, the national carrier has been operating domestic and international flights from Kuala Lumpur International Airport and secondary hubs such as Kota Kinabalu.1 Prior to its delisting, Malaysia Airlines was a big aviation group, with 29 subsidiaries and five associate companies. Now known as Malaysia Airlines Berhad (MAB), it has recently streamlined all its operations under Malaysia Aviation Group Bhd (MAG) which houses four different business segments, namely air transportation services, ground services, aircraft leasing and talent development. Malaysia Airlines is under the division of air transportation services segment, which also includes Firefly – a low-cost regional airline – and MASwings, a domestic airline servicing rural air services in East Malaysia.

Despite winning awards such as ‘5-Star Airline’ by Skytrax and the title of ‘Asia’s Leading Airline’ from the World Travel Awards in the past, MAS has been in a persistent loss-making position in recent years. Its financials took a hit in the early 2000s primarily due to higher fuel costs and airport charges, competition from budget carriers, as well as weakening Malaysian ringgit. Following the launch of the first business turnaround plan in 2006, MAS recorded an annual profit of RM851 million in 2007. However, this turned out to be unsustainable as it recorded losses every year since 2011. The primary reason cited was its failure to cut costs as it had been in the red despite year-on-year revenue growth. In its last publicly available annual report in 2013, MAS reported a net loss after tax of RM1.168 billion.

In 2014, Khazanah took MAS private as part of a RM6 billion-ringgit restructuring aimed at returning the beleaguered carrier to profit. However, even after MAS’ delisting and numerous restructuring efforts, the trend of negative profits continued. MAS disclosed net losses of RM812 million and RM791.71 million for FY2017 and FY2018, respectively. FY2018 saw a 11.4% decrease in total assets and a 15.65% increase in its total liabilities as compared to the year before. Figure 1 shows the financial highlights from 2015 to 2018.



The disappearance of MH370

Malaysia Airlines deeply regrets that we have to assume beyond any reasonable doubt that MH370 has been lost and that none of those on board survived…” – Text messages sent to the family members of MH370 victims.

On 8 March 2014, Malaysia Airlines Flight 370 (MH370), with 227 passengers and 12 crew on board, disappeared with unknown cause while flying from Kuala Lumpur International Airport to its destination, Beijing Capital International Airport. Sixteen days later, on 24 March 2014, then Malaysian Prime Minister Najib Razak officially announced that the missing flight had crashed in the Southern Indian Ocean without any potential survivors.

The challenge you have with crisis communications is not to make it worse, because you can’t make it better,” – Robert Jensen, CEO of Kenyon International Emergency Services

The unprecedented crisis thrust MAS in the global media spotlight. However, the airline failed to provide any specific information, and this resulted in speculation surrounding the cause of MH370’s disappearance – from mechanical failure of the plane, to hijack, and even to terrorism. Media coverage was rife with rumours, false reports, ambiguous information, and a general lack of clarity.

The perceived lack of transparency, inconsistency of information, and failure to provide timely information shone the spotlight on the poor crisis management by MAS and the Malaysian government. There was a series of fumbling news conferences, incorrect details provided by MAS, and a lengthy delay in provision of details on the progress of the search for the missing aircraft. All these led to scepticism and anger among victims’ families and raised questions about the credibility of the Malaysian government.

The search for the missing airplane became the most costly as well as the largest multinational search and rescue effort in aviation history. Due to existing political tension in the AsiaPacific region, several countries were unwilling to provide their military radar data on the possible path of MH370, hampering the investigation. Initially, the search was focused on the South China and Andaman seas; the search radius increased from 20 nautical miles to 100 nautical miles, and eventually covered an area of 27,000 nautical square miles. Search efforts were later moved to include the Indian Ocean and the west of Australia as well.

After a search spanning three years and involving 26 countries across 120,000 square kilometres of ocean yielded no tangible results, the Joint Agency Coordination Centre heading the operation suspended its activities in January 2017. A separate search launched in January 2018 by private American marine robotics company Ocean Infinity also ended in May 2018 after failing to locate the missing aircraft.

The downing of MH17

Either one of these events has an unbelievably low probability. To have two in a just a few months of each other is certainly unprecedented.” – John Cox, president, and CEO of Safety Operating Systems

On 17 July 2014, Malaysia Airlines Flight 17 (MH17), enroute from Amsterdam to Kuala Lumpur, was shot down by pro-Russian rebels while flying over eastern Ukraine, killing all 283 passengers and 15 crew members on board. This was a mere four months after the disappearance of MH370.

Earlier on 3 April 2014, the European Aviation Safety Agency, together with Eurocontrol and the International Civil Aviation Organisation (ICAO), had issued a safety bulletin advising that Crimean airspace in southern Ukraine should be avoided. However, the directive did not apply to the airspace of eastern Ukraine, where MH17 was shot down. Although many international airlines – including British Airways, Qantas, and Cathay Pacific – had already been making detours to avoid Ukrainian airspace over safety fears, MAS continued to use the route. Liow Tiong Lai, Malaysia’s former transport minister, justified this by saying, “The airspace the aircraft was traversing was unrestricted. I think since it’s an approved route it is safe and that’s the reason why we have been using this route.”

On the day of the incident, the airspace over eastern Ukraine was busy as 160 commercial planes flew over the region. At the time of the tragedy, there were three other commercial airplanes flying in the vicinity, including a Singapore Airlines aircraft flying from Copenhagen to Singapore.

Travel agents reported a spike in cancelled reservations following the MH17 incident. With yet another tragedy happening just four months after the disappearance of MH370, the airline’s reputation had gone downhill, accompanied by loss of confidence by passengers who “are very, very afraid about anything else happening again [and] they don’t want to take risk”.

Following the two deadly disasters, nearly 200 cabin crew resigned from MAS, with some citing fears for their safety and ‘family pressure’ as key reasons.

Crisis management

In the history of aviation… there’s never been an airline that had to go through two huge disasters in the span of four months, so I don’t think there’s any historical evidence that they can get out of this.” – Mohshin Aziz, research analyst at Maybank Investment Bank

In an attempt to recover, MAS resorted to lowering fares and adding flight capacity. Notwithstanding such measures, seat factor was lowered by 11.5 percentage points to 73% based on the quarterly report for the third quarter ended 30 September 2014. It recorded net losses of RM576 million for that quarter. Following the MH17 incident, the airline also announced that it would refund fares to customers postponing travel or cancelling their tickets, including non-refundable ones.

Three days after the search for the MH370 began, the share price of MAS fell by 16% to 21 sen. It continued to slide, hitting a low of 15.5 sen on 19 May 2014 following then Malaysian Prime Minister Najib Razak’s comments that “it might be too late to save MAS in its current form” – a record low at that point in time. The MH17 tragedy led to a further 13% fall in share price to 19.5 sen. Overall, the combined impact of the twin disasters in 2014 led to a fall of more than 36% in the share price.

Before the twin 2014 disasters, MAS had already been making a loss of US$1.3 billion over the previous three years due to fierce competition. The increase in passenger cancellations following the disasters and a lower number of bookings contributed to further financial losses in 2014.

What went wrong?

In the MH370 case, the information void and the reporting of inaccurate and sometimes contradictory information released by the Malaysian authorities led to public scrutiny from stakeholders. In the early days of the search for the missing plane, there was confusion with little information available. Malaysian officials struggled to keep up with questions from journalists and their incessant questions. Further, MAS received a lot of flak for taking four hours after MH370 went missing before informing the world. Relatives of the missing aircraft’s victims had demanded the release of pertinent information about the missing flight when none was provided by the Malaysian government. Most crisis communication experts agree that transparency is fundamental to gaining public trust.

In contrast, the lack of transparency may have destructive effects such as leaving a permanent stain on an organisation’s image. 187 In contrast to its handling of the MH370 disaster, analysts and observers had commented that the Malaysian government had been more sure-footed and timely in handling the MH17 crisis. MAS issued a public statement as soon as it confirmed that contact had been lost with the doomed flight. Instead, the MH17 incident sparked debate on whether the airline could have prevented the plane from flying over eastern Ukraine – a potential warzone – amid safety risk, especially since other airlines had rerouted their flights to avoid the conflict area.

The shining white knight?

Nothing less will be required in order to revive our national airline to be profitable as a commercial entity, and to service its function as a critical national development entity.” – Khazanah Nasional Berhad, Malaysia’s state sovereign fund

In response to the public relations crisis, the sovereign wealth fund of Malaysia, Khazanah Nasional Berhad (Khazanah), saw the critical need for intervention to keep MAS as a going concern. Khazanah rolled out the MAS Recovery Plan to acquire all the shares apart from the 69.37% interest it already owned. At 27 sen per share, Khazanah spent RM1.4 billion to become the sole shareholder of MAS in August 2014, allowing it to privatise MAS for the restructuring. In addition, it injected RM1.6 billion for the retrenchment of excess workforce and the migration of operations to a newly incorporated company, MAB. It was also planned that up to RM3 billion will be injected progressively into MAB, subject to strict conditions, over three financial years.

On 31 December 2014, MAS was delisted from Bursa Malaysia.

According to Khazanah, it was the most suitable candidate to lead the restructuring of MAS not only because of its majority shareholding, but also because of its experience in transforming local government-linked companies (GLCs) into sustainable profitable organisations. Learning from past turnaround failures, Khazanah’s MAS Recovery Plan proposed a comprehensive overhaul of the operations, with a heavy focus on adjustment of the cost structure and management of human capital.

The new cost structure would draw reference from industry benchmarks and work practices, with cost savings coming predominantly from renegotiation of supply contracts. Prior to the restructuring, MAS had more than 4,000 supply contracts, most of which contributed to the high operating cost due to redundancy and unfavourable terms. Under the recommendation of the then CEO, Christoph Muller, all existing contracts underwent review and renegotiation to reduce the total number of suppliers to no more than 2,000. For instance, the newly established catering agreement between MAB and Brahim’s Airline Catering Sdn Bhd allowed MAB to reduce its catering contract costs by 25%.

Another aspect which Khazanah’s MAS Recovery Plan focused on was the management of leadership and human capital. MAS employed approximately 20,000 staff while owning a fleet of 151 planes. The issue of over-employment became apparent when compared with AirAsia, a Malaysian budget airline and close competitor of MAS, which had a similar staff count despite operating a fleet of 189 planes. This has led to the decision to retrench 30% of staff, a reduction of 6,000 staff.

A plan or a sham?

Complete and independent ownership by private parties, free from any political interference, is key to the revival of Malaysia Airlines Bhd (MAB).” – Professor Dr. Sufian Jusoh

Khazanah’s MAS Recovery Plan was not without its critics. Opponents expressed strong disapproval on the basis that Khazanah, a state fund, has sole control of the company. They felt that Khazanah was not suited to restructure MAS for three reasons: lack of access to capital injection and expertise from private investors; Khazanah’s inability to manage tension with trade unions; and the underlying political motivation of Khazanah as a state-owned fund.

Khazanah expressed its concerns regarding third-party investors in the article, “The Khazanah Report 2014: Formulating the MAS Recovery Plan”. It argued that MAS’ recovery from the economic and reputational turmoil is only possible if it is supported by a principal shareholder with the financial capacity as well as the ability to align restructuring efforts with the commercial and social objectives of MAS. Private investors may not have the social interests of MAS in mind, for instance, flying certain routes for national development purposes. However, the capital injection from Khazanah has proven to be insufficient as MAB continued to struggle even in 2019 – its targeted year of return to profitability. This begs the question of whether the exclusion of private investors from the recovery plan was truly in the best interests of MAS.

The scepticism surrounding the MAS Recovery Plan also stems from Khazanah’s inability to establish cooperative relations with MAS’ influential labour unions. In August 2011, MAS entered into a comprehensive collaboration framework with its close competitors, AirAsia and AirAsiaX, which entailed a share-swap agreement. The cross-holding of shares was intended to synergise the two airlines but was called off in 2012 amidst pressure from MAS’ labour unions due to fear of possible retrenchments. In order to prevent history from repeating itself, Khazanah decided to curb the influence of the labour unions by dissolving them. This brought backlash from the union office-bearers and members who wanted to mount a constitutional challenge under Article 10 of Federal Constitution if the labour unions were to be dissolved. In response, Khazanah instead chose to replace the existing unions with “collaborative employee engagement” via its Works Council, which would not safeguard the interests of the workers’ representatives. The displacement of the influential labour unions was made possible by the fact that Khazanah has sole control over MAB and the decisions of the new management.

Detractors of the MAS Recovery Plan also expressed their disapproval on the grounds that Khazanah had an underlying motivation to spearhead the restructuring. Khazanah justified the state control over MAB based on the popular opinion among the public that MAB serves a symbol of nationalism and patriotism. Many opponents found it to be a trivial justification. Professor Dr. Sufian Jusoh, director of the Institute of Malaysian and International Studies (IKMAS) at Universiti Kebangsaan Malaysia, is one of those who identified with the proliberalisation of MAS. Dr. Jusoh explained that there exist many well-established international airlines that are not owned by their respective governments and it is a non-issue whether MAB remains as a national carrier.

The restructuring efforts by Khazanah were harsh and severely impacted the livelihoods of employees who were laid off. Even so, the affected employees were given little choice and could not retaliate. According to the President of National Union of Flight Attendants Malaysia (NUFAM), Ismail Nasaruddin, many of the retrenched employees were allegedly advised against taking legal action against MAS and told that the court was unlikely to address any cases relating to MAS, which no longer existed since the incorporation of MAB. Nasaruddin also revealed that the then Prime Minister, Najib Razak, was involved in some of the controversial retrenchment policies which have deviated from the policies proposed in the MAS Recovery Plan. The possible underlying political motivation raised questions as to whether Khazanah was truly suited to spearhead the MAS Recovery Plan.

Getting your way with power

If you belong to a culture displaying high power distance, you will tend to view power as a reality of life and believe everyone has a specific place in the hierarchy of power. You will expect that power will be distributed unequally.” – Geert Hofstede, social psychologist

Power distance deals with the fact that all individuals in a society are not equal. It concerns the inequality of distribution of power and authority among individuals in organisations. Malaysia has been ranked to have the highest power distance in the world, achieving a score of 104 on the Hofstede comparative power distance index. Its Southeast Asian neighbours – Singapore, Indonesia, and Philippines – had scores of 74, 78, and 94, respectively.

In very high power-distance cultures, subordinates are usually unwilling to go against or stand up against higher authority and will settle for this arrangement as they feel that this is the natural order of things. The party with the higher authority accepts this culture as well, and accordingly metes out consequences for anyone of a lower rank who goes against their decisions. The high-power distance suggests that culture in Malaysia is respectful of a complex, nuanced system of titled classes and untitled ‘commoners’ and tends to grant a lot of power to individuals at the top of an organisation. Some critics voiced that it is such a corporate culture in MAS – one that is “conservative and incredibly structured” and “does not reflect international attitudes” – which is hindering its ability to move forward from the twin tragedies.

Who’s in charge?

Although shareholders are in ultimate control over a company, they usually have no practical authority over the management and running of the company. Instead, the greatest shareholder power lies in the control over the composition of the board of directors.

Khazanah’s MAS Recovery Plan entailed a search for a new CEO. While the search for a new leader to revive the embittered company went on, then-CEO Ahmad Jauhari Yahya, who was in charge of the crisis management of Flight MH370 and Flight MH17, continued to be at the helm of MAS. Yahya stepped down from his position on 30 April 2015, when Christoph Mueller was appointed as MAB’s managing director and Group CEO.91 Although MAB’s contractual period for the CEO is for three years, the two CEOs who followed Yahya each lasted less than two years before resigning.

Christoph Mueller: May 2015 – April 2016

The first CEO appointed under Khazanah’s MAS Recovery Plan was Mueller. Mueller, a German, took on the role on 1 May 2015. Less than a year later, in April 2016, he left his position due to “personal reasons”. He was known as one of the industry’s best “crisis CEOs” following his success in turning around loss-making Aer Lingus, Ireland’s flag carrier. Experts had hoped that he would deliver the same magic touch to Malaysia’s national carrier.

During his tenure, Mueller made radical changes to the airline, including making huge layoffs, transferring all assets to a new company, retiring the entire Boeing 777 fleet, installing a new long haul business class product, entering into a partnership with Emirates for long haul flying, not serving alcohol on short haul flights, and more. He effectively reinvented the beleaguered airline to become a smaller regional carrier. The airline turned in a first monthly profit in years in February 2016. He was thanked for his contributions to the restructuring of the national airline, having “made a significant impact in putting the airline on the desired trajectory towards full recovery”. Despite his efforts and contributions to the company, he made the decision to leave after less than a year.

Peter Bellew: July 2016 – October 2017

Peter Bellew, an Irish, also quit prematurely before the completion of his three-year contract. He claimed to have resigned due to love for his home country, Ireland. In fact, he returned to Ryanair, taking on the position as Chief Operating Officer (COO) and calling it a form of “national service”. This decision seemed to take MAB by surprise as the company added in a statement that “Malaysia Airlines takes note of the unexpected announcement by Ryanair… regarding CEO Peter Bellew”. When asked at a press conference in the presence of both international and Malaysian media outlets on 27 September 2017, regarding speculation that Bellow would consider returning to Ryanair, the reply was that he had publicly “expressed his commitment to Malaysia Airlines”. However, a week later, Ryanair contacted Bellew, asking him to consider re-joining the company as COO, which Bellew accepted. Bellew explained “a week later the call came and in life we can really never say never. I am looking forward to being close again to my family and friends 14 hours away in Ireland.”

Interference or personal?

For both Mueller and Bellew, the actual reasons for their departure remain unclear. However, a source told New Straits Times (NST) that alleged interference by Khazanah in the running of the national carrier was the reason. NST claimed that Khazanah as the sole shareholder should take the blame for the sudden exit of the CEOs.

Khazanah attempted to downplay Mueller’s resignation, making it seem that it was due to personal circumstances. A source added that there were cases where Khazanah had bypassed the MAB board in order to micro-manage Malaysia Airlines. Mueller once said, “My experience is that it is very difficult to create a winning team from existing management,” making it more plausible. For Bellew, it is believed that he could not agree on some of the decisions by Khazanah over the overall running of the national carrier.

Déjà vu?

One of the signs of good corporate governance in a company is proper segregation of duties and a healthy balance of power between shareholders, the board and management. However, analysts such as Shukor Yusof from the Malaysian aviation consultancy Endau Analytics, have observed that even before the 2014 tragedies, there had already begun a “long history of mismanagement and government interference” with the airline having been “abused” for twenty years. Former Malaysian Prime Minister Najib Razak was Khazanah’s Chairman from 2009 to 2018, from when Khazanah was MAS’ majority shareholder with 69.37% ownership to the period when MAB was following through with the Recovery Plan. NUFAM also alleged that “the carrier’s financial woes are due to rampant mismanagement over the years – including having paid over US$1 per stick of satay for in-flight meals (competing airlines charge US$4 for five sticks of satay and rice) and purchasing tablet computers at more than three times their retail price”.

Furthermore, there was a 2011 saga regarding a share swap agreement which was intended to be entered into to “revive MAS”, but it eventually fell through. In August 2011, it was reported that Khazanah and Tan Sri Tony Fernandes had concluded negotiations regarding a share swap agreement between MAS and its rival, AirAsia, which involved Fernandes, the CEO of AirAsia, obtaining a 20% stake in MAS under the deal. Khazanah would then take a 10% stake in AirAsia in exchange. The purpose of the deal was purportedly to “improve synergies between the two”, as the two airline companies would be able to share resources and reduce redundancies. The closing of this deal was said to have become “urgent” after MAS poor performance in the first two quarters of 2011.

However, months later in May 2012, it was announced that the deal between MAS and AirAsia, which was “expected to reduce competition and help MAS…return to profitability”, fell through due to pressure from the workers’ union at MAS, as the union had “concerns that the tie-up may lead to restructuring and job cuts”. Commenting on the pre-2014 MAS board’s decision to terminate the share swap agreement, analysts said that the decision has raised concerns about how MAS would be able to turn around its dire financial situation, especially since it was “facing turbulent times amid an environment of high jet fuel prices and intensifying competition”.

Additionally, analysts raised the possibility of government intervention being a decisive factor in the ultimate termination of the share swap agreement. Mohamad Amirullah Yaacob, an analyst with Kenanga Research, stated that “the unwinding of the share swap appears to be politically driven”, rather than driven by “business logic”. BBC News reported that the decision to do away with the deal “[came] at a time when the popularity of the Malaysian government has been falling”. There was speculation about upcoming elections called by then Prime Minister Najib, which ultimately happened a year later in 2013. The MAS Union boasted about a 15,000 strong membership, which translated to “a big potential source of votes”.

Change for the Better

Nearly five years into the restructuring, it is clear that turning around an airline is far more difficult than piloting a plane.

Board changes

Pre-2014, Khazanah had two of its employees sitting on the MAS board of directors, one of whom was the sole executive director (ED). Three other members of the MAS board either held current or past key positions in government bodies. As such, five directors out of the nine-member board were government-linked. Three out of the eight non-executive directors (NEDs) were non-independent, and one of the three was the Chairman. All nine directors were Malaysians with one director below the age of 57.

The board had five board committees, chaired by two directors. David Lau Nai Pek chaired the Audit Committee, Nomination and Remuneration Committee, as well as the Hedging Committee. Meanwhile, Tan Sri. Krishnan Tan Boon Seng chaired the Safety & Security Committee as well as the Tenders Committee.

After 2014, there was a reshuffling of the board and new directors were added. Several enhanced corporate governance measures were also implemented, such as the creation of a new Governance and Ethics Committee to strengthen assurance, integrity and safety functions.

The board had eight male directors, with no female directors. While Lau, Mohamadon Abdullah and Tan were on the board pre-2014, Izham Ismal, Tan Sri Zamzamzairani Mohd Isa, Sheranjiv Sammanthan, Mohammad Izani Ashari and Ahmad Zulqarnain Che Onn were appointed as new directors.

Out of the five new directors appointed, three had held executive positions in Khazanah. This change was not unexpected given that MAB had become a delisted nationalised corporation. However, existing corporate governance issues could potentially be aggravated given that state ownership has increased from 69.37% to 100%. For example, Khazanah had acknowledged that one key issue that contributed to the financial difficulties of MAS was that it had to fulfil certain “national developmental obligations” which were often socially important but unprofitable. Such obligations include developing unprofitable local airline routes that would help contribute to Malaysia’s tourism but may result in significant losses to MAS.

The re-appointment of directors from the previous board was questioned by Khair Mirza, an aviation expert from transport infrastructure consultancy Modalis Infrastructure Partners. Even though the three directors had not breached the 2017 Malaysian Code on Corporate Governance regarding a tenure limit of nine years, Khair was of the opinion that keeping the same members in the board might be detrimental as it could deter new ideas and innovation, which are critical elements in reviving a loss-making company.

It is also good to have a combination of some with overall airline industry experience (at least two to three years) and some good professionals in finance and law,” said Khair.

Currently, a majority of the NEDs in MAB are equipped with accounting and finance knowledge, having graduated with a degree or with professional expertise and certification in those areas. However, no member on the board has relevant experience in the airline industry.

The previous board had a majority of directors who were either Khazanah appointees or directors with experience in government bodies, whereas the new board have a higher proportion of directors who are Khazanah appointees. There was also little management experience in the private sector among the board members.

Long road ahead

The MAS Recovery Plan promised “continuous communications and stakeholder engagement” by organising public accountability sessions, releasing annual reports, and keeping a continuous engagement with the press and public. However, there has been an absence of financial information regarding MAB after its privatisation. The current CEO Izham Ismail only announced that MAB suffered a marginally lower loss in 2018, but exact figures were not revealed. Furthermore, annual reports were not released to the public after the airline was privatised. Despite the restructuring efforts, MAB was still operating at a loss based on the latest financials available in January 2020 and reportedly requires financial assistance of up to RM21 billion to keep its operations going until 2025.

In 2019, the Malaysian government raised the possibility of a MAB buyout deal by private investors to save the struggling airline. In January 2019, Malaysia’s then Prime Minister Dr. Mahathir confirmed that MAB had received proposals from five potential airline carriers, namely AirAsia, Malindo Air, Lion Air, Air France-KLM alliance and Japan Airlines. Among the potential buyers, home-grown AirAsia was reported to be favoured by MAB management as Khazanah believed the synergy derived from a merger between MAB and AirAsia would amount to about RM1.4 billion yearly, which would be sufficient to cover MAB’s operations of RM1 billion per year. Furthermore, a takeover by a Malaysia airline would help keep MAB as a national icon that is a part of Malaysia’s identity.

In April 2020, MAB received another takeover proposal from Golden Skies Venture Sdn Bhd, (GSV), a newly established Malaysia private equity firm set up by former MAS employees and private individuals. GSV offered RM11 billion in exchange for 100% equity in MAG. However, the deal was not well received as Khazanah’s managing director Shahril Ridza Ridzuan expressed scepticism about its financial resources of a new firm, given the current COVID-19 pandemic-fuelled airline crisis and credit risk aversion.

The current turbulence in the global aviation industry resulting from the COVID-19 pandemic has complicated the sale decision. Aviation consultancy firm Aer Mobi’s CEO, Michael Walsh, said that a further cash injection from the government would be necessary prior to any sale. The Malaysian government would have to take into consideration the survival of all the airlines in Malaysia and might have to come up with further rescue plans for them as well. The future outlook of MAB is far from certain.



Discussion questions

  1. Explain the importance of risk management, the four lines of defence, and the role of the board and management in risk management. Was lack of proper risk management a factor in the tragedies involving MH370 and MH17?
  2. Critically evaluate the company’s crisis management and communications following the two tragedies involving Malaysian Airlines Flights MH370 and MH17.
  3. What are the roles of major shareholders, board of directors and management in corporate governance? Do you think the problems in MAS/MAB have to do with interference in management by the major shareholder? What can governments which have controlling stakes in companies do to monitor and hold boards and management accountable, without usurping the responsibilities of the board and management?
  4. To what extent should the state be involved in business, as major shareholders? What are the pros and cons of such involvement?
  5. Comment on the changes in the board of directors of MAB after 2014. Do you think the changes are for the better? Imagine you have been asked to provide advice on putting together a world class board for MAB. What would that look like in terms of size, leadership, independence, skills, experience, diversity, and other backgrounds?



The content was originally published on CPA Australia.
Photo by Stefan Fluck on Unsplash.