This article first appeared in The Edge Malaysia Weekly, on January 18 - 24, 2016

WALKING through the current Malaysia Airlines Bhd (MAB) office at the Kuala Lumpur International Airport (KLIA) in Sepang, one may be forgiven for thinking it is too simple to be the headquarters of our national carrier.

MAB now occupies a building in the southern zone of KLIA, where the cargo and flight catering operations are located. The office is quite bare and overlooks the airport and cargo handling hub. There is no Malaysia Airlines corporate logo emblazoned on its walls or any expensive painting or carving decorating its interior. Its elevator does not even have a motion sensor.

The national carrier’s long-serving staff would certainly see the stark contrast between the new office and the old headquarters in the central business district in Jalan Sultan Ismail, KL.

Initially, there was a plan to build a new corporate building for MAB in KLIA but that was scrapped by its current CEO Christoph Mueller, who believes the building that MAB currently occupies is sufficient to support the airline’s administrative processes. He felt that the money would be better spent on improving MAB’s products and the PSS (passenger service system).

A grand office probably does not matter much to Mueller at this moment; what is more important to him is that MAB has survived its worst wounds.

“The patient has left the emergency room; we have stabilised the patient but he is still not able to walk alone without help,” says the German, who has been in the hot seat for about nine months now.

The metaphor reveals his belief that there is hope on the horizon that the national carrier will recover and regain its shine after having been through very painful cuts, including almost a third of the workforce of the old company Malaysian Airline System Bhd (MAS) being let go. Also, the politically well-connected contractors were forced to renegotiate their terms in order to continue their business with the national carrier — a bold move that the past chieftains had not been able to execute.

Nonetheless, the cost-cutting could not have happened without the full support of Khazanah Nasional Bhd, which took the airline private at 27 sen per share. But whether or not the moves were the right ones will most likely continue to be hotly debated.

Mueller was appointed to the board of the then MAS in March 2015 and made its CEO in May. Following the winding down of the company, he assumed the post of group CEO at the new operating company, MAB, in September 2015. Mueller’s appointment was also an issue with some quarters who were not comfortable with the fact that a non-bumiputera was heading the national carrier. The rest, as they say, is history.

Though Mueller had previously turned around Belgium’s Sabena and Ireland’s Aer Lingus, there were still concerns about his ability to revive a premium full-service airline.

He was given three years to steer the beleaguered airline back to profitability by executing a RM6 billion restructuring plan that Khazanah had mapped out.

The status of the restructuring

According to Mueller, about half of the RM6 billion has been spent by MAB, partly on redundancy cost due to the termination of 6,000 of the 20,000 workforce. The total redundancy cost is still being worked out and should be finalised by August, he says.

The remaining RM3 billion will be utilised to improve MAB’s products, including new business class seats and WiFi on board, and to refurbish its airport lounges.

All of MAB’s 15 A330-300 aircraft will feature the new business class seats, which will be introduced in April. They come with increased working space and 90% of them will have direct aisle access and extra stowage space for personal items.

When asked whether the funds provided by Khazanah are enough, Mueller says it seems to be at the moment, although further depreciation of the ringgit could affect the restructuring plan going forward.

“We had to change the plan so that the money would be sufficient. For example, there was a plan to build a new building next to the airport and to buy new aircraft but I scrapped that. I have taken off a lot of expenses from the plan because otherwise the money would not be enough,” he remarks.

The fact that Mueller was able to make changes to the restructuring plan and Khazanah approved MAB’s new business plan in December shows that the sovereign wealth fund will allow the board to make its own decisions wherever it sees fit.

Some critics say MAB picked the low-hanging fruit by cutting costs and that there is no concrete plan to grow the group’s revenue.

Mueller’s response is that since MAB is only into its fourth month as an operating entity, there are a lot of things that have been planned that have yet to be executed.

“Yes, I fully agree that we are just starting on our five-year turnaround. We are just four months in and there is still a lot to do. We need new seats, we want to promote on board our aircraft the good food of Malaysia.

“So, we have many ideas and we have more than 200 projects. Have they all been implemented? No. We are just starting on them,” says Mueller.

As widely discussed, MAB will now focus on growing its Asia-Pacific operation, especially to Malaysia’s largest trading partners.

Despite Malaysia Airlines’ tarnished image in China due to the disappearance of MH370 in April 2014, Mueller says MAB is working hard to repair its reputation there. He claims to have seen an improvement in the load factor of Malaysia Airlines’ flights from China.

“We have huge marketing efforts in China and a really strong sales force. As a result, people are coming back. We have increased our China load factor significantly, and it is not just the business people but more and more tourists.

“Yes, we have had to deal with our reputation but you cannot just sit and wait. You have to go down and really explain that we are not MAS, that we are a new airline, that we have a new operating certificate … It is not easy but we really do see an improvement in China.”

As MAB scales back its long-haul operations outside Asia-Pacific, it has become highly dependent on its regional network, and the importance of China in MAB’s strategy cannot be overemphasised.

“We are confident that with the support of our hub here in KLIA, we can develop new markets that are much more important than the European market in the future. Malaysia’s trade with China is so much larger than with any country in Europe.

“We also see our obligation as the national carrier to connect Malaysia’s resource regions, where trade and tourism with China are very important. You have to follow the market,” says Mueller, commenting on MAB’s strategy to focus on Asia-Pacific.

MAB will set up local bases in seven other airports across the country, including the Penang International Airport and the Kota Kinabalu International Airport (KKIA). The latter saw several China-based airlines fly in directly from Shanghai and Guangzhou last year.

AirAsia Bhd will add Wuhan to its destinations within Greater China, which it will serve out of KKIA from Jan 22, besides Guangzhou, Hangzhou, Hong Kong, Shenzhen and Taipei. Malaysia Airlines flies to Shanghai and Taipei from KKIA.

Malaysians, time and again, have dealt with disappointment over the performance of government-linked companies (GLCs). Thus, over the years, any talk of reviving a GLC has been met with scepticism. This is more so with regard to the restructuring of the national carrier, which began after the 1997/98 Asia financial crisis. Like it or not, Malaysians are unconvinced that Mueller can turn MAB back into one of the most respected airlines in Asia.

But as the saying goes, the proof of the pudding is in the eating. Malaysians are waiting for Mueller and his team, with the support of Khazanah, to turn around the national airline and restore it to its former glory.

Can the wau bulan fly high again and compete against the likes of Singapore Airlines and Cathay Pacific? “We will have to take good care and rely on our fantastic workforce, and we have to recognise what they do. Then, we’ll see where it takes us,” concludes Mueller.

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