The Star Online: Business
The Star Online: Business |
| Posted: 26 Apr 2013 06:07 PM PDT The unique thing about Air France's offering on the KL-Paris route is that it has four classes of seating – First, Business, Economy and premium economy. The latter is a class not many airlines offer. It is a bit more expensive than economy but cheaper than business, and a lot roomier than economy. But still Alexandre de Juniac (pic), the face behind Air France, wants to check out what competition offers on the route. The only direct competitor is Malaysia Airlines (MAS) which uses an A380 for its KL-Paris route. De Juniac touched down on Tuesday on the first Air France flight into KLIA, and on Wednesday night flew out on a MAS A380. The head honco of Air France also met up with StarBizWeek deputy news editor B.K. Sidhu for an interview. Below are the excepts. Are you flying MAS on your way back? Yes, I want to test out MAS. Don't forget I am also the (de facto) chief marketing officer of Air France and I want to try to take lessons from what I see. They are using the A380 and I want to see how they arrange the cabin, the product and the service. They began using the A380 not long after we announced the KL-Paris route. Two carriers on the same route. Is there really enough traffic for two? That means there is a lot of traffic. Last year, over 100,000 French tourists came to Malaysia and thousands more from Amsterdam. With the Paris and Amsterdam link, people can now connect to any city in Europe. The network is very dense. It is connecting to two hubs and we have a connection to every city in Europe. (Air France and KLM are part of the Air France-KLM airline group). Malaysia is fast growing. Its industries are developing very fast from agriculture to pharmaceuticals and so many more. The country is growing and it is an interesting place for French businessmen, and the relationship between both countries is good. It is a trusting environment for business and tourism. The return is after 20 years. Why? It was UTA that flew to KL years ago, and then it stopped because it was a loss-making airline. Air France bought it in 1993 and it has moved forward again. We have opened many destinations in Asia. For instance, we decided last year to include KL among the destinations for our network, knowing that we already land in Singapore and Bangkok, which are not far away. In fact, we were convinced we had missed something by not having the KL route on our network. It is now appropriate. The second trigger for us to return is KLM. They have been flying here for many years. It (KLM) should be one of the oldest airlines flying here and we have bought them about 10 years ago. So it was a double-reason. There is place for two of us and we decided to open the route in addition to KLM. What loads are you expecting on the KL-Paris route? KLM is almost 80%. It is a high load factor. It also serves Indonesia. Historically, Indonesia and the Netherlands have strong links. We aim to have loads of about 80%. Air France is starting with three weekly flights. When will you increase frequency? When we see demand. According to our forecast, we could increase and it is much better to operate daily instead of three-times-a-week flights as operationally speaking, the latter is not the most convenient from the economic standpoint for the aircraft to wait on the tarmac but this is a start. It is good rhythm from thrice weekly to daily and many airlines do that. Air France also flies to Bangkok and Singapore. How is it possible to have loads of above 80%? The customer segmentation is different. For Bangkok, it is mostly tourist traffic and the aircraft that we operate has a larger economy class cabin. For Singapore, it is two types of traffic – connecting and transit traffic to Australia, Jakarta and also business traffic. For KL, it is totally mixed traffic – leisure and business traffic. There is also a very active French community in Malaysia of over 3,000 people and many European companies are investing here. So, there is high potential for us here. We hope Malaysian tourists and businessmen will use our aircraft and we are pretty optimistic about that otherwise we would not have opened the route considering that we also have flights to Bangkok and Singapore. We have been opening new routes in China, such as Yuhan, and in other places and now KL. We will open additional Asian destinations and obviously the reason we are targeting this part of the world is because the growth is here compared with the eurozone which is slow and lagging. It could recover but for the long haul, we have to target the fast-growing areas. On North America, we have established our network together with KLM and Delta for the transatlantic routes and seats. Strong growth in capacity is here. Nowadays the Asean area – Malaysia, Indonesia, Thailand and Singapore – represents a major opportunity for businesses, so we need to cover more. Why a B777 and not an A380 for the KL-Paris route like MAS? Our total fleet size is 103 aircraft of which eight are A380 and 62 are B777. We are very agile in moving planes from one place to another. We were using the A380 for Narita but with the earthquake/tsunami in Japan, we had to change the aircraft. We use the A380 for the Singapore route, and since we no longer have a partnership with Qantas because it now has a partnership with Emirates, we may have to move the A380 (from the Paris-Singapore route) to another location. As a carrier that has an enormous number of aircraft, we have to be flexible in the use of our fleet and we have to adopt the size of the aircraft and configuration to demand and this change happens every day. Every three months, we move planes and also for technical reasons. That is the advantage of operating a big fleet. Margins are thinning in Europe, hence many more carriers are moving to Asia? We are here in the hope of margins and traffic. We can capture a large part of the traffic in Asia in cooperation with Asian (airlines) including MAS and Chinese (carriers). We have to cooperate with them and will explore the areas in which we can cooperate and I am meeting the chairman of MAS to explore some form of cooperation. Of course, the difficulty at this stage is that it (MAS) belongs to oneworld and we belong to Skyteam, which are competing alliances. But it is not impossible that we could envisage something. It could be possible if MAS asks its other oneworld members and any arrangement could be limited to a particular route, destination or traffic. I give you an example. We have strong cooperation with Japan Airlines and it is a member of oneworld... so it is a case by case approach and we have to explore all of that. How is the restructuring going on at Air France? We are on track and on schedule according to the plan we put in place in 2012. We built it on three pillars – industrial, commercial and social. As a result of the plan and by 2014, we would have restored profitability, competitiveness and decreased our debt. We are reasonably optimistic we are on track and have not lost a day in our plan. By July 1 you will be the new chairman and CEO of the Franco-Dutch airline Air France-KLM. What happens to the restructuring at Air France? It will be followed through and it is my first responsibility at Air France-KLM to ensure the plan is implemented at all levels. What is your view on budget carriers? They are developing everywhere, though the trend started off in North America. They meet a demand for the short- to mid-haul market that is cost conscious, and pushed by the economic crisis where everyone looks for a cheaper price. Companies during an economic crisis push employees to fly behind and not at the front end of the aircraft. The development of low cost will remain an important trend in our industry. But what is interesting is that, in the US, the penetration of low cost is about to plateau. Customers still want good services and the market share for airlines like Air France and other legacy carriers has improved and they have come back after difficult periods. In Europe, the LCC market dominates with a 40% market share and the situation should change because established legacy carriers such as Lufthansa have reacted strongly by creating their own LCC and they transfer traffic point to point. We have decided to create our own LCC and we think passengers looking for low price should come to us instead of going to our competitors. Is there a future for long haul LCCs? Nobody has demonstrated that it can work. It is completely difficult. Long haul is different from short haul and it is more costly and it is very different to operate. We have not found a LCC operating long haul successfully and there is no reason to believe otherwise. |
| Up close and personal with Tim Andriesen Posted: 26 Apr 2013 06:04 PM PDT EVER since his appointment as the managing director of agricultural commodities and alternative investments to the Chicago Mercantile Exchange (CME) in the third quarter of 2009, Tim Andriesen has been racking up frequent flyer miles, flying around the world. It was just last month that Andriesen was in Malaysia to attend the Palm and Oils Conference & Exhibition: Price Outlook 2013. He tells StarBizweek how the CME group has developed during his time there and his craze for vintage car racing. Of risk management, commodities and derivatives In the 3 years or so that Andriesen has been with CME group, business has expanded. "CME has grown really well over the period that I've been there. We have pursued various product opportunities. Some of them are successful, some of them less so," he says. An interesting product, he says, that the CME group offers to customers is weather derivatives. The group has products that enable customers to manage weather-related risk, and also offer opportunities for speculation which absorbs the risk in exchange for possible profit on the variation in weather. CME offers various weather derivative products related to temperatures, snowfall, frost and hurricanes. The products are exposed to weather conditions in more than 47 cities in the United States, Europe, Canada, Australia and Asia. "These are all products that are really interesting in that there's a broad diversity of customers who have exposure to the weather. We all know that the weather can have an impact on our business, be it something like agriculture or a significant outdoor event," Andriesen says. One such contract is for snow removal. "We can't control the weather, but what we can control with these products is the financial impact of the weather," he says. Diverse derivatives The CME group is by far the largest and most diverse derivatives exchange in the world, with futures and options on grains, livestock, oilseeds, dairy, lumber and many other benchmark products. These are available either via the company's trading floors, its CME Globex electronic trading platform, and CME ClearPort clearing services for over-the-counter customers. Andriesen says the core responsibilities for an exchange are two-fold. The first is to discover price, which means to understand the price for a commodity. The second is to facilitate risk transfer. "It's for people who doesn't want to have risk. They could be farmer, end-users or people focused on their business, but because of that business it creates risk. Facilitating risk transfer means allowing them to transfer that risk to other market participants who want to take on that risk and who are doing that with the intention of trying to seek a return," Andriesen explains. Last year, Andriesen worked with the Ukrainian government and customers to help them develop the Black Sea Wheat Futures. The product was launched last year and is still in its beginning stages, he adds. The Black Sea region is a major exporting region, and is expected to continue growing but it is a place that lacks risk manager capability. "It's traded a little bit but we're continuing work to get it to grow. So we think that's a something in the long term that will be very important," he says. Although Andriesen never expected to be in the commodities business, he thinks where he came from, East Central Illinois, a primarily corn and soybean area influenced his career path. He had graduated from Southern Illinois University with a bachelor's degree in marketing with a specialisation in international business. In a tough job market, he took up a job that a grain company offered him. "I didn't know what a grain merchandiser was, but it came with a paycheck so I thought I'd give it a try," he says. So, starting from his time there, he learned about the business and agriculture. Andriesen spent a good chunk of his career actually trading physical commodities in the domestic US market, ranging from corn, and beans to wheat. "When you're a grain trader you're very much involved in risk management. It's understanding the risk around the positions you have," he says. Later on he ventured into the bank side of the business, working with several financial institutions in the OTC markets to develop risk management products for the bank's customers. Importance of free markets One of the things Andriesen and his wife aim to teach their four children is the importance of free markets and the role that they play. This is not necessarily so just in terms of futures, but also in terms of the importance of a market place in compensating people for meeting others' needs. "We've always had a belief that the way that you're successful is that you understand what people are looking for and what their needs are and you deliver on that, and quite frankly, you work really hard too," he says. The work ethic of "Get out, work hard, and that will carry you all the way" has been nurtured since his children were still younglings. For Andriesen, the biggest thing he continually tried to do is to be a good role model to others, especially to his children. "It's great to talk about things, free markets and how that works, but I think the most important thing is to lead by example," he says. Of course, there are days when doing that proves to be challenging. Another value that Andriesen teaches his children is the fact that there is nothing easy in life. "I come from a generation and a place where we learned that there's nothing easy in life. Nothing is handed to you. Nobody owes you anything," he says. Opportunities for success are aplenty, but no one is owed this. He adds that it is one's job to find opportunities, and make things happen. He also believes that, that is what society wants. "You want a place where people that work hard, are honest, and create value, get something in return," he says. Whenever he is back in Chicago, where the CME headquarters are located, he often commutes with his eldest two children who are also working in Chicago. Andriesen admits that he was an average kid, one who played sports, watched TV and just had fun. Due to the amount of travelling he is required to do these days, he does not have a lot of time to do many of the fun things he used to do, like play tennis. Having said that, his interests and hobbies have evolved, he says. "My hobby right now is racing cars," he says. Adrenalin-filled fun One would think that racing cars is dangerous. Going at sound barrier-breaking speeds in a confined four-wheeler round a track, leaves little or no space for even teeny-weeny mistakes. However, Andriesen begs to differ that the adrenalin-filled recreation is dangerous. "No it's not dangerous actually! Think of it this way. Where else would you want to have an accident? Number one: there are ambulances all over the place. Number two: you're in a car with a roll cage so it's almost impossible to hurt yourself. And you're belted in so you're not going anywhere," he says. Furthermore, the racing suit that drivers are required to wear has three layers of Nomex, which is a flame-resistant material. "So, if there's a fire, you're at least fireproof for a little bit," he says. He adds: "It's actually much less scary than driving on the Interstate some of the time." Andriesen is a member of the Checkered Past Vintage Racing group, and usually races at various racetracks in the Midwest during the summer months. In a week, he would get about six days of track time. Datsuns and Alfa Romeos are common cars one would see at these races. He first got into the recreational sport when he lived in Australia. He took a 1996 Nissan Skyline GTR and did some track time. He has been hooked ever since. "I race in what's called vintage historic, which is pre-1975 cars. I race a 1973 Datsun 240Z. It's very amateur. We go out and have fun, and we try not to wreck the cars, and just have a good time," he says animatedly. People refer to vintage racing as gentleman racing, he says. "You're a little less aggressive and really are a little more careful about trying not to wreck the cars. It's because you don't make any money from it, so when you break your car you have to pay for it," he says. Because many of these older car parts are hard to come by, an ongoing joke between him and the other racers is that the car parts are made out of "unobtainium". Last year, Andriesen had the opportunity to play the role of a driving instructor, in helping a friend out. "Literally for two days, myself and some of the other guys I race with were called to be driving instructors. Like a Groupon thing, the driver only pays US$169 and gets three laps around the track in either a Ferrari F430 or a Lamborghini Gallardo. Our job was to sit next to them and make sure they didn't wreck the car, which was a little scary!" he says. Ride the waves, dude Andriesen thoroughly enjoyed the time he spent in Sydney when he served as managing director, commodities and commodities of National Australia Bank. He had made friends with a surf photographer, who took pity on him for not being able to surf. So Andriesen and his friend made it a point to meet every Wednesday morning at Manly Beach to surf. "Keeping in mind that he's really good, and me standing on a board and going forward was my definition of surfing," he laughs. |
| Posted: 26 Apr 2013 06:02 PM PDT THIS is about a tussle for control, accusations of wrongdoing, an apparent attempt to gain support with an eye-popping pledge, and a policy U-turn. And no, this has nothing to do with Malaysia's 13th general election. Bright Packaging Industry Bhd's announcement on Thursday that it was scrapping a plan to pay generous dividends, shows that there are lingering effects from a boardroom battle that began last December with a requisition for an EGM to remove some directors and to appoint replacements. That showdown ended with the conclusion of the EGM in February, when the resolutions for the proposed board changes were carried. However, that doesn't necessarily mean it's smooth sailing all the way from then on. The new people at the helm of Bright Packaging have been in charge for two months now. The cancellation of the dividend policy is not all that surprising a promise to pay out all distributable profits as dividends for the next five financial years sounds too good to be true anyway but what else is in store for the manufacturer of aluminium foil packaging materials? The problem is the current management team isn't saying much, which is similar to the reticence of the four shareholders who had demanded that the EGM be held. The four were Datuk Wira Syed Ali Abbas Alhabshee, Ang Lay Chieng, Tee Wee Keat and Lye Jun Fei. They proposed that they be appointed to the Bright Packaging board and that then managing director Wong See Yaw and executive director Yap Kok Eng be removed along with non-independent non-executive directors Wong Siew Yoong (who's See Yaw's sister) and Yeap Cheng Chuan. Yap and Siew Yoong retired and were not re-elected at the AGM preceding the EGM, while See Yaw and Yeap were ousted at the EGM. Syed Ali, Ang, Tee and Lye secured board seats. Ang was the only person among the quarter who was appointed as an executive director. Voting on the resolutions were by poll, which indicated that right until the end, there was resistance to the changes. (Two other board members at the time, executive chairman Nik Mustapha Muhamad and independent director Low Wan Choon, have been retained.) What was said and done between December and the EGM on Feb 21 added to the drama leading up to the shareholder meeting. But the traffic flowed one way only. Between Jan 14 and Feb 4, the Bright Packaging board issued three press releases. The first one touted the experience and abilities of the four directors who faced being booted out. It also pointed out that based on the profiles provided, Syed Ali, Ang, Tee and Lye seem to have "very limited or no knowledge" of Bright Packaging's business, and may require time to build industry knowledge. On Jan 18, the company announced that the directors had resolved to pay out 100% of all distributable profits as dividends over the next five financial years "to reward shareholders". When interviewed by a daily, the then MD, See Yaw, was asked if the dividend policy was a sweetener for the minority shareholders ahead of the EGM. "Of course we need to please the shareholders. It's my job (to do so). At any point that I don't do that, I do deserve to be removed from the board," he said. The announcement of the dividend policy was accompanied by a second press release from the Bright Packaging directors. In it, the board noted that it had not received any comments from the requisitionists, and raised several questions about their motives and plans. Still, the requisitionists said nothing publicly. The third press release was issued to address allegations made in a letter from a group of minority shareholders to the Minority Shareholder Watchdog Group (MSWG). The Bright Packaging board said the allegations were "frivolous and baseless" and were made to discredit the board, especially those directors whose removal has been proposed. The board then went on to give its side of the story in respect of four areas that the MSWG had brought up. In the end, these efforts to explain themselves didn't help the four directors who were dropped. Demi Maju Sdn Bhd, a Wong family vehicle, has sold Bright Packaging shares a number of times last month, easing its shareholding from 30.6% to 28%. The reconstituted board has been busy this month. On April 19, the directors said there would be another EGM to seek shareholder approval for proposed share buy-backs. On the same day, the company announced that it wanted to halve the par value of its shares to 50 sen and to reduce its share premium account by up to RM2.16mil. This is so that it can slash part of its audited accumulated losses, which stood at more than RM24mil as at Jan 31. According to Bright Packaging, the aim is "to rationalise the statement of financial position of the company and to facilitate the company's objective to obtain a better financial position moving forward". These proposals are essentially accounting manoeuvres and don't involve cash. But dividend payments do require cash outflows. As such, it's reasonable for the board to do away with the dividend policy when the declared focus is on the growth of the company. "Based on the current assessment of cash needs of our business, the company requires the earnings to be re-invested into the company to build its capacity and that excessive funds are required for the reinvestment for business expansion," it says. The announcement on Thursday made it clear that Bright Packaging has undergone a board revamp and that the new board wants to broaden the business. However, the directors have yet to share details with the shareholders. Perhaps they're not ready to do so, but they shouldn't keep others waiting for too long either. Keeping mum may be a strategic advantage when you're plotting to wrest control of a listed company, but once you're in the driver's seat, reluctance to engage with shareholders and the rest of the investing public, is a sure way to breed apathy or worse, suspicion. ■ Executive editor Errol Oh is mystified by cases of listed companies being subjects of noisy tugs of war and then fading into anonymity later. What about the huge potential that sparked the intense contests in the first place? |
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