How to do business if Meritocracy is not welcomed?

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Oct 22 2007
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Meritocracy is perhaps the last word a government would like to hear that practice nepotism, cronyism or racism policies. You can bet your last penny such government would have pathetic policies implemented in large-scale ranging from education to corporate business. There’s nothing wrong with such policy except that it generated and will continues to generate walking zombies demanding 30 percent stake in your businesses, putting hurdles to successful companies out of jealousy to hinder it from progress further and using intimidation to force you to submit in the name of M&A (merger and acquisition).

Government-controlled media and even Tony Fernandes might be too scared to report or express it but the fact that the successful story of AirAsia Berhad (KLSE: AIRASIA, stock-code 5099) was put into the chamber of torture by both the national airlines Malaysia Airline System (KLSE: MAS, stock-code 3786) in a cohort of the Malaysia government only proves that meritocracy is not welcomed in the country. And Tony Fernandes is no foreigner mind you – he’s a Malaysian citizen.

MAS Hates AirAsia’s Success

Government-linked conglomerate DRB-Hicom (KLSE: DRBHCOM, stock-code 1619) initially thought the low-cost freight business was an easy one and could create another success story and score another bumiputra point. They ended up with two Boeing jets and $37 million in debt. Tony Fernandes bought the bankrupt-airline for a token of 1 ringgit (26 cents), assumed $12 million of Air Asia debts and transformed it into the most successful low-cost airline in the Asia. But the more successful Tony is and the bigger AirAsia grows the jealousy of MAS runs deeper.

Long story short, AirAsia was proposing to use the old international airport Subang as the country’s low-cost carrier terminal. However the government rejected the proposal justifying that the government wanted to make KLIA (Kuala Lumpur International Airport) a regional hub which means both premiums (MAS) and low-cost (AirAsia) services should be centralized within KLIA. In actual fact KLIA was boasted with first-class infrastructure but couldn’t see the traffic commanded by first-class airlines such as Singapore or Hong Kong it dreamt of. The government further justified that Subang airport would be used as a hub for aircraft maintenance, repair and overhaul activities.

Government’s Evil U-Turn Policies

Subang airport was strategically located compared to KLIA and you can see people grumbling with the huge costs and the lengthy time required to travel to KLIA. And both MAS and the government knew that granting AirAsia the permission to operate from Subang is tantamount to sending MAS to gallows. After AirAsia was relocated (it didn’t have an option) to KLIA, somehow MAS launched its own version of low-cost carrier in FireFly. The purpose was to give AirAsia a run for its money. AirAsia couldn’t be bother with the new startup as it was busy with its ambitious AirAsia X, the long-haul service which could cause MAS to press the panic button. AirAsia also asked for two daily flights to Singapore but was rejected point blank.
MAS drag AirAsiaBut to beat AirAsia you need more than just another cost-carrier service provider. And so not to make it looks so obvious the FireFly was launched at Penang as its “base”. It proved to be a temporary base all right. To AirAsia’s astonishment, FireFly was granted Subang as the new base to fly from but with the conditions that it could only serve routes not handled by AirAsia. Tony Fernandes heaved a sight of relieve, not that he can do anything being bullied. But MAS didn’t plan to stop there.

To rub salt into the wound, the Malaysia Cabinet now ruled that FireFly can now fly to the same places that AirAsia Bhd serves, out of the Subang airport. It was reported that FireFly is planning to buy bigger planes to fly to 25 local and regional destinations, mostly the same routes being serviced by AirAsia. In the battle synonym to David against the Goliath, it appears MAS is out for vengeance and won’t blink twice about crushing AirAsia to pieces.

MAS’s Jealousy & Government’s Inconsistency

Why the government is contradicting itself with the whole affair? Why Firefly suddenly given all the priviledges and advantages not granted during AirAsia’s earlier requests? Why a father (the government) would give sweets and chocolates to the second son (FireFly) but directed the first son (AirAsia) to bed without sweets when the first son asked for it in the first place? Could the whole plan is to kill AirAsia although Fernandes has done a fantastic job in putting the country on the world’s map? One wonders if the government would treat AirAsia the same way if it was started by another bumiputra company such as DRB-Hicom.
Meritocracy not welcomed in MalaysiaIt’s sickening to watch a successful local company being pulled by its nose not to move forward simply because MAS was badly managed. The simple plan was to reduce the success and failure gap and the easiest way is to see the other party collapse, never mind how the other party’s success was due to true meritocracy. But then nobody likes to see MAS suffered in losses in the first place. When you already decided to strip yourself naked and walk around the street then you can’t fault people for calling you cuckoo, can you?

Given choice, Tony would gladly sell off its stake at premium to MAS and watch with popcorns if the government-backed entity could further grows AirAsia, or rather bankrupts the company once again, the same way DRB-Hicom did it. I would avoid AirAsia stock for the time being.

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The only sympathy I have is for fellow travellers who have to go to KLIA.

Tony? Nope… he and his cronies have gotten so much already so zero sympathies. Besides AirAsia’s success is based on no comptetion because frankly the service sucks!

hello sovind,

consumers always lose out but strangely malaysian voters seem to enjoy it very much …

airasia might operates in “limited competition” environment within low-cost sector within the country but the competition from regional low-cost carriers are “real” …

furthermore, if airasia success is based purely on no-competition then i don’t know what you call those drb-hicom which couldn’t survive in the first place …

yes, the service sucks but if MAS could be threaten by such lousy service, can you think of the consequences and what might MAS do if airasia’s services are great?

cheers …

“frankly the service sucks”

Which airline are you benchmarking with? MAS or some other LCC airlines?

dear stocktube,

the following info might bother your ‘racist’self:

“AirAsia is a bumi controlled company”

fyi, tuneair sdn bhd, the controlling shareholder of Airasia is 52% owned by 2 bumi individuals (kamarudin and aziz). tony owns the remaining 48%. your sick mind always look at things from racial angle. the fact that the govt seems to bias towards MAS is totally not race-related.

get a life

hello anonymoous (Thursday, November 01, 2007 5:54:00 PM),

did i ever said airasia is no a bumi-controlled? which statement that made you think the article was based on race?

there’s a thin line between meritocracy and racial and obviously you chose the latter … maybe you can explain why your MAS is so sick even with monopoly status …

but then with your chain of thought, i can guess pretty well why …

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