This article first appeared in The Edge Malaysia Weekly on September 11, 2023 - September 17, 2023

Last week, Malaysia Aviation Group Bhd (MAG) group managing director Datuk Captain Izham Ismail came out to say that the airline group was prepared to bite the bullet and cut ties with its long-time catering partner Brahim’s Food Services Sdn Bhd (BFS) even if it means facing a backlash from passengers for disruptions to their in-flight dining options.

This follows months of negotiations for a contract renewal, with neither side willing to give in, so an agreement could not be reached.

Although there have been plenty of complaints made against Malaysia Airlines Bhd (MAB), a wholly-owned subsidiary of MAG, since the termination of the contract on Aug 31, the move is viewed as a step in the right direction even though the national carrier should have been better prepared to deal with the transition to new food and beverage providers.

Indeed, MAG’s board of directors and management’s determination to end an agreement that was deemed lopsided earned them praise, particularly for a national carrier that has been chastised in the past for its history of bailouts that amounted to RM28 billion at end-2020. “If we don’t have the courage to take on legacy contracts, then why do you need me as a CEO?” its group MD was quoted as saying.

MAG is not alone when it comes to government-linked companies (GLCs) with lopsided agreements of the past. Take the Ministry of Defence’s failure to protect the government’s interest when it entered into a lopsided contract with Boustead Naval Shipyard Sdn Bhd in a RM9.13 billion project to build six littoral combat ships in 2011. Not a single ship has been delivered as promised.

It is hoped that MAG’s latest action serves as an example of how GLCs should start looking at addressing the issue of unfair terms found in their contracts, especially those that favour certain parties with political clout, and leaving taxpayers to bear the brunt of the losses when the GLCs need to be bailed out.

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