A letter from Swiss

"P. Gunasegaram's column was interesting. MAS has a serious positioning problem; it should not offer low-cost fare while positioning itself as best airline. Its well-paying passengers will get used to lower fares, and ultimately to the fact that these fares pay for such service. So, the airline will not be able to increase the fares on the segment in future anymore.

Looking back five years, one can deduce which concept failed in Europe and which succeeded. Swiss Airlines tried for years to get business share from low-cost carriers Easyjet and Germanwings. But is this really what it wanted low-paying passengers on expensive routes? It eventually radically stopped this practice and has now become one of the most successful airlines in Europe.

MAS should position itself along its many strengths good service, better flight-times and better airports. Most importantly, MAS is one of the safest airlines on the planet! They have better safety records than Singapore Airlines and Thai or Cathay. Yet no one knows about it. The best kept secret is probably their best asset.

When Europeans or Americans travel through Asia (to Australia or any other destination), they normally look at safety standards. “Safest airline track-record in Asia” would quite likely pull passengers to MAS at least from the destinations they serve (Amsterdam, Rome, Paris, London and Los Angeles.).

MAS should use hard facts. They have it. “Safest airline in the world”. Of course, it needs to back this up. This would work better than using votes from a travel magazine."

Christoph, 
A Swiss living in KL

The article appeared in The Star on Saturday, 18th June 2011. 

"It is very heartening to read the letter which was written by a customer of Malaysia Airlines System (MAS) from foreign country. Nowadays, the airlines industry faces the challenging times, from rising oil prices to the competitions from the newbies. MAS is not either, facing the threat from low-cost airlines AirAsia Berhad in their home market.

MAS share price have been on the downwards for the wrong reasons. They post lost last quarter and have since received negative outlook from research houses. After so many skepticism from the analysts, at least this letter have shown that MAS is not bad at all. 

What I want to highlight here is that if we have special advantages, why not show to the others?  In this case, Christopher really like MAS because it is the safest among South East Asia airlines companies. This is a point that MAS should take note.

Foot Note: I like both MAS and AirAsia and still wondering where will be my next trip. =)

The curse of merger and acquisition

A Branch of RHB Bank. Courtesy of mypj.com.my.

Sometimes, becoming a bigger entity is bad. It is now an open secret that Maybank and CIMB are fighting to be the biggest bank, not only in Malaysia but South East Asia generally. The takeover of RHBCap will catapult CIMB to be the biggest bank in Malaysia, with an asset base of RM405 billion (as at 31st March 2011) while the Maybank-RHBCap combined will solidify their status quo as the biggest bank in Malaysia and SEA (in term of market value). 


The tussle had heightened up to a new milestone when the current shareholder,Abu Dhabi Commercial Bank (ADCB) sold their 25 percent stakes to their parent company, Aabar Investment PJSC yestersday. With a price tag of RM5.9 billion, the stakes are valued at 2.25 times of their book price which stands at RM4.79. Although the valuations are on the high side when compared to the recent banking M&A (Hong Leong Bank and EONCap mergers at 1.42 times), it deserves such premium as RHBCap is much bigger entity and the stakes are hard to come by. At a price of  RM10.80 paid by Aabar Investment, it seems difficult for both CIMB and Maybank to match the price.


However, the main objective that I would like to share is the effects to the customers. Could you imagine what will happen to man on the street if the M&A takes place? I believe that RHBCap should be left as an entity rather being merged with bigger banks. 


If you read articles by analyst, you will find words like "synergies, efficiency, higher profit and   potential expansion". But what happen to words like "duplication, interruption of service and monopoly" which will not be mentioned in the articles. As we could predict either CIMB-RHBCap or Maybank-RHBCap will have huge number of branch duplication. It is not economical to keep two branches side-by-side, resulted from the merging of the two banks. Therefore we will have less access to the bank branch. Besides that,  it is inevitable for staffs to be options to be retrenched as a part of rationalization of branches.

Combined banks will also have a bigger market share, which might give them a greater power to control the market by having less competition. I give you an analogy, let say you sell product A and your rival also sell the same product. Luckily, you manage to throw out your competitor and bought over their business. Therefore you can have greater market share and importantly control your product price, or even increase them since the competition is no more there. That is what I mean the effect to the customer.

The banks might be more selective to dish out loans, and chooses their customers. Since I am not analyst so I can see this clearly. Haha


Foot Note: This is just my humble opinion for our banking industry. I am not responsible to any damage that will be caused from my article . I would suggest that we should change to Islamic banking that have proved better compared to the conventional banking. =)