In August 2011, loss-making flag carrier Malaysia Airlines (MAS) and AirAsia went into a share-swap deal that promised synergies and growth for both rival Malaysian carriers in Asia’s nascent open skies regime.
There was no mention of how it would benefit consumers, leading the Malaysia Competition Commission (MyCC) to investigate the now-aborted deal and slap a RM10-million fine on each carrier.
Both airlines have said they would appeal against the ruling, with Asia’s largest budget carrier AirAsia grumbling that MyCC should look at other monopolistic corporations such as Malaysia Airports Holdings Bhd, which runs all airports except one in Malaysia.
“When businesses agree to share markets, they are agreeing to stop competing at the expense of the consumers,” MyCC chairman Tan Sri Siti Norma Yaakob said in her statement on Friday.
Left unsaid is the role of those who made the deal possible, from state sovereign wealth fund Khazanah Nasional Berhad, which had shares in both airlines, and even merchant bank CIMB, which advised the deal.
Are MAS and AirAsia the only ones carrying the can for this deal but not the elite army of consultants who worked on the share swap without realising it would flout business rules?
The fact is, it took so many meetings and possible deals to make the share swap finally make sense to both rival carriers. Both did not go willingly to the table but the realities of air travel made them band together to compete with others – at the expense of Malaysian travellers.
Under the 2011 deal, AirAsia’s biggest shareholder Tune Air would take a 20.5% stake in MAS while Khazanah would hold 10% in AirAsia. After the restructuring, MAS would dominate the premium travel airspace and AirAsia the low-cost service, allowing each to focus on their respective markets.
“Why do we do this? I think we can make a lot of money,” AirAsia chief executive Tan Sri Tony Fernandes had told reporters at a briefing to announce the share swap.
“I would say the indications are quite positive and that there are many synergies to be had from the collaboration, such as procurement, learning from each other’s strengths and co-branding, but the collaboration is a necessary, rather than sufficient, condition for success,” Khazanah managing director Tan Sri Azman Mokhtar said a month after the deal was signed.
But the share swap was unwound eight months later due to opposition from MAS workers and politicians who felt it benefitted AirAsia more than the national airline.
Even then, the regulators did not investigate the events that led to the soured deal. MAS and AirAsia lost time and money but the consultants and merchant bankers were paid, although the results were less than sweet.
Perhaps it is time for other regulators and the Public Accounts Committee (PAC) to move in and put Khazanah and other government-linked companies (GLCs) under the spotlight for their business practices.
The PAC should review how these GLCs hire consultants and banks to carry out mergers and acquisitions and other deals that later cost rather than bring in money.
After all, it is public funds that have led to the creation of Khazanah, MAS and other GLCs. And Khazanah’s money is in both MAS and AirAsia, and for that matter, CIMB.
Both airlines are public-listed companies. Their shareholders need to know that the share swap was scrutinised to comply with all laws and regulations, not face a fine years later because someone overlooked the anti-trust elements of sharing resources and markets.
MyCC has done its part in protecting the Malaysian consumer. Now it is time for Putrajaya or PAC to do its part in protecting the Malaysian taxpayers’ monies. – September 8, 2013.
