[COLUMNIST] Solving the Malaysia Airlines conundrum credibly

In August alone, three different flights heading to different destinations were diverted, either making emergency stops or returning to airports they departed from, three days in a row from the 20th to the 22nd of August (Malay Mail, 2024). Shortly after, another flight inbound from Seoul to Kuala Lumpur was cancelled (Free Malaysia Today, 2024).

The amount of diversions and cancellations within two weeks is unheard of for any airline, which causes particular concern over what has happened to our national airline.

Prior to the last flight cancellation, the managing director of Malaysia Aviation Group (MAG), the parent company of MAB, announced that they would be cutting airline frequency by 20% due to global shortages of spare parts, receiving fewer aircraft than they were supposed to, and losing maintenance, repair and overhaul (MRO) staff to their competitors (Malay Mail, 2024a).

This led to some politicians claiming internal sabotage by the government when the government decided to lease two hangars in Subang to SIA Engineering Company (SIAEC) at the end of 2023 without restrictions barring them from poaching MAB’s employees (Free Malaysia Today, 2024a).

While the loss of MRO staff undoubtedly impacts MAB’s overall performance, it is unfounded to claim that the government has sabotaged the group by leasing hangars to a foreign company without restrictions. This situation should not be seen as systematic poaching by competitors but rather as a reflection of MAB’s inability to offer competitive benefits to their employees, prompting them to seek better opportunities elsewhere.

The claim of poaching remains unverified, with no evidence beyond job advertisements on social media. If any act of hiring could be interpreted as poaching, how will a foreign company field its workforce in our country without fear of repercussions?

Even if there is an agreement barring foreign competitors in Malaysia from poaching local talent, individuals who feel wronged by management or inadequately compensated for their skills and expertise could still seek opportunities overseas, as millions of Malaysians in other fields have done. The brain drain problem in Malaysia has been profound for decades.

Furthermore, such a restrictive measure would deter foreign establishments in our country and be anticompetitive (unhealthy for our industry), creating a labour monopoly favouring local companies. This could ultimately harm Malaysians by limiting their employment opportunities and stifling innovation and economic growth.

The main focus of MAB’s issue should not be on the exodus of employees, but rather on MAB’s inability to compete with others despite the billions of Ringgits the government has provided to bail them out. In 2020, the then Minister of Finance, Tengku Zafrul Aziz, confirmed that up until 2020, the government had injected RM28 billion into MAB (New Straits Times, 2020).

With this much being spent without results to show, it is crystal clear that MAB has massive management and operational issues.

While MAG’s explanations for the constant delays and cancellations of flights are reasonable, MAB is not the only airline suffering from these problems. The shortages of parts and manpower are major concerns in the aviation industry worldwide, especially as the industry is reviving at a much faster pace than anybody expected. However, few have been hit as hard as MAB, which has had to cut its flight frequency by 20%.

Thus, the critical question that needs to be asked regarding MAB’s fate is: is it worth it to continue bailing out MAB, and how should it be done credibly?

The government has already spent a significant amount of money to bail out MAS and, later, MAB multiple times. Despite numerous attempts to reinvigorate the airline, all have faltered, with little outcome or impact shown. As such, the previous administration led by Dr Mahathir Mohamad floated the idea of shutting down MAB (The Edge, 2019).

Setting aside the Sunk-cost fallacy (i.e., we have already spent so much we have to finish saving it), getting MAB back up on its feet will certainly benefit the people, as it provides another choice of airline services and job opportunities.

Financially, the Minister of Transport, Anthony Loke, has stated that MAB’s current situation is in a good position (The Star, 2024). Thus, assuming that MAB would not put too much strain on our already stressful national coffers, it is reasonable to attempt to keep it in the air, but this time around credibly. EMIR Research has long time emphasised that all government bailouts must come with sensibility tests and a robust, neutral bailout framework to guarantee the maximum impact and outcomes for every cent committed (refer to “Technocratic legal bailout framework to arrest “bailoutpreneurship”).

Furthermore, there should be a limit on how far we go to keep it afloat, as our country is burdened with debt, and the current administration is striving to consolidate and rebuild our fiscal strength.

So, what needs to be done?

The decision to reduce the validity of MAB’s Air Operator Certificate (AOC) from three years to one year and require monthly reports to the Civil Aviation Authority of Malaysia (CAMM) is a step in the right direction.

Additionally, reducing flight frequency for selected destinations is the right decision to make. Although it might decrease the airline’s overall revenue, it is essential to ensure that every aircraft in the air is safe to fly. The last thing MAB need is an accident due to a technical malfunction caused by improper inspections resulting from a lack of engineers and technicians on the ground. Limiting flight frequency would allow more time for thorough inspections, preventing such disasters.

However, the above are just short-term solutions designed to keep the airline running a little longer. MAB needs to identify the root cause of the problems they are currently facing.

To address the lack of skilled workers to maintain their aircraft, a robust staff retention programme is essential to prevent more employees from leaving for better benefits. This should include not only better salaries but also other benefits such as work-life balance and performance-based job prospects, fostering a positive working environment that motivates staff.

In addition to MAB’s improved employee retention strategy, various ministries (including education, human resources etc.) should leverage the training programmes under MAB Engineering Services to attract more youth to join these programmes.

MAB could also offer graduates of their training programmes reduced course fees after being employed by MAB for a certain period. While this would reduce revenue from the training courses themselves, the long-term benefits would be much greater, helping MAB retain more staff.

Regarding the shortages of parts and aircraft, while this is a global issue, MAB should consider sourcing alternative parts such as used serviceable material (USM) instead of waiting for OEM parts, which can take a long time to arrive. This could be an effective cost-cutting strategy that not only keeps aircraft in the air but also reduces the carbon footprint by utilising parts that would otherwise go to waste.

MAB could also consider using third-party manufactured parts, known as Parts Manufacturer Approval (PMA) parts. The non-OEM parts, which received PMA from the Federal Aviation Administration (FAA) of the United States (US), are widely recognised for their OEM quality at a lower price.

The use of FAA PMA parts is also permissible by the CAAM under Civil Aviation Directive 8204 (CAD 8204). Thus, there is no reason to reject using PMA parts given the global shortage of OEM replacements.

Another source for aircraft parts is 3D printing, which has already proven to be extremely helpful in keeping aircraft functional, especially for older aircraft that no longer have parts being manufactured. It is cheaper, lighter, and has shown tremendous potential in aircraft MRO services, making it a perfect solution for parts shortages.

The utilisation of 3D-printed parts would also expose our aviation sector to the prospect of 3D printing in aerospace, and hopefully encourage further expansion within the industry, building on the presence of GKN Aerospace from Britain, which set up operations in Johor as early as 2018 (3D Printing Industry, 2018). This will also expand job opportunities for our highly skilled talents preventing them from becoming brain drain.

Lastly, it is important to reassess the MAG’s management board’s ability to strategically navigate aviation industry challenges. The shortages of parts and aircraft are not new; they have been a challenge since the world began recovering from the COVID-19 pandemic. Why is MAB struggling with this issue disproportionately compared to other airlines?

Furthermore, the leasing of hangars to SIAEC was publicised in 2022 when Impeccable Vintage Properties (IVP), a subsidiary of Khazanah Nasional Berhad, signed the non-binding Memorandum of Understanding (The Malaysian Reserve, 2022). MAG should have had ample time to work on employee retention!

There is no excuse, especially when Asia Digital Engineering (ADE), the aircraft MRO service subsidiary of Capital A, is thriving despite parts shortages and competition from SIAEC.

Regarding the issue of employee poaching, if regulations are introduced, it will be a significant challenge to balance between monopolising the labour market and maintaining free competition.

Malaysia cannot afford to sink any more money into the business. MAB, and by extension MAG, must step up, take responsibility for what has happened, and make credible improvements before it is too late.

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