An industry friend commented when Christoph Mueller was appointed to take over the troubled Malaysia Airlines (MAS), and to set it on the path to profitabilty that it “would take a brave, brave man to lift an airline that has fallen so far down to fly high again”.
But then again Mueller is no ordinary airman. The 52-year-old German veteran aviation professional has a good track record in successfully restructuring Ireland’s state-back Aer Lingus and spearheading a revamp at Lufthansa.
Although bravery has nothing to do with Mueller’s mission to “reinvent” a new airline his experience and “micro-managing” ways of doing things have, thus far, impressed his bosses at Khazanah Nasional Bhd, MAS’ owner, as well as analysts, and industry personnel watching his every move since he assumed control on May 1.
Christoph Mueller : MAS is “technically bankrupt”. (Image credit: CAPA)
In his first media conference on June 1 he showed he meant business, as he outlined plans the new company, Malaysia Airlines Bhd (MAB), which will take over the running of the airline from September 1.
First he acknowledged MAS is “technically bankrupt”, and that the decline of the airline’s performance started long before the tragic events of 2014 when MAS lost two Boeing 777-200ER aircraft.**
The priority, he stated, is to stop the bleeding and take on the more painful exercise of eliminating the sources of losses, downsizing of the staff, and renegotiating contracts with the help of the administrator, PwC ( PricewaterhouseCoopers).
Mueller’s first difficult task is to oversee the axing of about 6,000 of the airline’s 20,000-odd staff, which is part of Khazanah’s RM6 billion (US$1.6 billion) 12-point restructuring exercise to revamp the struggling national carrier. The 14,000 staff who will be re-employed have 12 days to decide whether they want to join the new company.
Mueller said a second round of letters would be sent out in about two weeks, as some of those who were offered reemployment might not accept the jobs.
He revealed the turnaround plan will be carried out in three phases.
The first phase, to run through 2015, is to stop the bleeding.
Phase two in 2016 will focus on restructuring with implementation of 40 projects of all sizes. “We are about to structure more than 40 projects over the next three months, which will enable us to go back to a cost level that is competitive and allows us to offer cheap fares and still make money,” Mueller said.
The third phase, from 2017-2018, will see the airline start rolling again by having a competitive cost base, best network, competence in revenue management and having industry leading technology driving the operation.
MAS has to axe 6,000 staff as part of its revamp. (Image credit: Malaysia Airlines)
The new carrier will be grouped into three divisions – operations, support functions, and learning and development — with a total of 12 subsidiaries.
Describing MAS’ restructuring process as a “hard reset”, he said the revitalised MAS would be like a start-up.
“It might not be a start-up, but it will be like one with everything new – new company, new shareholders. In fact everything will be new. We have applied for a new airlines certificate, we have asked IATA (International Air Transport Association) to transfer the MH code,” said Mueller.
He stressed that IT (information technology) would play a big and important role in MAS’ restructuring, as investors were only willing to invest on two key areas, namely IT and service quality.
One of his new appointments is a chief information officer (CIO), Tan Kok Meng, who took up the post on May 18 and brings with him over 20 years of experience in the IT and management capacities. He will assist the company in developing enhanced IT structures and support moving forward.”
At the briefing Mueller also scotched reports that the new airline would be downsized to serve only regional routes within Asia. He reiterated that MAS would continue to be a full-service international carrier, serving routes worldwide.
“London has always been MAS’ flagship route to Europe. We have the best schedule, with one flight in the morning and another in the evening. We will retain London, but will look at whether serving the route with the Airbus A380 is the best option,” he said.
Mueller conceded that Australia is a major market for the airline and its routes serving the continent will thus remain intact. MAS currently serves Perth, Adelaide, Melbourne, Sydney and Brisbane in Australia, and Auckland in New Zealand.
MAS remains a full-service international carrier after the restructuring. (Image credit: Cn0ra/iStock)
He also gave an assurance that there will be no capacity reduction of the domestic network run by MAS and its subsidiaries, Firefly and MASwings.
“The domestic network remains fully intact. In fact, we have plans to increase frequencies in Sabah and Sarawak. We’re contemplating to focus MASwings on rural air service network, which is a very important element of our mission.”
On the sale of aircraft Mueller, said it is too early for MAB to decide whether the group will sell off the six A380 super jumbos that it owns.“The world has changed since these aircraft were ordered, and I believe I might not be the only one saying this, but I think a couple of airlines’ CEOs are scratching their heads whether this aircraft size is still appropriate.”
“The big task is to bring down our costs … we need to buy better and we need to buy cheaper. There are currently about 20,000 suppliers in MAS, resulting in a very fragmented base,” he added.
As for the rebranding Mueller said he would leave that to Malaysians, shareholders and stakeholders to decide, stating that the wau (kite) symbol is “fantastic”.
He said he could not divulge more details on the restructuring, as the briefing was just to present a “prototype” of what the new MAS would be like.
But one thing he is sure of, and that is the rejuvenated MAS will be a 5 star legacy airline: “Our reputation comes from Skytrax 5 star, and we have demonstrated to the world we can deliver that. We cannot have lower ambitions than what we have in the past.”
We wish Mueller good luck in the tough task ahead of him to raise a once proud symbol of Malaysia’s aviation, which was brought to its knees by years of mismanagement (read story here) and the twin disasters of 2014. He gave himself three years (also the term of his contract) to turn the airline back to profitability by 2018. We hope he will have a free hand to do this, and no interference as he works with his new team to give wings to MAS to fly high and golden in the skies again.
** On March 8 last year MAS flight MH370 disappeared with 227 passengers and 12 crew members aboard enroute from Kuala Lumpur to Beijing and is still missing. Four months later, on July 17, flight MH17 from Amsterdam to Kuala Lumpur was shot down over Ukraine killing all 283 passengers and 15 crew on board.
• TravelWeekly Asia contributes to this article
