After launching the Business Turnaround Plan (BTP 1) in February 2006, Jala succeeded in turning around the airline in less than two years. MAS achieved a record profit of RM851 million in FY2007 ended Dec 31 versus a RM1.3 billion loss in 2005. One of his first few turnaround moves was to deal with the national carrier’s dwindling cash by selling its headquarters.

Prior to his appointment as managing director and CEO of MAS, Jala successfully led the business turnaround of Shell MDS (Malaysia), the first gas-to-liquid commercial plant in the world.

He was also the managing director of Shell Sri Lanka, where he helped shape the turnaround of Shell’s liquefied petroleum gas (LPG) business in Sri Lanka.

Between 2000 and 2002, he led a team of top-notch internal consultants and revamped Shell’s global retail business model in its bid to achieve profitable growth. Shell MDS and Shell LPG Sri Lanka saw a significant improvement in profits after Jala left the company.

But will it be the same for MAS given the current turbulence? Will MAS soar post-Jala?

Analysts are mixed on this development. Some believe that it will be business as usual while others view Jala’s exit to take up his appointment as minister as a great loss to the airline, which posted over RM400 million in operating losses in 2QFY2009 ended June 30.

The negative view on Jala’s departure is understandable given that the aviation industry is still mired in dwindling travel demand and fluctuating jet fuel prices. Also, Jala is seen as a one-man army who has the ability to transform an organisation from a “no-hoper” to a trendsetter.

MAS chairman Tan Sri Dr Munir Majid aptly puts it: “Idris (Jala) has been a remarkable CEO. His vision and drive, his passion and his indefatigable energy coupled with his transformation principles, have changed Malaysia Airlines.
He leaves behind a strong legacy and people transformed.”

Biggest fear
The biggest fear is that MAS will return to its old ways where cost ballooned, planes were bought at inflated prices, tickets sold at huge discounts and the airline always seeking government help.

This should not happen as Jala has put in work processes called standard operating procedures (SOPs) on how things should be done at MAS. These SOPs will be difficult to unwind or withdraw, unless it is done consciously by his successors.

With Tengku Datuk Azmil Zahruddin at the helm, it is highly likely that Jala’s SOPs will continue to be executed.

“So in some ways, it will be difficult for MAS to change course on the way it operates,” says an official familiar with MAS.

After all, Tengku Azmil worked closely with Jala in his capacity as  then chief financial officer to come up with the blueprint.

Note that Tengku Azmil has much experience in the aviation industry. Prior to his appointment as the executive director/CFO of MAS in 2004, he was the boss of Penerbangan Malaysia Bhd.

Replacing Tengku Azmil as CFO will be the airline’s fianace senior general manager Mohd Azha Abdul Jalil, sources tell The Edge.

Commenting on Tengku Azmil’s appointment, Munir said that over the past four years, Azmil and Jala have worked very closely to steer the airline out of its financial crisis and set the vision for Malaysia Airlines’ transformation into the world’s five-star value carrier. “Azmil has our full support, and the support of our 19,000- strong employees,” he says.

With Tengku Azmil as captain, MAS is almost certain to continue Jala’s five-year Business Transformation Plan (BTP 2), which features bold profit targets of between RM1.5 billion and RM3 billion per annum by 2012. The cornerstone of the plan is to turn MAS into a “five-star value carrier”, meaning a full-service airline at the price of a budget carrier.

To achieve this, MAS will have to lower costs, enhance yields and get the ratio between ticket price and load factor right. The plan eventually is for the airline to achieve positive returns for its shareholders even after factoring in the cost of capital.

Given the challenges in the airline industry, where many profitable airlines do not earn their cost of capital, achieving its targets under BTP 2 will be a tall order for MAS.

Under BTP 2, MAS wants to reduce its system-wide unit cost (CASK) to 14 sen per available seat km. It is far higher than the CASK for AirAsia which is about eight sen, but much lower than that of other full-service carriers.

The national carrier is already on track to achieve up to RM1 billion in cost savings this year, after saving some RM2.3 billion from 2006 to 2008.

Lower costs will enable MAS to reduce fares and survive the onslaught of other carriers, especially AirAsia X, which is also flying international destinations and could potentially eat into the national carrier’s domain.

While it is interesting to see how MAS will continue to perform without Jala, Tengku Azmil’s administration will be equally, if not more, intriguing. This is because it will be during his time at the helm that  BTP 2 matures.

And also, as the financial storm clears, it will be interesting to see how he steers MAS to greater heights by increasing its network, enhancing yields and possibly take on mergers and acquisitions (M&A).

Note that MAS will be getting a delivery of narrow-body planes at end-2010. The airline has also hinted at plans for M&A over the next few years.

Jala’s appointment as the boss of MAS in December 2005 to save the national carrier from the brink of bankruptcy has borne fruit as the airline is on a stronger footing today. However, there is still work to be done to ensure that what has been achieved can be improved on and is built to last, to ensure that MAS does not backslide into the frail position prior to its turnaround.

This article appeared in Corporate page of The Edge Malaysia, Issue 770, Aug 31-Sept 6, 2009.