Prasarana reserves ‘at least’ 30pc of MRT for Bumi contractors

By Boo Su-Lyn

Malaysian Insider, 23 August 2011

KUALA LUMPUR, Aug 23 — Syarikat Prasarana Negara Bhd will reserve at least 30 per cent of the Klang Valley Mass Rapid Transit (KVMRT) construction packages for Bumiputera contractors.

Abdul Malik Azman, Prasarana’s head of MRT Procurement Management Department, told The Malaysian Insider today that the quota for Bumiputera contractors was part of the government’s “national agenda.”

“We have this Bumiputera agenda approved by the MOF (Finance Ministry).

“At least 30 per cent of packages should be allocated for Bumis. This is the national agenda,” he told The Malaysian Insider after a briefing for pre-qualified contractors at Prasarana’s office here today.

In May, Prasarana had caved in to pressure from Malay rights groups when it revised pre-qualification criteria for several construction packages.

The project owner had said then that contractors who wanted to tender for elevated civil works, stations and depots work construction packages would be allowed to form joint ventures (JV) or consortiums among local companies.

Twenty-eight firms including heavyweights such as Sunway, IJM and MRCB have been shortlisted for the construction of the first phase of the KVMRT project

The works packages were divided into two categories: Open and Bumiputera.

The value for contracts under the Bumiputera category is about RM250 million per package, based on the last briefing to contractors by Prasarana in May.

Abdul Malik said today that there were 18 work packages, comprising eight packages for elevated civil works, eight packages for stations and two packages for depots.

He said six out of the 16 packages for elevated civil works and stations, as well as the Kajang depot work package, were reserved for Bumiputeras.

“A few Bumis here can (also) bid in the Open category. (They can go) fishing in the pond and ocean. They have more chances,” said Abdul Malik.

He pointed out that Trans Resources Corporation Sdn Bhd, Ahmad Zaki Sdn Bhd and MTD Construction Sdn Bhd could bid for all eight elevated civil works packages.

Trans Resources Corporation and Naim Engineering Sdn Bhd could bid for all eight stations and both Sg Buloh and Kajang depot work packages, he added.

Abdul Malik told a press conference earlier today that winning contractors would be picked based on their financial capabilities, their equipment and “realistic” offers.

The Prasarana official, however, refused to specify what he meant by a “realistic” price, saying: “If we say, we might not get a competitive price.”

He added that the first two elevated civil works packages, which are a 5.2km viaduct from Taman Bukit Ria to Phoenix Plaza in Cheras and another 5.4km viaduct from Phoenix Plaza to Bandar Tun Hussein Onn, would be awarded in January or February next year, and construction of the multi-billion ringgit rail project would start.

Najib: Tajuddin intervention ‘off-site’ solution, not settlement

By Shazwan Mustafa Kamal

Malaysian Insider, 12 August 2011

 

Najib said his administration’s decision to step in on Tajuddin’s cases should not be “misconstrued”. — File pic

 

KUALA LUMPUR, Aug 12 — Datuk Seri Najib Razak defended his administration’s intervention in Tan Sri Tajuddin Ramli’s civil cases, saying today that the move should be seen as an “off-site” solution. The prime minister said that Putrajaya’s letter to all government-linked companies seeking for them to withdraw their suits against the former Malaysia Airlines (MAS) chairman should not be “misconstrued” as an out-of-court settlement.

“It can’t be misconstrued as a settlement out of court… this is a discussion to find positive solution off- site,” he told reporters today. He did not, however, elaborate on what he meant by the phrase.
Najib also stressed that the matter was not finalised and was still in the “process of discussion.”

“We are aware of our position and we hope are hoping for positive outcome,” the PM added.
Minister in the Prime Minister’s Department Datuk Seri Nazri Aziz has insisted that the government’s intervention in Tajuddin’s cases could save the government billions in legal claims.

The letter to the GLCs, said Nazri, was not an order set in stone and did not outline any commitment on behalf of the companies stipulating that Tajuddin would walk away scot-free.

Nazri had told The Malaysian Insider yesterday that he had written to GLCs earlier this month seeking for them to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

The Padang Rengas MP had listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Tajuddin was a protégé of Tun Daim Zainuddin, a close friend of former prime minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now-discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Nazri says Tajuddin intervention could save Putrajaya billions

By Clara Chooi

12 August 2011

 

Nazri insists that the letter was not an order for the firms to let Tajuddin off the hook. — File pic

 

KUALA LUMPUR, Aug 12 — Datuk Seri Mohamed Nazri Aziz has rebuked those who have questioned his authority in intervening in the Tan Sri Tajuddin Ramli’s civil cases, insisting today that the move could save the government billions in legal claims. 

 

The minister in the Prime Minister’s Department disagreed that he had overstepped boundaries with a letter earlier this month telling all government-linked companies to withdraw their suits against the former Malaysia Airlines (MAS) chairman, claiming he had done so in his role as a “facilitator” for the government.

Nazri also told detractors to check their facts before spewing insult against him, saying, “I know what I am doing.”

He accused DAP publicity chief Tony Pua of practising double standards for saying the minister should be placed under the Emergency Ordinance for issuing the letter, asking the leader why he had not urged the same when other Pakatan Rakyat (PR) leaders attempted to intrude on government affairs.

“I want to ask him (Pua): When (PAS president Datuk Seri Abdul) Hadi Awang asked the Damansara Utama Methodist Church (DUMC) and Jais (Selangor Islamic Religious Department) to see him and explain the recent church raid, why did he not rebuke Hadi?

“Because what power does Hadi have in doing so? He is not the mentri besar of Selangor and neither is he the minister for religious affairs. So why the double standards, Tony?” Nazri told The Malaysian Insider.
Similarly in the controversy over the Kedah government’s ban on entertainment outlets during Ramadan, Nazri said DAP chairman Karpal Singh had no business ordering the businesses to stay open.

“On my part, I spoke to the second finance minister and he told me why don’t I explore this issue and that I may be the facilitator to urge these GLCs to sit down with Tajuddin to come up with an amicable solution. So what power did I abuse?” he asked.

Nazri said that to defend himself, Tajuddin, who is facing millions in legal claims for allegedly causing MAS to suffer losses in excess of RM8 billion during his tenure, had made a whopping RM13 billion counter-claim.
“Our total claims by the companies against Tajuddin are only half a billion ringgit. That is why, we said we should sit down and talk,” he said.

The letter to the GLCs, said Nazri, was not an order set in stone and did not outline any commitment on behalf of the companies stipulating that Tajuddin would walk away scot-free.

“It’s different if I went and spoke to some parties and then went claiming as if the government has agreed to settle all claims and let him go,” he said.

Nazri also disputed law professor Abdul Aziz Bari’s claim that, notwithstanding his explanation that the letter only constituted advice, he could not absolve the Najib administration of responsibility by attempting to settle the outstanding claims against Tajuddin.

“It is my letter so I should know better whether or not I made an order or advice. I asked them (GLCs) to speak with Tajuddin’s people. He (Aziz) is shallow in his thinking,” he said.

Nazri had told The Malaysian Insider yesterday that he had written to GLCs earlier this month seeking for them to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

The Padang Rengas MP had listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Pua: Investigate Nazri for power abuse in Tajuddin Ramli’s cases

By Debra Chong

Malaysian Insider, 12 August 2011

KUALA LUMPUR, Aug 12 — The DAP’s Tony Pua has accused Datuk Seri Nazri Aziz of abusing his authority by meddling in lawsuits involving Tan Sri Tajuddin Ramli, and today called for the de facto law minister to be investigated.

The DAP publicity chief described as “unprecedented” Nazri’s recent directive to several government-linked companies (GLCs) to withdraw their ongoing suits against Tajuddin and settle the matter out-of-court, saying the minister in the Prime Minister’s Department could be investigated under the Emergency Ordinance.

Pua said the directive was ‘unprecedented’. — File pic

“Nazri can be investigated under section 2(1) of the Emergency (Essential Powers) Ordinance No. 22/1970 where ‘Any member of the Administration, Parliament or State Legislative Assembly or any public officer who commits a corrupt practice shall be liable to a term of imprisonment of 14 years or a fine of RM 20,000 or both’,” the Petaling Jaya Utara MP pointed out in a statement.
“Such an instruction from a minister’s office, especially one with no authority over the various GLCs including Malaysian Airlines System (MAS), Telekom Malaysia and Prokhas (formerly Danaharta), must be at the very least highly improper, and at worst an illegal and corrupt practice to allow Tan Sri Tajuddin Ramli to get away with billions of ringgit in debt,” Pua said.

He stressed that the companies are listed on Bursa Malaysia and have their own board of directors to decide the interest of their respective companies and that Nazri had no business giving any kind of instruction as the latter did not sit on any of the boards.

“His directive to these GLCs made a complete mockery of corporate governance in these companies and will only turn away local and foreign investors who will not tolerate blatant interference from the government on business and financial decisions,” Pua said.

He slammed Nazri’s “attempt” to explain yesterday, saying the directive “is clearly designed to provide the [Tajuddin] breathing space and a desperate attempt to bail him out of billions of ringgit in debt to the government agencies and companies, as well as to excuse him from causing billions of ringgit in losses to our flagship carrier MAS”.

Yesterday, Nazri said his directive was merely to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin in a massive debt bailout for the former MAS chairman.

The minister denied it was a bailout.

Law expert says Nazri’s ‘advice’ still an order

By Shannon Teoh

Malaysian Insider, 12 August 2011

 

KUALA LUMPUR, Aug 12 — Datuk Seri Nazri Aziz cannot dodge responsibility for the Najib administration’s directive to GLCs to drop their suits against Tan Sri Tajuddin Ramli which critics have called a bailout for the former Malaysia Airlines (MAS) chairman, according to a constitutional expert.

Abdul Aziz Bari, professor of law at the International Islamic University, told The Malaysian Insider that in a constitutional Cabinet government, the entire Cabinet is responsible for all government actions.

Abdul Aziz said the entire Cabinet is collectively responsible. — File pic

“Of course, the finance minister is responsible for fiscal matters. But the entire Cabinet is tied in as well. This is the meaning of collective responsibility.
“In this context, whether or not Nazri gave advice or orders is not important. As a minister, Nazri is responsible to Parliament, meaning the public, on what happens to GLCs which belong to the public,” he said.

Nazri, minister in the Prime Minister’s Department, had told The Malaysian Insider yesterday that he had written to GLCs earlier this month to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

He said the matter was referred to Second Finance Minister Datuk Seri Husni Hanadzlah who then directed him to pen the letter, taking note that Tajuddin’s case was scheduled for case management in court yesterday.

“Since it involved the law and I am the minister in charge of law, Husni told me, why don’t you look into this. It is not a cloak-and-dagger move ... we knew this would come out somehow and there is nothing to hide. I wrote that letter using my letterhead,” said Nazri.

The Padang Rengas MP listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Nazri issued the directive to the GLCs earlier this month. — File pic

 

Prokhas is a private limited company wholly-owned by the Minister of Finance Incorporated and tasked to manage the residual assets of Pengurusan Danaharta Nasional Berhad and its group of companies. 

 

But Abdul Aziz said, in his email yesterday, that “Nazri cannot escape with the excuse that he only advised and did not order the GLCs. That is just terminology. Whether advice or suggestion, they are all directives and if they result in losses, then the Cabinet must answer to Parliament.”

He added that in a democracy that practices accountability, this would mean a resignation.

The Malaysian Insider reported yesterday that Putrajaya, through Nazri’s letter, had directed all GLCs, including MAS and the national debt restructuring company Danaharta, to cease all civil suits against Tajuddin, the former chairman of the national carrier and protégé of Tun Daim Zainuddin.

Daim is a close friend of former Prime Minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Nazri says directive will not spell bailout for Tajuddin

By Clara Chooi

Malaysian Insider, 11August 2011

 

Nazri stressed today that the directive was not a “cloak and dagger” move. — file pic

KUALA LUMPUR, Aug 11 — Datuk Seri Mohamed Nazri Aziz confirmed that Putrajaya had decided to attempt

reaching an out-of-court settlement with Tan Sri Tajuddin Ramli but denied today this would result in a massive debt bailout for the former Malaysia Airlines (MAS) chairman. 

 

The Minister in the Prime Minister’s Department told The Malaysian Insider that his directive ordering all government-linked companies to withdraw their suits against Tajuddin earlier this month was merely to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

He stressed that this was not a “cloak and dagger” move and explained that it was “Tajuddin’s people” who first approached the government with a proposal to reach an out-of-court settlement about six months ago.
He said the matter was referred to Second Finance Minister Datuk Seri Husni Hanadzlah who then directed him to pen the letter, taking note that Tajuddin’s case was scheduled for case management in court today.

“Since it involved the law and I am the minister in charge of law, Husni told me, why don’t you look into this. It is not a cloak and dagger move ... we knew this would come out somehow and there is nothing to hide. I wrote that letter using my letterhead,” said Nazri.

The Padang Rengas MP listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Prokhas is a private limited company wholly-owned by the Minister of Finance Incorporated and tasked to manage the residual assets of Pengurusan Danaharta Nasional Berhad and its group of companies.

“I want you to remember here that we, these three parties, sued Tajuddin and of course, he filed his defence.
“Let’s say if we win, we get the money and if we lose, we will probably have to pay his costs but he not only filed his defence — he counter-sued us.

“In any case, there is a 50-50 chance of winning or losing ... If we win, okay, but if not, we will have to make the payout so that is why it was worth looking at his proposal — which is if we withdraw, he will withdraw,” he said.

Tan Sri Tajuddin Ramli. — file pic

Nazri said this was the “minimum offer” the government was willing to settle for but reiterated that the GLCs would still have to discuss the proposal before deciding on their next move. 

 

“This is the minimum ... we withdraw, he withdraws. For further discussion, how much he is to pay and so on, it is up to the two parties to discuss. That letter that I sent was for them to sit and discuss this proposal but you must understand that we cannot direct these three because they are GLCs and they are legal entities that can make their own decisions.

“If they feel they have a strong case, then go ahead but the government feels that we have to look into an out-of-court settlement so that we do not lose,” he said.
Nazri pointed out that MAS was presently not in the best financial position to be battling out expensive court cases and should consider looking into the proposal.
He said his letter was merely to “facilitate” this move but stressed that it would be “too naive” to assume that one letter was enough to settle the long drawn out financial saga.

The Malaysian Insider reported this morning that Putrajaya, through Nazri’s letter, had directed all GLCs, including MAS and the national debt restructuring company Danaharta, to cease all civil suits against Tajuddin, the former chairman of the national carrier and protégé of Tun Daim Zainuddin.

Daim is a close friend of former Prime Minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Anwar: Was MAS turnaround a mere charade?

By Shazwan Mustafa Kamal

Malaysian Insider, 10 August 2011

Anwar also said today that the deal raises fundamental issues of transparency. — file pic

KUALA LUMPUR, Aug 10 — Datuk Seri Anwar Ibrahim has questioned the latest effort to rescue the loss-making state airline, charging today that the Malaysia Airlines (MAS)-AirAsia share swap meant that Putrajaya’s previous turnaround plans had failed. 

 

He also said the deal would create a monopoly that will burden air passengers.
“Is the government specifically admitting that the so-called successful turnaround of MAS was a mere charade? The Prime Minister must be held accountable for misleading the rakyat on this.

“More importantly, the deal raises the question as to what is the fate of the GLC Transformation Programmes that had been launched by Prime Minister Najib Razak to much fanfare and wastage of millions of the rakyat’s money,” he said in a statement, claiming that the share swap would not benefit MAS employees.
The national airline recently recorded a first-quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago.

MAS main shareholder Khazanah Nasional Bhd has defended previous efforts at reforming the national flag carrier with managing director Tan Sri Azman Mokhtar saying that the share swap was necessary to keep MAS afloat.

Anwar also raised concerns of AirAsia’s possible “monopoly” of the domestic airline industry with the recently-inked MAS-AirAsia share swap yesterday.

“The MAS-Air Asia share swap announced yesterday raises serious concerns over the dominance of Air Asia over MAS and effectively reducing competition between the two.

“This may lead to a virtual monopoly of the domestic airline industry in the long run and give rise to risks and concerns associated with monopolies, more so because of the involvement of cronies and political power brokers,” the Opposition leader said.

The opposition leader charged that Tony Fernandes’s participation in the MAS board was a possible conflict of interest. — file pic

MAS main shareholder Khazanah Nasional Bhd finalised a share swap with Tune Air Sdn Bhd yesterday which saw the state investment arm pare down its stake in the ailing state carrier by almost a third. 

 

Under the “Comprehensive Collaboration Framework”, Tune Air, AirAsia’s main shareholder, will swap a 10 per cent stake in the no-frills airline for 20.5 per cent share in MAS.

Before the share swap, Tune Air was the biggest shareholder in AirAsia with 26.28 per cent stake while Khazanah held a total of 69.33 per cent share of MAS.

The MAS board will also see some new faces, namely Land & General Bhd founder Tan Sri Wan Azmi Wan Hamzah, former IJM chief executive Datuk Krishnan Tan, Astro chief executive Datuk Rohana Rozhan and David Lau from Shell Malaysia, who will act as independent non-executive directors.
AirAsia founder and chief executive Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have also been appointed as non-independent non-executive directors of MAS.

MAS managing director Tengku Azmil Zahruddin Raja Abdul Aziz, who stepped down will join Khazanah as an executive director effective September 12, 2011. An executive committee led by Tan Sri Mohd Nor Yusof will manage the state carrier until a new chief executive is appointed while day-to-day operations will be handled by Khazanah executive director and MAS board member, Mohd Rashdan Mohd Yusof.
Anwar charged that Fernandes’s participation in the MAS board raised the likelihood of a conflict of interest in spite of Fernandes’s “non-executive” position.

“This is clearly a violation of corporate governance rules and should not be condoned.
“This deal also raises fundamental issues of transparency because of the secrecy in which it was shrouded. In this regard, the Securities Commission must investigate the possibility of irregularities including insider trading of the shares of both entities,” added Anwar.

The collaboration agreement comes into immediate effect for a period of five years with the option of an extension for a further five years.

Despite MAS share swap, Fernandes’ heart is with AirAsia, says FT

Malaysian Insider, 10 August 2011

 

Brown heaped praise on “serial entrepreneur” Fernandes’ business acumen. — File pic

 

KUALA LUMPUR, Aug 10 — The Financial Times has praised AirAsia boss Tan Sri Tony Fernandes’ move to swap stakes and help ailing flag carrier Malaysia Airlines (MAS), but said today the “serial entrepreneur” remains focused on plans to make the low-cost carrier the region’s most successful airline. Fernandes and his partners’ private vehicle, Tune Air Sdn Bhd, yesterday exchanged 10 per cent of their AirAsia stock for 20.5 per cent of the loss-making MAS, which has undergone several financial restructuring but keeps bleeding red ink.

The influential global business daily pointed out that Fernandes has had an uphill battle in the aviation industry, buying a two-plane operation in 2001 for RM1 and taking over its then RM40 million debt despite being sneered by the Malaysian elite as a “comic upstart”.

“If he can help MAS recover, he will. But not at AirAsia’s expense. Recognition is sweet. But victory is sweeter,” wrote Financial Times regional correspondent Kevin Brown in a column published today.
The column pointed out that “So far, Mr Fernandes has hardly put a step wrong. As a serial entrepreneur, he has founded no fewer than four airlines — AirAsia, its long-haul affiliate AirAsia X and joint ventures in Indonesia and Thailand. He is also part-owner, with his business partner, of the privately held Tune Group, which runs hotel, financial services and mobile phone businesses”.

It added that AirAsia has grown from two planes to more than 100 planes now, and has just signed an US$18 billion (RM54 billion) deal with Airbus for 200 A320s over 15 years — the third-biggest order in the aircraft maker’s history.

“Investors are in no doubt about Mr Fernandes’ Midas touch. The shares have outperformed the global aviation index by more than 100 per cent since AirAsia was floated in 2004. No carrier has bettered its average 57 per cent annual increase in net income. The stock, up almost a third this year before the latest turmoil, was worth US$3.6 billion before the shares were suspended on Monday. That is more than double the market value of the Malaysian flag-carrier,” Brown wrote.

He noted AirAsia has benefitted from being in the right place at the right time.
“Its pace of growth is underpinned by the rapid expansion of emerging Asian economies. Average economic growth of about seven per cent a year is lifting millions more people every year to an economic level at which they can afford a budget airline flight.

“But Mr Fernandes is not just grabbing chunks of a growing market. AirAsia has grown consistently, as well as fast, thanks to a rigorous focus on expenses. Costs per passenger kilometre are lower than both Southwest Airlines of the US, which invented the low-cost model, and Ryanair, the Irish group often regarded as the world’s most competitive carrier,” Brown said in the article.

However, the state-owned MAS has “failed either to adapt to the low-cost era, or to trade effectively as a premium carrier, the strategy pursued (albeit with faltering success) by neighbouring Singapore Airlines”, Brown wrote, noting that MAS has had to be restructured twice in the past nine years following financial crises.

“Angered by the airline’s resistance to change and worried by the looming cost of fleet renewal, the government has given up, forcing MAS to accept a deal, confirmed on Tuesday,” he added.

“For Mr Fernandes, this is a moment to savour. Never shy of self-promotion, he has been hurt and offended over the years by the Malaysian elite, which has largely regarded him as a comic upstart. They laughed when he started in business with two old aircraft and US$250,000; they laughed again when he spoke of building AirAsia into the region’s most successful airline, when he launched a Formula One racing team and when he tried to buy an English Premiership football club.

“Their laughter has now ceased. But it would be ironic if Mr Fernandes’ moment of recognition turned out to be a millstone round his neck. This is not an inconsiderable risk. The deal was officially characterised as a partnership, but would be better seen as a last-chance rescue. Both earlier restructurings of MAS failed to resolve its underlying problems, and (Tan Sri) Azman Mokhtar, the head of Khazanah, has spent years putting it through a reform programme, to little effect,” wrote Brown.
But Brown said while the government hopes “the freewheeling Mr Fernandes will provide the missing ingredient”, the aviation tycoon’s new task would divert inordinate amounts of time from running AirAsia and its offshoots, which are soon to be joined by a Tokyo-based joint venture with ANA of Japan.
“With Singapore-based rival Tiger Airways in trouble – suspended from flying in Australia on safety grounds, and bleeding S$2 million (RM4.8 millio) a week – this is not the moment for Mr Fernandes to take his eye off the ball.

“All the signals are that he will not. Indeed, all the obvious gains will accrue to AirAsia: Route rationalisation is likely to favour the lower cost operator, and the deal should reboot government thinking on awarding new routes, on which it has tended to favour MAS. Mr Fernandes will aim to push MAS upmarket, and try to close Firefly, the flag-carrier’s largely domestic budget offshoot, leaving AirAsia with a local monopoly,” Brown said.

Share swap deal: AirAsia's Fernandes to gain 20% stake in MAS

STAR, 7 August 2011

KUALA LUMPUR: Malaysia Airlines (MAS) and AirAsia will swap shares in a surprise deal which will see Tan Sri Tony Fernandes becoming the single biggest shareholder.

Khazanah Nasional Bhd, which owns over 69% of MAS, is said to have concluded negotiations with Fernandes to come up with a deal to save the national carrier.

Sources said the deal, which was struck last week after negotiations over the past year, became urgent after MAS' poor showing in the last two quarters.

Fernandes is set to get 20% of MAS equity under the deal that is to be signed next week, with some sources saying it has already received the Government's approval and could be inked by tomorrow.

Industry players expressed surprise at the deal because of past animosity between the management of the two airlines.

Those who were aware of the negotiations were also surprised at the speed at which it was concluded.

At present, Khazanah, a strategic investment company, holds about 69% stake in MAS, and under the deal with Tune Air Sdn Bhd, it will get a similar stake in AirAsia. Fernandes and his co-founder partner Datuk Kamarudin Meranun hold 26.28% in the world's biggest budget airline.

Fernandes declined to comment when asked about the deal.

Insiders in both airlines confirmed that the negotiations concentrated on the synergy such a share swap would bring.

First, there will be rationalising of routes. Between them, the two airlines cover most of the lucrative routes from Asia to Europe.

Second, when they are seen as a single unit, their bargaining power with airports and aircraft manufacturers will double, said a source close to the deal.

He pointed to the recent move to merge SapuraCrest Petroleum and Kencana Petro-leum via a share swap as an example for the AirAsia-MAS deal.

Insiders said it was unlikely the two airlines would merge into a single unit, but would operate though separate managements at operational level, while sharing common directors and policies.

Malaysia will get the best of both worlds a premier full-service carrier in MAS and the best budget carrier in AirAsia.

“They have been competing with each other for too long, and it's time to work together because there is more than enough to go around,” said a senior government official.

The official added that the “feud” between the two had been going on for 10 years since Fernandes and others took over the ailing AirAsia from DRB Hicom.

AirAsia is twice as big as MAS in terms of market capitalisation. MAS is worth about RM5.3bil, while Fernandes' outfit is worth slightly more than RM11bil.

AirAsia stocks closed at RM3.95 per share yesterday while MAS' was at RM1.60.

A news portal, The Malaysian Insider, which broke the story of the deal yesterday, reported that Fernandes would likely appoint Khazanah's executive director of investments Mohd Rashdan Mohd Yusof as chief operating officer after the share swap. Rashdan already sits on the MAS board.

Sources said no decision was made about the position of MAS CEO Tengku Datuk Azmil Zahruddin.

MAS recorded a first quarter net loss of RM242.3mil against a profit of RM310.6mil in the same period last year. Analysts expect the national carrier to make full-year operating losses due to high fuel costs and falling yields.

In contrast, AirAsia recorded a first quarter profit of RM171.9mil for this year and a record RM1.5bil in profits for 2010.

Sources said the merger would also force the two airlines to take stock of their future aircraft purchases if they are to enjoy any synergy.

AirAsia purchased 200 Airbus A320 aircraft earlier this year with an option to buy another 100, while MAS was set to make a decision on the replacement aircraft for its Boeing 747 and 777 fleet, which is more than 20 years old.
 
*MEDIA STATEMENT FROM KHAZANAH

Kuala Lumpur, 7 August 2011

”We refer to media reports that Tan Sri Tony Fernandes and Dato' Kamarudin Meranun will emerge as the single largest shareholder of Malaysian Airline System Berhad (“MAS”). These reports are incorrect. The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad's portfolio. Khazanah will continue to maintain its position as the single largest shareholder in MAS.
As an active strategic investor, Khazanah constantly reviews ways to improve the performance of its portfolio companies and concurrently the competitiveness of key strategic sectors of the economy. Further announcements will be made at the appropriate time with regard to Khazanah's position in MAS' ongoing transformation plan.”
 
*MEDIA STATEMENT FROM AIRASIA'S TAN SRI TONY FERNANDES & DATO' KAMARUDIN MERANUN

Kuala Lumpur, 7 August 2011

"We refer to the press coverage over the last two days that has reported that we would become the single
largest shareholder in MAS.

We wish to clarify that this is not true.

As the major shareholders of AirAsia Berhad and AirAsia X Sdn Bhd, we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise."