Friday, 12 September 2014

More tips for Khazanah

There is some additional comment regarding the benchmarking of SIA and MAS. Whenever people make comparison of staff productivity of SIA vs. MAS, they use the figure of 14,000 plus staff for SIA and 19,000 plus staff for MAS. 

This is completely wrong! The 14000 plus staff of SIA is at COMPANY level, while the 19,000 plus staff of MAS is at GROUP level. According to the SIA 2013/2014 Annual Report the SIA GROUP workforce is 23,716 people. Those people should use this number instead of the 14000 plus number. 

According to page 6 of the MAS 2013 Annual Report, the workforce at COMPANY level is 16,246 people. This is the number that Khazanah should use to benchmark MAS against SIA, although it still not like for like because of the presence of Engineering an Airport Ops Staff in the MAS number. 

Using the MAS Company level workforce to benchmark, would show that MAS staff productivity in terms of Employee per aircraft is worse off by 8% rather than 25% as stated in the Khazanah report. If there are staff to be retrenched, it would involve around 2,000 people not 6000 as claimed by Khazanah.

Saturday, 6 September 2014

Dearest Khazanah

Dear Khazanah,
Please consider our appeal below, we cannot stay silent any longer.

"The Khazanah Document on Saving The National Icon has a flaw which will have serious consequences to 6000 MAS staff. The authors of the document carried out a benchmark exercise to compare, among other things, the productivity of MAS staff compared with the industry average and selected airlines namely SIA and Cathay, The benchmark indices are Revenue per Staff (Exhibit 7) and Employee per Aircraft (Exhibit 8). For the purpose of this discussion we will examine the prodctivity of MAS staff against that of SIA simply because the SIA annual report contains a lot of useful data.

Referring to Exhibit 7 of the report the Revenue per Staff is RM850,000 compared to SIA's RM2,250,000 (after conversion).

In Exhibit 8, the Employee per Aircraft for MAS is 183 compared to SIA's 138 per aircraft. The industry average is 123 staff per aircraft.

The question is how were these figures arrived at? There is a feeling that the comparisons were not apple to apple. A test was made using data from the MAS 2013 Annual Report and the SIA 2013/2014 Annual report. This is not to challenge the Khazanah's figures but determine the veracity of the computation method.

The data required for the computation are as follows:

MAS ( Annual Report 2013)

Revenue RM15,121,204,000
Staff strength 19577
Fleet Size (excluding FireFly & MASWings) 108

SIA (2013/2014 Annual Report

Revenue $12479.7 million 
Staff strength 14,240
Number of Aircraft 104


1, MAS - Revenue per Staff = RM772396
Reported in Annual Report - RM772000
Employee per Aircraft = 181 employee per aircraft

2. SIA Revenue per Staff = $876383
Reported in Annual Report - $876383
Employee per Aircraft = 137 employees per aircraft

It is to be noted that the SIA staff number of 14, 240 does not include the Engineering and Ground Handling staff which are parked under the subsidiary/sister companies thereby giving a favourable outcome to the Employee per Aircraft Index.

The MAS staff number includes personnel in Engineering and Airport Operations resulting in a poor (25% worse) Employee per Aircraft Index compared to SIA.

This confirm the suspicion that the comparisons were not apple to apple.
It is regretable that based on this flawed assumption the authors of the Khazanah report recommended tha 6000 MAS staff be axed. See Exhibit 8 of the report.

What would the MAS figures be if the staff from Engineering and Airport Operations numbering, say, 5000 is not included in the computation?

No of staff involved = 14577
Revenue per Employee = RM1,037,333
Employee per Aircraft = 135 employee per aircraft.

Based on these new figures would the recommendation to axe 6000 still hold?

It would be highly regretable if 6000 staff have to be axed because of a flawed assumption. 

I am appealing to Dr. Don to bring this to the attention of the powers that be to correct the mistake which will cost 6000 people their jobs."     

Former Head of MAS Engineering.

Wednesday, 3 September 2014

Former Head of MAS Engineering speaks.


It is really heart-breaking that 6000 staff member will have to go under the Khazanah restructuring plan. All in all, about 20,000 or more people, including family members and dependents, will be affected by this move.

The Khazanah announcement with regard to the downsizing of the new MAS workforce to 14,000 lacks substance to enable meaningful comments to be made. In my view if the workforce is reduced to such numbers with the current company structure intact, then new MAS, scope of business will have to be shrunk to what it was in the 1980s. It appears that Khazanah is going for a quick fix. According to some analysts new MAS will save RM715 million by axing 6000 people for the work force.

However, MAS will have to cancel/defer deliveries of new aircraft thereby incurring additional cost in terms of penalty payments to the aircraft manufacturers.

The suggestion to restructure the current MAS by spinning-off Engineering, Airport Operations and MasKargo into 100% subsidiaries will achieve the objective of reducing the workforce of new MAS to 14,000 people or less, at the same time will avoid retrenching 6000 people and creating new businesses which could contribute to new MAS' income.

The transfer of the domestic operations and secondary regional points to FireFly will further reduce new MAS' cost. In addition to the reduction in technical and cabin crew which will be transferred to FireFly, substantial saving would be in the reduction of lease rental for the B737-800 and the maintenance cost of those aircraft that are transferred to Firefly.

Assume the following:

- 25 B737- 800 aircraft has to be transferred to FireFly

- Monthly utilization of 300 Flight hours.

- Lease rental of USD300, 000 per month

- Direct maintenance cost of USD700 per flight hours

Lease Rental for 25 aircraft = USD(300,000 x 12 x 25) = USD90,000,000

Maintenance cost = USD(700 x 300 x 12 x 25) = USD63,000,000

Total savings to new MAS USD153 million or about RM459 million per year.

If we add the cost of the 6000 people, the cost reduction to new MAS is more than RM1billion per year.

The money that Khazanah proposed to compensate the retrenched staff could be gainfully used to set up the new subsidiaries.

Any rebuttals are most welcome. Silence is no longer an option.