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| Qantas: MRO talks with MAS off |
| Written by Doreen Leong | |||
| Monday, 13 April 2009 00:00 | |||
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“Qantas is not pursuing any further discussions on a potential MRO joint venture with MAS,” Qantas spokesman Joe Aston tells The Edge via email. He did not specify when and why the talks between the two airlines fell through. MAS, in an immediate response to the Qantas statement on the aborted talks, maintains that it is still discussing the MRO JV with the Australian carrier. MAS’ senior general manager of engineering and maintenance Mohd Roslan Ismail tells The Edge that the memorandum of understanding (MoU) for the setting-up of the MRO JV ended last month. “We are discussing an extension of the MoU with Qantas but have yet to come to an agreement,” he adds. The statement by Mohd Roslan mirrors what the national carrier announced to Bursa Malaysia on March 27. It stated then that the MoU between MAS Aerospace Engineering (MAE) and Qantas had expired but that both parties were still working on the details of the JV. To recap, MAS had signed a MoU with Qantas in December 2007 to set up a JV company to provide airframe maintenance services from Malaysia. MAS had said the JV would help develop Kuala Lumpur as a hub for MRO services in Asia-Pacific. Former Qantas CEO Geoff Dixon had said then that Qantas wanted to capture the growing Asia-Pacific MRO market, which was expected to reach US$15 billion (RM54.2 billion) in sales by 2016, and do overflow airframe maintenance for Qantas and its subsidiary airlines. He said Qantas Engineering was supposed to provide significant input for the management, engineering and quality system of the new company, which was targeted to commence operations in 2008. Dixon also said the venture would be built on the A$300 million (RM772.7 million) investment Qantas had previously committed to its Australian engineering operations. Qantas had, for many years, contracted overflow engineering work to a variety of MROs in Asia and an operation in Malaysia would provide the opportunity to consolidate some of this work while providing further growth for the Qantas group. However, Qantas saw a change of management in November last year. Alan Joyce succeeded Dixon as CEO following the latter’s retirement at the conclusion of the Qantas AGM on Nov 28 last year. Joyce beat CFO Peter Gregg and group executive general manager John Borghetti to the high-profile job. However, last Tuesday, it was reported that Borghetti would be leaving the airline next month after 36 years of service. MAS Engineering & Maintenance, which is part of MAE, is a leading aircraft maintenance repair and overhaul organisation, with over 35 years of experience. MAS E&M has more than 80 customers, including Lufthansa, Saudi Arabian Airlines, Jet Airways and Austrian Airlines. Indeed, if talks with Qantas are off, it would be a setback for MAS which is looking at growing its MRO business. Many airlines are trying to expand their revenue source to cope with the challenging operating environment. MAS’ executive director and CFO Tengku Azmil Zahruddin had previously said that MRO was targeted to contribute some RM400 million to the company in 2008 versus RM300 million in the previous year. Like most other companies, MAS has been buffetted by the current economic downturn, which has reduced global travel. For FY2008 ended Dec 31, MAS’ net profit fell to RM244.3 million from RM851.4 million previously while revenue remained flat at RM15 billion. While its talks with Qantas are uncertain, MAS has had better luck with its Indian counterparts. On Feb 27 this year, it sealed an agreement to set up a 50:50 JV airframe MRO company in Hyderabad, India, making this the first MRO venture overseas for MAS. The airline hopes to capture half the Indian MRO market in the long run. MAS entered into the MoU last August with India’s GMR Hyderabad International Airport Ltd, a JV held by GMR Infrastructure Ltd (63%), Malaysia Airports Holdings Bhd (11%), Airports Authority of India (13%) and the Government of Andhra Pradesh (13%). This article appeared in the Corporate page, The Edge Malaysia, Issue 750, April 13-19,2009.
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