"Dangerous" to award long-term contract, Brahim's termination to sort legacy issue: MAG chief

KUALA LUMPUR: Malaysia Aviation Group (MAG) decides on "walking its own catering path" to end a 25-year legacy issue that has seen it incurring vast expenses just to keep the partnership alive, its top executive said.

MAG group managing director Datuk Captain Izham Ismail stressed that by ending its partnership with Brahim's Holdings Bhd, the group wanted to ensure that subsidiary Malaysia Airlines Bhd's financial burden in the past would not be repeated.

"For an organisation to award a (long-term) contract like this (25-years), it's dangerous for the business. With the economic movement as we progress year-on-year, we cannot make any adjustments (if there is any) escalation of costs and so forth."

He added that MAG had realised that some of its service providers were not operationally efficient.

"They're only hiking up margins to cover their loss. That's not fair. Why does Malaysia Airlines have to bear the crux of all these legacy issues, which is not ours?" he added.

Malaysia Airlines had accrued a huge amount of net loss before it was restructured in 2015. The national carrier's biggest financial net loss was RM2.52 billion in 2011.

Izham said the public outcry of Malaysia Airlines losing money for the last two decades could not continue and it is important for the carrier to have partners that could operate their business efficiently.

"This management team and the board is responsible to ensure that Malaysia Airlines is profitable by doing a fair business. Seventy-eight of our international partners realised that the new Malaysia Airlines has strong integrity. We don't succumb to being bullied and we stand for the right beliefs and values.

"Did the management and the board understand the magnitude of the journey that we're going to go through by addressing this legacy contract? The answer is yes with eyes wide open," Izham said in an interview.

The partnership between MAG and Brahim's in-flight catering unit Brahim's Food Services Sdn Bhd came to an end on Aug 31 this year.

The New Straits Times had first reported on June 15 that the parties were ready to put an end to their turbulent 25-year partnership due to a disagreement in their new contract.

Izham said the negotiation on the contract renewal that started in November 2022 was lopsided and came to a deadlock with regards to the "termination of convenience" clause.

Without divulging much into the content of the contract due to the non-disclosure agreement signed, he said the clause follows international standards and MAG had ensured that it conducts fair business practise with all of its service providers.

"Whatever contract negotiation we put in place or offer to our service providers is based on international standards. We remain steadfast to ensure that MAG runs a fair business, profitable in any sense we could commercially and we want our partners to be profitable as well.

"It was never our intent to give our service provider a hard time. We want to achieve a contract which is viable to both parties; which drives profitability to both parties. When both parties gain profitability, they can invest back into the business and drive efficiency thereafter," he added.

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