MAS-AirAsia deal: A new monopoly in the works?

Opposition parliamentarians hit out at the MAS-AirAsia share swap deal, describing it as the birth pangs of another monopoly, which they fear, will further depress the quality of Malaysian air transport at the expense of the rakyat.

"It creates a monopoly, or at least an oligarchy. Monopolies are the single largest stumbling block in the process to reform the Malaysian economy," said PAS research department head Dzulkefly Ahmad (left).

He added that monopolies are distortions that concentrate the wealth of the economy into the hands of a chosen few. Because of the lack of fair competition, monopolies see little need to improve the quality of their products or services.

Dzulkefly pointed out existing 'monopolies', such as Media Prima's stranglehold on the terrestrial electronic media, Telekom Malaysia's grasp on the Malaysian Internet 'backbone' infrastructure and similar monopolies over sugar, rice and flour have been given to government 'cronies'.

"Fair competition in the air travel industry will create a better and more rewarding service environment," he stressed, adding that the deal between the two carriers would instead accomplish the opposite.

His views were echoed by DAP national publicity secretary Tony Pua, who had a deja vu moment.

Pua sees the deal as reminiscent of the days before 1999, when there was only one air travel provider.

"It can only result in the consumers losing out," he lamented.

Pua believes that the share swap will result in less options and reduce competition for Malaysian air travel.

"Tony Fernandes (right) (AirAsia CEO) will not compete too hard with the national carrier - it would be like killing himself, as he will have roughly 20 percent shares in it," argued the Oxford-educated Petaling Jaya Utara MP.

'Share swap not the medicine for MAS'

Dzulkefly, who himself graduated with a doctorate in philosophy from Imperial College London, said that whatever the deal is, a cure for MAS it is not.

"It is not the medicine MAS needs. If it is like this, it would seem that the medicine will kill the patient," joked the politician.

He posited that former MAS CEO Idris Jala's (right) work of reforming and reorganising MAS was far from complete prior to him being extricated to the then newly set-up government transformation steering agency Pemandu.

"We know for a fact that Idris' job in MAS was not done. Far from a complete turnaround, he just reorganised assets with 'creative accounting', the so-called widespread assets unbundling exercise. It made MAS look good and profitable on paper," said Dzulkefly.

He contended that what MAS needed was not a share swap with AirAsia, but more concrete reforms and a Fernandes of its own, or at least, another Idris to lead the way.

"What MAS needs is a man with acumen, experience and who is well-entrenched in the airline industry to lead the change. What they are doing is not addressing the problem and instead will end up shortchanging the public," warned Dzulkefly.

The PAS leader also questioned the timing of the exercise, which is being done just prior to the Competition Act 2011 coming into full effect.

The Act passed by Parliament at its last sitting, was drafted to restrict monopolistic practices in Malaysia.

"I think it is actually against the The Competition Act. The Act only comes into effect next year. Are they trying to circumvent it?" he asked.

Not at rakyat's expense

While acknowledging divestments of government-linked companies (GLCs) by Malaysian sovereign equity holding company Khazanah as a good thing, Dzulkefly stressed that it must not be at the rakyat's expense.

He argued that divesting the government's sovereign interest in MAS must take into account the fate of air travel in Malaysia.

More curiously, Dzulkefly noted that the practice seemed more like a 'bailout' of MAS by the cash rich AirAsia. What was strange he added, was that the 'bailout' was by a competitor.

Though he noted that with MAS shares valued at about a third that of the AirAsia shares, Fernandes would have the upper hand as he will have to swap less shares for more of MAS', at a ratio of 1 to 2.5.

"He (Fernandes) will be laughing all the way to the bank," Dzulkefly claimed.

Khazanah has agreed to exchange some of its shares in MAS with AirAsia shares, giving Fernandes ownership of a major chunk of the national carrier while the national sovereign holding company will become AirAsia's newest shareholder.

Shares of both carriers have been suspended by the Kuala Lumpur Stock Exchange pending their announcements on the share swap deal.

Analysts said that both companies will gain from the swap, with MAS avoiding a head-to-head cut throat race with AirAsia, while the low-cost carrier will have more bargaining power for licences and air routes with Khazanah as its shareholder.