A Tale of Two Airlines

A Tale of Two Airlines

In May last year Malaysia Airlines flight 370 from Kuala Lumpur to Beijing, carrying 239 people disappeared and has yet to be found.

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These two disasters don’t appear to be all that different. Both involved tragic loss of life and soul wrenching pain for victim’s families. Both were Malaysian-based airlines and both have a good safety record. That, however, is where the similarities end.

The responses from the respective companies in the face of tragedy could not be further apart.

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The confusion caused by bumbling miscommunications from the Malaysia Airlines disaster only worsened an already fragile public. Not only did the victims of flight MH370 receive incomplete, garbled responses to queries, exacerbating an already tense situation, but Malay Chinese relations were strained as a result. Remember, the flight had 154 Chinese on board. Chinese officials were furious with China’s foreign ministry spokesman Hong Lei responding to the governments initial statement that flight MH370 had “ended in the Indian ocean.”

“We demand that Malaysia provide all available information and evidence on how it reached this conclusion.”

Who on earth puts out a statement that the flight “ended in the Indian ocean,” after it has clearly crashed and families were desperate for information while being equally distraught?

The outcry in China was so vehement that one Malaysian Government official was pushing to have the government censor the Internet to keep angry Chinese from rioting and torturing Malays.

The incompetence was truly breathtaking.

In what promises to go down as one of the world’s worst corporate communication disasters in history, 16 days after the disappearance Malaysia Airlines issued the following response to victims family… BY TEXT:

“Malaysia Airlines deeply regrets that we have to assume beyond any reasonable doubt that MH370 has been lost and that none of those on board survived.”

Yes, by text message! Only a complete moron would think this to be acceptable.

When Air Asia flight 8501 went down, CEO Tony Fernandes response was immediate, sincere and thorough. When his company didn’t have any information to divulge they didn’t bungle and make things up. Rather than diverting blame or responsibility Tony has accepted it.

“I am the leader of this company, and I have to take responsibility.”

and this…

“Even though we don’t know what’s wrong, the passengers were on my aircraft, and I have to take responsibility for that.”

Tony’s Twitter feed has been running red hot with a constant stream of condolences and information as it comes to light. In contrast, Malaysia Airlines acted in much the same way a stolid bureaucracy typically acts.

What then is the difference between the two companies?

As you can see from the stock charts above Malaysian Airlines was struggling before the twin disasters. Air Asia on the other hand has been growing its value over time. No prizes for which company I’d rather own a stake in.

At the time of the tragedy Malaysia Airlines was a parastatal. As of August, 2014 the Malaysian government decided to unilaterally divert Malaysian citizen’s tax dollars into the company and it became a wholly owned asset of the Malaysian government. Unbelievable!

Despite overwhelming historical evidence that the societies which produce the greatest wealth, and have escaped grinding poverty, are the same societies where freedom of exchange is at its highest, we still have governments convincing citizens it’s in their best interest to restrict freedom of exchange.

Don’t be deceived as to what the government of Malaysia taking over the airline means. The government forcibly takes money from citizens and then uses it to run the airline. This is the complete antithesis of free exchange.

The Malaysian Government has invested over $1b during the last decade into Malaysia Airways. As expected, the more involved it has become, the steeper the losses have grown. Now, I get it that these twin disasters may have forced any company, private or not, to drastically restructure, which would almost certainly have involved shedding corruption in order to survive. I get it that they may well have been forced to file for bankruptcy. Great!

What then? This would have allowed more competent entrepreneurs such as Mr. Fernandes to buy the assets and attempt to turn it into a profitable enterprise. Unfortunately, that wonderful opportunity was never allowed to take place. Instead we will get a zombie.

What I can guarantee you is this… the airline will continue to produce losses, and it will become an avenue for corruption, ineptitude and mismanagement. While it has cost the Malaysian taxpayer over $1b, I’ll bet money that over the next decade the cost to taxpayers will only get progressively greater.

The difference in the situations is that Tony has a strong, vested interest in his company. His company has a certain spirit to it which is led from the ethos instilled. They see passengers as clients, they see people as humans not as objects which need to be dealt with. Government organizations don’t operate like that. Tell me the last time you encountered some government official that treated you as a valued client.

The argument that Government acts without prejudice and not for their own gain is naive. They are apathetic. Why sweat and toil if you’re not subjected to the market forces which force you from your job?

The anti-capitalist band will tell you that capitalists take advantage of people. It’s simply naive to pretend that people don’t seek to take advantage of each other. Of course they do. People will try to charge as much as they can for something and pay as little as possible. The free market is the balance. Artificial impediments to human nature will never work any more than Malaysian Airlines will become “magically” more efficient under Government control.

What does this have to do with you?

The world is undergoing an economic contraction right now, and this period of time is ripe with opportunities for societies to correct imbalances, shed excess, become better, more resilient, more innovative. It is also a period of time ripe with opportunity for soothsaying politicians to increase their power by promising the implausible. Both will happen. Our job is to attempt to see which way things are going and to act accordingly.

A happy and prosperous 2015 to everyone and thanks for all the communications in 2014. It’s been a pleasure.

– Chris

“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” – Milton Friedman

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