Brahim's explainer an eye-opener, nixes legacy and monopoly accusation?

KUALA LUMPUR: Brahim's Holdings Bhd telling its side of the story on Sept 8 may have opened the public and industry observers' eyes about its turbulent partnership with Malaysia Airlines Bhd.

The allegation that Brahim's in-flight meals quality is poor comes with a question mark, an industry observer said.

"If it is really bad, how can the company continue to supply food to 35 global airlines, including the world's eight largest companies?" Wan Mohd Farid Mohd Zakaria, a senior lecturer at UiTM's Faculty of Business and Management, asked.

Most attracting public attention, Wan Mohd Farid noted, is the fact that the government rescued Malaysia Airlines in 2014, following the MH370 and MH17 disasters.

Parliament, together with Khazanah Nasional Bhd, submitted a motion called MAS Reorganisation Plan in 2014 and the Malaysian Aviation Bhd (Administration) Act 2015.

The enforcement of the act directly cancelled the 25-year contract, which at the time had only been running for 12 years. This came without any compensation, and the outstanding food debt owed to Brahim's amounting to RM73 million was not paid after MAS changed its name.

Similarly, the "legacy contract" which linked the company to acquiring MAS Catering in 2003 is said to be the relationship between Brahim's executive chairman Datuk Seri Ibrahim Ahmad and his brother Tun Abdullah Ahmad Badawi, who was the prime minister at the time.

Records show that negotiations to take over MAS Catering started about eight months before that when Tun Dr Mahathir Mohamad was still prime minister.

Coincidentally, during the same period, Dr Mahathir handed over the premiership to Abdullah a month before the Brahim's-MAS Catering transaction was finalised.

"These facts clearly reject the claim that Brahim's enjoys a 'legacy contract, a monopoly' as well as provides poor service quality," said Wan Mohd Farid.

Following the end of Brahim's concession with Malaysia Airlines on Aug 31 this year, the national carrier saw late food deliveries causing serious flight delays on the first day of it handling directly its in-flight meals. There were allegedly 75 flight delays mainly due to catering problems at KLIA on Sept 1.

In an interview with the New Straits Times early this month, Malaysia Airlines' parent Malaysia Aviation Group group managing director Datuk Captain Izham Ismail said it had  anticipated the backlash from its passengers.

MAG had also put in place a plan to mitigate the operational hiccups well before its partnership with Brahim's ended.

Captain Izham expected flight delays and improvement of Malaysia Airlines' in-flight meals to normalise within this month after facing backlash from passengers since Sept 1.

He said it was facing teething challenges over the distribution of hot meals onboard Malaysia Airlines' aircraft due to the limited number of high-lift trucks that its ground handling unit AeroDarat Services Sdn Bhd has.

Meanwhile, Wan Mohd Farid said the fiasco should not be allowed to continue as this will affect KLIA's status as a travel hub, which has been pushed down to number 46 in the world.

Brahim's subsidiary Brahim's Food Services Sdn Bhd (BFS) stopped supplying in-flight meals on Malaysia Airlines aeroplanes from Sept 1 this year after efforts to reconcile the two companies failed, ending their two decades of catering contract.

MAG, however, still owns a 30 per cent stake in BFS, while Brahim's holds the remaining 70 per cent.

Wan Mohd Farid said a research into the facts presented by Ibrahim gave a clear picture of why the catering contract was originally for 25 years.

"It is related to the acquisition cost of MAS Catering which is RM170 million and just by extending the contract period, it meets the bank's requirements. Just like highway concessions. the real issue now is the 70 per cent equity price in BFS. Brahim's, although reluctant, had to sell because Malaysia Airlines wanted the business back."

On Aug 23, Deloitte Malaysia reportedly valued Brahim's 70 per cent BFS stake at up to RM129 million, excluding any goodwill. This is based on Deloitte Malaysia's assessment of between RM162.8 million and RM184 million for BFS as a whole.

"Is Malaysia Airlines willing to meet the price wanted by Brahim's or will the shares be released to another party willing to pay? This is interesting to observe," he said.

Wan Mohd Farid added that the issue should be handled more prudently because when Brahim's contract was terminated on Aug 31, the victims were the passengers.

"There is also industry rumours that Malaysia Airlines is asking other entities not to continue negotiations so that the negotiations remain with Brahim's. I think this matter can be resolved immediately if Malaysia Airlines fulfills Brahim's request or at least an amount agreed upon by both parties," he said.

Is it necessary for the government to intervene?

Wan Mohd Farid said this is a matter that can be dealt with at the corporate level. But the government will definitely speak up if the situation does not change.

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