KUALA LUMPUR 7 Sept – Brahim Holdings Bhd (BHB), which owns 70 per cent stake in Brahim's Food Services (BFS), should listen to offers from other interested parties if they can meet their pricing, instead of wrangling with Malaysia Aviation Group to make up their mind.
Malaysia Airlines Bhd has a 30% stake in BFS.
New Straits Times reported last week that Deloitte Malaysia had valued the whole of BFS at RM162.8 million to RM184 million. A back-of-the-envelope calculation suggests that MAB would be forking out RM114 million to RM128.8 million for the 70% stake.
MAB’s parent company Malaysia Aviation Group Bhd (MAG) has repaired and strengthened its balance sheet, following the completion of its debt restructuring in 2021 that saw a RM3.6 billion capital injection from Khazanah.
MAG’s cash balance stood at RM4.6 billion at end-2022. The airline group also expects to become profitable this year on the back of the rising cost of airfares amid an upswing in travel demand that continues to hold strong.
“Brahim’s is holding the majority share. They should be the one to decide if there is an interested party that is ready to pay the amount,” says Wan Mohd Farid Mohd Zakaria, a senior lecturer at UiTM's Faculty of Business & Management to DagangNews.
“That would be the best solution, though I am not sure if there is a specific clause saying that MAG has the first right to refuse for the 70% stakes.
“The fiasco with the in-flight catering could have been avoided if this purchase of 70% is completed earlier.
“BHB has stated they are ready to sell its 70% stake in BFS, which would help it regularise its financial condition, including the settlement of RM49.88 million in debt to OCBC Al-Amin Bank Bhd, which in part led to the delisting of the financially distressed company from Bursa Malaysia last year,” he said.
BFS is the largest contributor to BHB’s top line, contributing about 90% to its total revenue.
Meanwhile, Thought Partners Group Consulting (TPG) founder and group managing partner Abi Sofian Abdul Hamid said: "As you can see the process to get an approved caterer is quite lengthy and while BHB was saying they just wanted a particular clause be removed, which the carrier should have considered the implication and weigh which one is cheaper.
"Although BHB is saying they are still willing to work with Malaysia Airlines, I am not sure whether Malaysia Airline willing to lose face," he told DagangNews today.
At the core of the spat between the two, is BHB is upset that under the Malaysia Airlines Recovery Plan in 2015, which saw the airline ending its 25-year supply contract with BHB and slashing its catering bill to 25% from 20%.
The 25-year contract negotiations came to a halt after the national carrier included the "termination for convenience" in the new contract, which allows a party to terminate a contract without any valid reason.
"I think the onus is on Malaysia Airlines to plan properly. I previously raised my concern on Pos Aviation Sdn Bhd assuming the wide scale role of BFS in a short time and whether they are capable. Yes they have been doing some catering works for many years but are they in the same scale as BFS?," he added.
Meanwhile, the former executive chairman of Malaysian Aviation Commission Dr Nungsari Ahmad Radhi said Malaysian Airlines could have handled the transition better especially when it comes to the Business Continuity Plan (BCP) and the communication with other stakeholders.
The two companies ended their long negotiations after did not see any resolution to their contract problems, so Malaysia Airlines terminated on their end, and executed their BCP on 1 September.
"Malaysia Airlines had to sign this long-term contract and under the carrier's restructuring exercise, most contracts were renegotiated, except for BFS’s, which the inflight catering contract was kept," he added.
Nungsari added that BHB had this long contract to leverage on to grow the company, however the company failed to leverage on the contract.
"BHB never able to grow the non-Malaysia Airlines business and they went into packed food business a while back, however it didn't take off very well," he added. - DagangNews.com
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