Malaysian Airlines something amiss? - where is the Independent Administrator?Independent Advisor? MAB?

1MDB has been attracting much attention, maybe it is time to also look at our Malaysian airlines - something seems to be amiss there or maybe not?

MALAYSIAN AIRLINE SYSTEM BERHAD (ADMINISTRATION) ACT 2015 was hurriedly passed in Parliament and came into effect on 20/2/2015.

The ACT was said to be necessary to save our Malaysian Airlines - and to that there was the provision for the appointment of an Administrator - a person who really was independent ...and also an Independent Advisor... It is these persons that were supposed to work out the proposal to save our Malaysian Airlines... and only after the proposal has been accepted will  the new entity, MAB(Malaysian Airline Berhad), come into the picture...

But sadly, I have not seen any news report about the appointment of this ADMINISTRATOR - and suddenly we hear about MAB(Malaysian Airline Berhad) entering into catering agreements.... 

It seems that NO Independent Administrator or Independent Advisor was appointed? [Note when the Administrator was appointed, ROC was to be informed and all of us were also supposed to be informed by adverts in news papers (...notice of his appointment to be published in at least two national daily newspapers, one of which shall be in the national language...)

So, does that mean that it is still the MAS Board of Directors that are calling the shots... the very same people who failed us and put MAS into such a bad shape? 

Who then set up the new entity - MAB(Malaysian Airline Berhad)? Same people again... Why are agreements being signed before the Administrator comes into the picture...with the proposals

Malaysia Airlines Bhd (MAB) has awarded Brahim’s Holdings Bhd’s 70% owned subsidiary Brahim’s Airline Catering Sdn Bhd (BAC) new catering agreements (NCAs)...The company said the two parties had agreed that to avoid uncertainties in negotiations posed by the yet-to-be-appointed administrator over the existing catering agreement, or revisiting the terms...

Have the necessary 'check and balance' provided by the new law - i.e. the Independent Administrator...and Independent Advisor  totally been ignored?

If so, the whole proposal and everything that is being done to set up the new company, MAB may be tainted? The same persons who were responsible for the state of affairs in MAS are still in control? Should there be a Parliamentary Select Committee monitoring this transition...?

Looks like at the end of the day, workers and their unions will suffer - because already notices have gone out about impending terminations.... and re-hirings? 

The whole exercise should have been most Transparent - as it involves all Malaysians...but it looks like it is not. Same caterers - and they say that they have agreed to 25% price reduction... so, who agreed to pay them excessive prices before this for so many years? Same people? Makes one wonder, how much more could have been saved if there was an open tender...done by the Independent Administrator? Am not clear but it looks like this exclusive contract expires only in 2028?  

Read again the Star report - all it says is that airlines catering cost will go down by 20-25% - well, that may not be because of price cuts - it could be also be  because of changes to the menu....or even other reasons. It is interesting that the catering company's shares went up...(see Star Report below)

So, questions that need to be answered:-

Was there an Independent Administrator appointed?
Was there an Independent Advisor appointed?
Was the proposal of the said Administrator approved or rejected?
How is it now MAB seem to have already come into existence and is entering into agreements? What happened to MAS?
How did the property and rights pass from MAS to MAB, and when did this happen?
Is the Malaysian Airlines, its employees, etc now no more under MAS, but in fact are under MAB?
Is MAS still the employer or not? If MAS employees end up being terminated by reason of this, should they not be entitled to termination or lay-off benefits?
If these employees are no longer employees of MAS - what happens to existing Collective Bargaining Agreements?
If MAS has no more employees - will that mean that all MAS employee unions will cease to exist - and new unions need to be registered?

7  Qualifications of Administrator
(1) No person shall be appointed as an Administrator unless he—

(a) is a natural person; and
(b) has consented in writing to his appointment.

(2) The following persons shall be qualified to be appointed as an Administrator:

(a) a company auditor approved under the Companies Act 1965; or
(b) a person who is, in the opinion of the appointer, capable of performing the duties of an administrator.

(3) The following persons shall not be qualified to be appointed as an Administrator:

(a) an undischarged bankrupt;
(b) a mortgagee of any property of the Administered Companies;
(c) a person with direct or indirect shareholding in the Administered Companies;
(d) a person who is, directly or indirectly, interested in any contract or arrangement to provide goods or services to the Administered Companies;
(e) an auditor of the Administered Companies; or
(f) an officer of the Administered Companies.

Now, this Administrator will be tasked amongst others...

17  Administrator may re-negotiate contracts or prepare proposal or both

(1) The Administrator may, in the administration of the Administered Companies, at his sole discretion, take any one or both of the following actions:

(a) re-negotiate the terms and conditions of any contracts or agreements of the Administered Companies with the counterparties;
(b) prepare a proposal with respect to the Administered Companies or any claims and liabilities against or of the Administered Companies.

(2) The proposal referred to in subsection (1)(b) may include any provision as the Administrator thinks fit.
(3) Without prejudice to the generality of subsection (2), the proposal may provide for the transfer of any property, business or liability of the Administered Companies to a person named in the proposal—

(a) by means of vesting under Part V; or
(b) in accordance with the relevant law applicable to effect the transfer of such property, business or liability.

(4) The Administrator shall, upon the completion of the proposal under subsection (1), submit the proposal to the Independent Advisor and the appointer.

AND, the qualification of the INDEPENDENT Advisor..

18  Appointment and qualifications of Independent Advisor
(1) Upon being notified by the Administrator that a proposal will be prepared under section 17, the appointer shall appoint an Independent Advisor.
(2) No person shall be appointed as an Independent Advisor unless—

(a) the person has consented in writing to the appointment;
(b) the person is independent of the appointer, management and board of directors of the Administered Companies and the Malaysia Airlines Berhad, and has no interest whatsoever in the Administered Companies and the Malaysia Airlines Berhad; and
(c) the person is—

(i) an investment bank;
(ii) a firm of accountants; or
(iii) a person (other than a natural person) who is permitted to carry on the activity of advising on corporate finance which is a regulated activity under the Capital Markets and Services Act 2007 [Act 671] and who, in the opinion of the appointer, has the requisite experience or is capable of performing the duties of an Independent Advisor.

 20  Decision of the appointer
(1) The appointer shall consider the proposal of the Administrator together with the report of the Independent Advisor submitted to the appointer under subsection 19(3).
(2) Where the appointer approves the proposal, the Administrator shall implement the proposal in accordance with its terms.
(3) Where the appointer rejects the proposal, the appointer may—

(a) direct the Administrator to revise the proposal;
(b) direct the Administrator to prepare a new proposal; or
(c) terminate the administration of the Administered Companies.

 21  Implementation of proposal

(1) Where the approval of a regulatory body is required to implement the proposal and conditions are imposed by the regulatory body, the Administrator shall refer the conditions imposed to the appointer.

(2) If the appointer thinks that the conditions are not in the interest of the Administered Companies, the appointer may—

(a) direct the Administrator to revise the proposal;
(b) direct the Administrator to prepare a new proposal; or
(c) terminate the administration of the Administered Companies.

(3) Prior to the implementation of the proposal, the Administrator shall send a copy of the proposal and the report of the Independent Advisor by registered post to the last-known address of or through electronic medium to each of the creditors of the Administered Companies affected by the proposal and any other persons affected by the terms of the proposal.

(4) Notwithstanding the provisions of any law or contract, the Administrator shall have the power to implement and do all things necessary to fully and effectively carry out and give effect to the proposal or any part of the proposal without the need for any notice to or approval or consent of any member or creditor of the Administered Companies or any other person affected by the proposal and the proposal shall be binding on the Administered Companies, the creditors of the Administered Companies and all persons affected by the terms of the proposal, including the Malaysia Airlines Berhad, if applicable.

(5) Notwithstanding anything to the contrary in any law of guarantee—

(a) the implementation of a proposal under this section shall not release or discharge any security provided by any person to secure any duty or liability owed by the Administered Companies to any of its creditor; and
(b) each such security and any such duty or liability of the person providing the security shall remain valid and enforceable against that person notwithstanding the implementation of the proposal, or any compromise, arrangement, reconstruction or amalgamation in connection with the Administered Companies.

(6) Notwithstanding the failure to notify any creditors of the Administered Companies and persons affected by the terms of the proposal in accordance with the requirements of subsection (3), such failure shall not affect the validity of the proposal.

 22  Transfer of property or liabilities

(1) If the proposal directs that property or liabilities are to be transferred, the Administrator shall transfer the property or liabilities to the transferee in accordance with the vesting provisions under Part V and the terms and conditions set out in the proposal.
(2) For the purpose of this section, a reference to “Malaysia Airlines Berhad” in Part V shall be construed as a reference to the proposed transferee named in the proposal.

MAS to cut catering cost by 25 pct under new contracts with Brahim’s  

Monday, 11 May 2015 By: M. HAFIDZ MAHPAR

KUALA LUMPUR: Malaysia Airlines Bhd (MAB) has awarded Brahim’s Holdings Bhd’s 70% owned subsidiary Brahim’s Airline Catering Sdn Bhd (BAC) new catering agreements (NCAs) that will slash the national carrier’s catering cost by up to a quarter.

In a joint media statement, MAB and BAC said the new pricing methodology, coupled with future new product offerings and menu structure at MAB, effectively provided for a 20-25% reduction of catering cost over the previous catering agreement.

“The NCAs provide a competitive pricing methodology for meals and cabin handling, which will help realise savings and operational efficiencies,” the companies said.

The agreements entered into on Sunday were benchmarked against international standards and based on industry best practices.

“Overall, the NCAs provide for a strict service level agreement and key performance indicators (KPIs) to be adhered to, considerably improved pricing, non-exclusivity and a shortened tenure, compared with the previous catering agreement,” the statement added.

The NCAs, which began on May 10, have an initial tenure of five years with an additional five years’ renewal subject to strict conditions.

The conditions include BAC meeting critical KPIs over the initial five years, no breach of specified key events which will trigger a termination of the NCAs, and upon mutually agreed pricing for the extended term of the next five years.

The agreements are in two separate contracts covering “wide body aircraft” flights and “narrow body aircraft” flights, in line with international norms.

The NCAs are the result of a broader on-going review and renegotiation of Malaysian Airline System Bhd’s (MAS) supply contracts, which is a key component of the 12-point MAS Recovery Plan.

BAC is currently the exclusive in-flight caterer to MAS under a 25-year catering agreement expiring in 2028 at the KL International Airport (KLIA) and Penang Internationmal Airport.

Brahim’s said in a statement to Bursa Malaysia that BAC had no option but to sign the service level agreement (SLA) to maintain its role as an inflight meals caterer to MAS as well as staying relevant as a global halal flight kitchen servicing 36 other international airlines at the KLIA.

“BAC can be compelled under the new MAS Act to continue supplies to MAS despite MAS withholding payments and is prevented from filing legal action for unpaid receivables. This had also caused severe problems in cashflows to BAC operations and had affected its ability to upstream dividends to Brahim’s. Brahim’s as a holding company required cashflows from BAC to meet its debt obligation to avoid triggering loan defaults,” Brahim’s said.

The company said the two parties had agreed that to avoid uncertainties in negotiations posed by the yet-to-be-appointed administrator over the existing catering agreement, or revisiting the terms of the NCAs agreed between BAC and MAS/Khazanah Nasional Bhd prior to the administrator’s appointment, the NCAs should be executed by MAB instead.

The new airline entity MAB is independent of MAS and is outside the ambit of the MAS Act.

“In view of the confidentiality clause on certain terms in the agreements, the agreements would not be made available for inspection,” Brahim’s said.

Brahim’s ended trading 0.5 sen higher on Monday at 96.5 sen. - Star, 11/5/2015

So, are we not following the law - then  why create elaborate provisions if no real intention to use it?