What now for troubled MAS?

There is an interesting suggestion that Prime Minister Tun Dr Mahathir Mohamad would like to shut down, bail out or sell off Malaysia Airlines (MAS).

The correct question here is not why you would sell MAS off but why wouldn’t you? The national carrier loses huge amounts of money, has a near unpayable debt and requires continual government subsidy.

Those politicians and analysts with all good reasons might want to change the management, but my thinking is that they’re not killer arguments in favour of a sale.

For if it was possible to gain good management by appointing the likes of Tony Fernandes to turn MAS over and a revival while still in public ownership, this would not benefit the taxpayers.

Even if he was there, he won’t be able to turn around the airline, the airline would turn around them instead.

What’s happening is that we’re being shown the value of having government as the owner.

What actual people doing the actual valuing think of the value of government as the owner – it’s bad. As to why, that should be obvious too. Governments are run by politics, they run things by politics. And politics isn’t the way to run a business, the value of doing so is negative. So, politics intrudes upon the running of a business, the business is worth less.

No, instead, the point of at least trying to sell off MAS is to find out whether there is any value in having MAS at all.

Of course, MAS still claims to have maintained discipline in turnaround plan obligations even though that actually could be a different ball game altogether.

By most accounting standards, MAS has terrible losses and debt in fact. But accounting standards aren’t the be all and end all, not at all.

At least some of the value of the great legacy airlines lies in their landing slots at airports in other countries. Ones at Heathrow have significant value, those at, say, Gladstone, do not.

These values are not reflected in those standard accounts on the basis that it’s difficult for an airline to monetise them. But it’s possible that a buyer would value them sufficiently to take over the entire operation.

But the real point is to find out whether MAS actually has any value. If no one wants it at any positive price at all then that’s an indication that the existence of the airline is a drain upon the wealth of us all.

MAS, then should not have existed in the first place. If no one does want to buy it, the correct solution is simply to close it down.

There is no economic or financial rationale in maintaining it in its current condition. A loss-making business can’t continue indefinitely.

Now, in the absence of an investment lifeline and government subsidy, MAS surely will go bust.

Well, yes, there are talks, just talks with prospective investors from all over the world searching for someone who is able and willing to cover losses in the bad times, and get the profits for in the good times.

But we know very well that we shouldn’t take very seriously what people actually say because of revealed preferences.

That is, what people actually do is a very much better guide to what they value and how they feel than what they might say about anything.

If the investors are in then they can be in anywhere in the airline business, if they are not from the airline, then MAS too should be welcoming them to invest.

Otherwise, this is odd really because it is like we forbid the investors not to contribute something to the airline’s wellbeing agenda.

If running the airline was a goldmine then they wouldn’t be in trouble in the first place. And if it could easily be made so then there’d be someone shovelling in cash right now.

Thus, we can usefully assume that it’s not a goldmine and also that it’s not easy to make it one.

Obviously, companies are run by mere mortals, not everyone is going to get their calculations or, as is obvious at times, their hopes and dreams don’t come true, right.

So, some will foray into business and then go bust. But it’s that very going bust which gives us the confidence that we’re in a competitive market.

In spite of that some airlines do succeed like Ryanair and Easyjet because they both brought something new into the equation.

It was their new technologies which allowed them to lower costs. Is that nice?