Names:Idanazura Binti Junus and Mohd Haikal Hazman Bin Mohamad Sukri
Students ID: 13081161 and 14071500
Course Code: ENG 1014
Course Name: English for Business
Assignment: Argumentative/ Persuasive Essay
Weightage: 15%
Title of essay:
On 8 August 2014, Khazanah National announced plans to privatise Malaysia Airlines (MAS) in an attempt to revive the national carrier as it was struggling financially. Without doubt, the twin aviation disasters, MH370 and MH17, have also further contributed negatively towards MAS financials.
The former prime minister of Malaysia, Dr Mahathir Mohamad said that the national flag carrier should be privatised as it is running at a loss. The Malaysia Airlines System Employees Union (Maseu), on the other hand, strongly stated that they will only support the privatisation of MAS if there is to be a new management team.
In the past 12 years, MAS has undertaken about half-a-dozen restructuring exercises. Considering its current situation, the idea to privatise is seen as a necessity. In your opinion, can MAS turn itself around if it is now to be privatised? Why or why not? Justify your stand and support your arguments with reasons and examples. You should write between 600 and 650 words.
Instructor: Mrs Anuratha Murugagoo

On 8 August 2014, Khazanah Nasional Berhad (“Khazanah”) proposed an official petition to the Board of Directors of Malaysian Airline System Berhad (“MAS”) to handle a particular capital cutback and refund apply (“Proposed SCR”) of MAS’ ordinary shares. It shows the strategies of Khazanah National to privatise Malaysia Airlines (MAS) in an effort to recover the federal carrier while it was striving financially. Privatisation can be defined as the trade of public service to private business or the agreement activities of a public service through a private body. Currently, MAS faces financial problems due to the double air travel accident which is MH370 and MH17. Unfortunately, if MAS is now going to be privatised, it will create several problems to them. Financial difficulty will be the main problems for MAS if it is decided to be a private company. It is because the low financial incentives or subsidies will be provided by the government and this will cause the financial problems to the MAS itself. According to the Tan (2008), MAS faced financial problems before when it was privatised between 1993 and 2000. He stated that the long-term debt (LTD) of MAS raised extremely in 1993, 1994 and 1998 after privatisation took placed. In addition, he also declared that the average debt-equity ratio (total liabilities of the company divided by its total equity) rose from 1.02 before privatisation to 2.50 after the privatisation. Therefore, the financial difficulty can be harms for MAS if it is privatised due to large debt problem. Moreover,no guarantee for a good performance of the new leadership or management team can cause a serious problem for MAS. Khazanah National has announced in their media statement that they will conduct the huge changes in leadership team and there will be a new management team soon.However, there will be no guarantee that the new management team will have a better performance than the current management team. The recently challenge is the unit operating charges have continually keep on greater compared with unit income (income per accessible seat-kilometre). Thus, a new management team is not guaranteed can face this challenge if they are unexperienced and unskilled in managing airlines company.

When privatisation happened, MAS would be able to keep the profits and can improve efficiency and able to cut the cost. Before privatisation, average revex ratio (total operating revenue as percentage of total operating expenditure) of MAS have increased marginally from 100.1 to 102.2 after privatisation. MAS also get international passengers that increased from 4.7 million (before privatisation) to 6.5 million (after privatisation). (Malaysia Airlines 1992b).However, this argument is not valid. As be stated in Malaysia Airlines (1991–98), MAS’s operating profit as a percentage of operating revenue was below the international and regional average, and was at low level compared to SIA. Except for 1994, this figure deteriorated steadily until 2000. Average operating profit as a percentage of operating revenue declined from −0.07 to −0.40 after privatization, although the latter figure included the whole of 1997.This cause Tajudin Ramli, the previous owner before to sell the MAS to the government to minimize the loss. This show that although the privatization increased the MAS profits for a period of time, it was still low compared to other privatized airlines that might cause bigger loss to the company in the time. If the MAS wanted to be privatized, the company must be confident and be able to compete with other privatized airlines.(Tan,2008)

In conclusion, MAS should not be privatized because the airlines itself have limited financial sources if be privatized now in order to minimize the loss and still lack of managerial experience that might be the challenge to compete with other privatized airlines. The 4th prime minister, Dr Mahathir Mohamad already stated that “privatization of MAS does not make any differences because the Khazanah already own about 70 % of MAS share, which mean almost absolute control over”.

References List
BERNAMA.2014.MAS privatisation could be the best option for restucturing..New Straits Times.11 August.
Boeing Corporation. nd. Available at:
<http://active.boeing.com/commercial/orders/summaries.cfm> (access 02 November 2014)
Khazanah Nasional Berhad. 1993. Khazanah Proposes to De-list Malaysian Airline System Berhad. Available at: http://www.khazanah.com.my/docs/140808%20MAS20%KNB20%delisting%20media%20statement.pdf {Accessed 31 October 14}
Tan, J., 2008. Privatization In Malaysia: Regulation, Rent-Seeking, And Policy Failure/ Jeff Tan, n.p.: New York, NY: Routledge, 2008.,THOLweb Catalogue, EBSCOhost, viewed 31 October 2014.
The Sun. 9 March 2000.Water & Environment International. P .66.
Wong, W.S., 2014.Dr M mystified by Khazanah privatisation of MAS. The Star.12 August.