TF didn’t tell the whole truth about AirAsia X & RAS

Updated: 25-10-2011 Please read the article quoted from Business Time report dated 21-7-2006 – AirAsia not the ‘golden child’. You will see from this report how AirAsia got all the helps (i.e. AirAsia was given 91 trunk routes and etc) from the Badawi’s Administration under the so-called “domestic air rationalisation exercise” and AirAsia grew at the expense of MAS.

Below was what Tan Sri Tony Fernandes had been reported to have said as reported by the Star on 26-4-2007 when the then Minister of Transport, Datuk Chan Kong Choy, announced that FAX/AirAsia X Sdn Bhd had to return the Rural Air Services (RAS) in Sabah and Sarawak to MAS.

“Fernandes said FAX would be launching AirAsia Long Haul operations soon, and that it would be too distracting to operate turbo-propeller aircraft as well.”

At the material time, Tan Sri Tony Fernandes didn’t tell the nation the whole truth that FAX has failed to perform the RAS satisfactorily for Sabah and Sarawak. It was one of the most misleading statements to say the least.

The full Star report is reproduced at the end of this article

In 2006 Tan Sri Tony Fernandes/AirAsia Bhd lobbied so hard for RAS during the Badawi’s Administration. RAS was taken away from MAS and granted to AirAsia Bhd. Thereafter, AirAsia Bhd subcontracted RAS to Fly Asian Express Sdn Bhd aka known as FAX and now known as AirAsia X Sdn Bhd.  On 2-10-2011 Tan Sri Tony Fernandes also claimed in his interview with AgendaDaily online that he got very little helps from the Badawi’s Administration. Yours truly leaves it to you to judge whether Tan Sri Tony Fernandes was telling the truth.

Remember Badawi’s Administration specially built LCCT costing a total of about RM250 millions, AirAsia Bhd was given special “rights” to owe Airport Taxes amounting to about RM125 millions, after AirAsia Bhd was granted RAS it was granted a subsidy of about RM180 millions and was then allowed to subcontract RAS to a newly incorporated company called Fly Asian Express Sdn Bhd now known as AirAsia X Sdn Bhd. After FAX’s failure to perform RAS satisfactorily and changed its name to AirAsia X Sdn Bhd it was granted international flights to  London, Melbourne, Perth, Brisbane, Mumbai, New Delhi, Taipei, Beijing and Shanghai in competition with MAS.

The prominent shareholders of AirAsia X Sdn Bhd via Aero Venture Sdn Bhd are:

• DATO KALIMULLAH MASHEERUL HASSAN  14, 835, 900 shares
• LEE KIAN ONN                                               13, 720, 666 shares
• TAN SRI ANTHONY FRANCIS FERNANDES   33, 855, 194 shares
• DATO’ KAMARUDIN MERANUN                      65, 375, 587 shares  

In the first place, why must AirAsia Bhd be relying on the government for helps when it is not our national carrier and profit maximisation orientated without having to perform national service or duties as our nation ambassador where profitability was never the main priority. We have been told that it has been doing extremely well with huge profits year in year out. Of course, it was never highlighted in all the press reports that a big chunk of AirAsia Bhd’s profits were from un-realised forex gained which could have also resulted in losses due to exchange rate.  Read AgendaDaily online report HERE.

Did Tan Sri Tony Fernandes tell the truth about why FAX/AirAsia X Sdn Bhd gave up RAS?  The answer is a NO. Tan Sri Azman Mokhtar knew or ought to have known that what Tan Sri Tony Fernandes said in 2007 was not the truth. At the material time, Tan Sri Azman Mokhtar and/or YB Tan Sri Nor Mohammad Yacop, the then very powerful Minister of Finance II,  knew of how FAX/AirAsia X Sdn Bhd screwed up the RAS in a very short period of eight months and how six aircraft were not maintained or poorly maintained and another six aircraft were cannibalised for spare parts. The extremely poor RAS provided by FAX/AirAsia X Sdn Bhd have resulted in complaints and protests from the Sabah and Sarawak State Governments, Sarawak Tourism Board, politicians and members of the public.

Tan Sri Tony Fernandes said statement was to make him and AirAisia X Sdn Bhd looked good. The then Minister of Transport YB Datuk Chan Kong Choy, who has been implicated in the PKFZ scandals and was charged in Court recently for three counts of cheating, was fully aware of the inability of FAX/AirAsia X Sdn Bhd to provide proper RAS for the people of Sabah and Sarawak. The situation got worse when MAS discontinued all its technical and operational supports to FAX/AirAsia X Sdn Bhd from 26-2-2007.  After March 2007, the RAS under FAX / AirAsia X Sdn Bhd were from bad to worse. 

In April 2007 the then Minister of Transport Datuk Chan Kong Choy stepped in to rescue FAX / AirAisa X Sdn Bhd by announcing that MAS had to take over the RAS. Presumably, the announcement was meant to save FAX/AirAsia X Sdn Bhd/Tan Sri Tony Fernandes of the embarrassment.

Backgrounds of FAX’s RAS in Sabah & Sarawak and AirAsia X Sdn Bhd:

1. On 19-5-2006 Fly Asian Express Sdn Bhd aka FAX was incorporated.
2. At the material time, FAX has no experience whatsoever in operating an airline business.
3. AirAsia Bhd / Tan Sri Tony Feranndes lobbied and the  Badawi’s Administration granted the RAS. Subsequently, AriAsia Bhd subcontracted RAS to FAX. 
4. Thereafter, the Badawi’s Administration also granted FAX a very valuable Air Operation Certificate (AOC), without which no company can operate an airline business. A company had to satisfy the Department of Civil Aviation (DCA) its financial standing, proper work force, system and technical knowledge of operating an airline. At that material time FAX could not have satisfied the conditions as as it was just been incorporated.
5. The Badawi’s Administration gave it or AirAsia Bhd a subsidy of RM180 millions. The subsidy was paid in one lump. Your truly will table a question in Parliament to find out who actually received the said subsidy.
6. On 1-8-2006 FAX officially took over the RAS from MAS  but MAS carried on to provide technical and operational assistance.
7. On 26-2-2007 MAS discontinued its technical and operational support for FAX.
8. After 26-2-2007 FAX could not satisfactorily perform the RAS as it has no technical and operational support from MAS resulting in very erratic RAS.
9. The Badawi’s Administration received too many complaints from the Sabah and Sarawak State Governments, politicians and members of the public regarding the extremely poor RAS by FAX and the Badawi’s Administration had no alternative but to dump the RAS back to MAS, the nation’s step child.
10. On 26-04-2007 the then Minister of Transport, Datuk Chan Kong Choy, announced that FAX will cease operating the RAS and MAS to take over.  
11. Thereafter, MAS took over RAS and commissioned Stork Fokker to do the inspection of the twelve aircraft before it resumed RAS.  
12. At the time of the start of the said inspection six out of the twelve aircraft were grounded awaiting parts or maintenance, and consequently only six aircraft were in service. Components and parts are being canabalised from the grounded aircraft.
13. After the completion of the said inspections, it cost MAS RM35 millions to refurbish the aircraft. Yours truly believes that Tan Sri Azman Mokhtar was aware of the said inspections and the reports by Stork Fokker dated 3-7-2007.    
14. On 21-09-2007 FAX changed its name from Fly Asian Express Sdn Bhd to AirAsia X Sdn Bhd. The Badawi’s Administration granted AirAsia x Sdn Bhd international routes including London, Melbourne, Perth, Brisbane, Mumbai, New Delhi, Taipei, Beijing and Shanghai in competition with MAS.
    
15. On 9-10-2011 Tan Sri Azman Mokhtar announced that the secret MAS – AirAsia share swap was inked between Khazanah Nasional Bhd and Tune Air Sdn Bhd and that Khazanah has the option to purchase 10% of AirAsia X Sdn Bhd despite the AirAsia X Sdn Bhd’s RAS track records. He also said that investment banker Stanley Morgan has been commissioned by Khazanah tocarry out a valuation exercise on AirAsia X Sdn Bhd.
16. On 16-8-2011 during the meeting with bloggers Tan Sri Azman Mokhtar, after being pressed questioned, declared that the AirAsia X Sdn Bhd was a “DODGY” deal.  
17. Since September 2007 AirAsia X Sdn Bhd’s history was rewritten as we can see from AirAsia Bhd’s website regarding its corporate profile. Below was the new corporate profile of AirAsia X Sdn Bhd: 

“AirAsia X

Focusing on the low-cost, long-haul segment – AirAsia X was established in 2007 to provide high-frequency and point-to-point networks to the long-haul business. AirAsia X’s cost efficiencies are derived from maintaining a simple aircraft fleet and a route network based on low-cost airports, without complex code-sharing and other legacy overheads that weigh down traditional airlines without compromising on safety. Guests continue to enjoy low fares, through cost savings that we pass on to our guests.

AirAsia X’s efficient and reliable operations are fully licensed and monitored by Malaysian and international regulators, and adhere to full international standards. AirAsia X is committed in offering X-citing low fares, X-emplary levels of safety and care, and an X-traordinary in-flight and service experience to all our guests – spreading the amazing AirAsia experience to X-citing destinations in Australia, New Zealand, China, Taiwan, Japan, Korea, India, Middle East and Europe.”

 It was history rewritten with no references to Fly Asian Express Sdn Bhd aka FAX or RAS or it is a different legal entity to AirAsia Bhd and that it is not a member of IATA, therefore, it was not subjected to the IATA stringent Safety Audit like MAS and other IATA members.  Read HERE for the AirAsia X’s corporate profile.

Under normal circumstances when an airline operator has been found to be financially and/or technically unsound and/or unable to carry out its operation, the Government through its Department of Civil Aviation is duty bound to nullify the Air Operation Certificate (AOC) but not in the case of FAX/AirAsia X Sdn Bhd. Instead FAX/AirAsia X Sdn Bhd was awarded with numerous international routes by the Ministry of Transport. Routes were granted as though the Ministry of Transport has no record of AirAsia X Sdn Bhd FAX/RAS days. It was a case of WILLFUL BLINDNESS of what had happened to the RAS under FAX/AirAsia Sdn Bhd. There was no demand for the refund of the subsidy of the RM180 million on a pro rata basis, as the contract was terminated prematurely,  from AirAsia Bhd or AirAsia X Sdn Bhd by the Badawi’s Administration.

Furthermore, with the track records as reported by Stork Fokker dated 3-7-2011 the Department of Civil Aviation (DCA) did not nullify the Air Operation Certificate (AOC) of AirAsia X Sdn Bhd. Yours truly believes that no positive actions have been taken by MAS or Khazanah to recover the RM35 millions from AirAsia X Sdn Bhd for refurbishing the un-airworthy aircraft.    

Read HERE for similar incidents in other less developed country like Nepal where four of its low cost airlines (Air Nepal, Alpine Air, Muktinah Airlines and Gorkha Air) have its Air Operation Certificate (AOC) nullified on 17-7-2010.

Despite the above state of affairs of FAX / AirAsia X Sdn Bhd, its AOC was in tact and were awarded with international routes by the Badawi’s Administration.  Yet, Tan Sri Tony Fernandes said that he got little helps from the Badawi’s Administration. 

Below is the report of Datuk Chan Kong Choy’s announcement.

Star, Thursday April 26, 2007

Rural services back to MAS

By SIM LEOI LEOI and PAUL CHOO

PUTRAJAYA: It has come a full circle – the rural air services will be taken from Fly Asian Xpress(FAX) and handed back to Malaysia Airlines(MAS).

Transport Minister Datuk Seri Chan Kong Choy, who announced this Cabinet decision yesterday, gave assurances that it would not affect MAS’ turnaround plan.

“We have gone through the proposal and recommended to the Cabinet that MAS via its subsidiary Firefly be appointed to take over the rural air services.

“We also agreed that the provision of such services is the Government’s responsibility and a type of social service so we will continue subsidising the cost of running these operations, which amount to RM60mil per year, to maintain the low-fare structure.

“Officers from both my ministry and the Finance Ministry will go through all the details of the subsidy,” Chan told reporters at his office.

It has been less than a year since MAS handed over the rural air services to AirAsia, which then subcontracted them to FAX.

Earlier this month, FAX shareholder Datuk Tony Fernandes proposed that Firefly take over the operations of all rural air services, citing it as the “logical thing to do”.

Fernandes said FAX would be launching AirAsia Long Haul operations soon, and that it would be too distracting to operate turbo-propeller aircraft as well.

On Tuesday, MAS managing director Idris Jala said it would consider taking back the service if it did not jeopardise the national carrier’s turnaround plan.

“To be fair to MAS, as a public listed company, the proposal will be brought to its board for consideration. However, I have already spoken to MAS’ top management and they are prepared to look into it.

“But this is the Government’s decision. The takeover of these services will be a separate exercise from its restructuring plan. The Government will be responsible for any profit and loss incurred by MAS for the provision of these services,” he said.

In response to this latest development, Idris replied in a statement that they had just been informed of the decision and would await details from the ministry.

“Once the details are received, we will need to study them before making a decision,” he said.

FAX chief operating officer Raja Mohd Azmi Raja Razali said they were pleased with the announcement, as it would enable them to work together with Firefly on a seamless handover.

“My main concern is with the staff in Sabah and Sarawak. They have my assurance that we will take care of them in the eventual transfer.

“All employees based in Miri and Kota Kinabalu will have the option of joining Firefly or AirAsia Long Haul,” he said in a statement.

He added that this resolution would allow AirAsia Long Haul to concentrate its efforts in making the company the world’s first long-haul low-cost airline.

According to Bernama, Sarawak Tourism Board chief executive officer Gracie Geikie said it would be a big help towards reinstating tourism destinations in the state’s rural areas on the global map.

“As it is 100% owned by MAS, Firefly is in the best position to take over the service,” she said.

She said tourism players in the state went through an “expensive experience” after FAX took over the service.

In Kota Kinabalu, acting Sabah Tourism, Environment and Culture Minister Datuk Karim Bujang said the step would not only greatly benefit the people living in rural areas but would also help boost tourism.

Read HERE for the Star report.