Letter To Mas Management Cfo Tengku Azmil

NO PAY CUT FOR CREW MEMBERS To Effendi Abdul Rahman, Senior General Manager Group Human Resources By Malaysia Airlines Flight Attendants Association (MAFAA) Members 17 June 2009 The association members are deeply concern over the company’s recent 1st quarter 2009 financial report stating of the losses over RM600 million, amid speculation that the company is now pushing further to improve its cost saving measures by planning a 5% pay cut for all employees across the board. We note that the price of fuel has contributed huge losses towards the company’s finances with the economic downturn and with the latest H1N1 virus epidemic, the is a shift in the company’s way of doing business. We wish to inform the management that the MAS Flight Attendants Association (MAFAA) council and its members are always behind the company during the trying moments of any crisis and with this current situation, it is no exception. There is no doubt that our members have proven themselves by winning awards for the airline during any crisis and that simply represents the support towards the company from crew members. At no time should these tireless efforts displayed by our MAS crewmembers are ignored. In lifting the spirits to contribute ideas and views, allow the association to comment a little on the company’s behavior in its expansion plans and perhaps our views will be taken into consideration for the company to implement a healthier approach towards its finances spending. Constant positive spending for the right things are important for the company’s expansion but there are times, we need to minimize cost and the unnecessary wastage. We also need to put risk management in place in order to help identify the unnecessary huge money out flow and spendings. We certainly want to see the company progress even during bad times. There are times when such crisis occurs in a business, it could bring advantages, if everything is carefully planned and in place. We certainly hope the right people are being hired for such enormous task on cost savings measures, zooming on the right areas. The company should also review on why losses are still evident as other airlines are also facing similar problems but did not sacrifice the QUALITY AND SERVICES of their airline.

We note the company is undergoing heavy re-branding as to provide a new image to the airline but as long as it is within the right budget, then it should be fine. As employees, we hear of many unnecessary spendings present and in the past during the early period of 2005. We hear of several individuals being engaged of their expertise and several companies being pulled in to assist the company in its Business Turnaround Plans (BTP) while realizing more money will be spent to pay them. MAS management is paying so much for a business service from these few in return for something where many have said may not benefit the employees or the company in along run. At no time should MAS suffer from any adverse publicity especially in terms of losing money. While both the management and employees are battling the winds of crisis today, the association that represents 2,000 MAS crewmembers has become mediators to endless of queries and complaints, both from crew and airline staff. Many are carrying out their grievances to us over the huge losses and cost saving measures. Our role is also to remind everyone, both the employees and management on the need to be prudent and cost effective. Many employees are perplexed by some of the company’s plans especially on opening new business subsidiaries, spending on huge advertisements and endless MH campaigns. All these may have chewed a chunk of the company’s savings. While these are being spent, we are also spending huge amount on fuel hedging which is costing the company abundance. We wonder if there is any left for rainy days or during time of crisis like today. Many employees have also said that since there is already a tight budget around the company, why are there still so many business divisions engaging senior management team and executives? We see of several business units creating several key positions with overlapping job descriptions where at no time will affect the company’s expenditures of payroll and allowances in a long run. There are possibilities several key individuals are being paid too costly and with this, it is also affecting the morale of senior staff who has witnessed all these shortcomings. While promotions for low ranking remains slow, higher positions were created. Why was this done during the time of economy crisis? The recent news by the management to seek pay cut of a minimal 5% from the employees received mixed reactions from all parties. Before the financial year announcement was made, the management had already embarked aggressively to reduce overheads and cost from all business units especially from Flight Operation and In-Flight Services divisions. There have been many signs indicating that MAS crewmembers are taking a bigger toll under these cost savings measures, in terms of their employment benefits as well on their allowances by reducing the numbers of crew operating on flights.

These are already early current indications to cost saving measures. While the company is asking everyone to play a role in lowering cost in one hand, the other hand appears to be paying more for something which of times were irrelevant. The sad thing is that many crewmembers are already affected by these strong adjustments to their income in the last 2 years. Many crewmembers were unhappy of their low salary scale and have expressed their concerns with the association. Scheduling management has taken drastic measures to reduce monthly meal allowances and flight operations have froze flights due to low load factor. These measures have been implemented amid to the implementation of FTL scheme. By fact, crewmembers have experienced the enormous economy crunch, very much earlier before the announcement of the airline’s financial loss. Many claimed that the airline has saved millions in the past few months especially on variable manning of crewmembers, reduction in night stops and the reduction of flight duty monthly. There are also claims stating of unnecessary hiring of “special task force” and engaging overseas experts to implement the FTL scheme. The project fail to impress or even convinced the crewmembers, as no results were made published to any one of them. It is also conflicting to the company’s transparency policies. If millions were spent for such project, then there should be some form of transparency to convince the employees who are till this moment is facing a dilemma over the introduction of the FTL scheme. And today with another blow requesting a pay cut from these group of employees. How will any of these requests becomes acceptable to the crewmembers? After what they have gone through, we believed no one would come forward or even agree to the idea of pay cut. While we pursue to ensure everyone including the company will not suffer during the economic down turn, we want the management to take sensitivity into account on the crewmembers. There should no longer be any employment or policy violations, work sufferings and loss to the income for crewmembers with the excuse of cost spending measures. The need to tighten the budget belongs to the company and those who have access to the budget and that responsibility should be given serious consideration especially on higher earnings. The fact will be is that there will not be much left for crewmembers by end of the day as most of their earnings depend on the flight allowances and which they don’t have today. The company’s earlier announcement stating crewmembers will earn 5% to 20% in increased of pay and allowances were merely speculative figures, as many have not seen these increased today. Crewmembers want the management to reconsider the pay cut request. The crewmembers do not want to be affected with the proposed pay cut but instead is seeking the company to review the bigger expenditures in other business unit areas.

If the situation is worsened by no choice and the decision to reduce the employee’s pay is imminent, than it should only be done on voluntarily basis and not merely by decisions of one party who represents the employees in MAS. The pay cut must be viewed as a fair move and acceptable by employees themselves. Employees however would want to be briefed and consistently updated on the company’s pro-active measures aligned to the crisis. The Company must also provide valid information that can help generate better understanding amongst the crewmembers. Emphasizing a must on cost savings measures without providing full data will not help create awareness. The Company must also highlight areas of concern other than fuel factor that needs reduction. Providing proper data to all these measures must come with a necessity outlook of the Company’s future plans. Employees may not want to hear issues of manpower being the only reason to resize the budget of Flight Operations / In Flight Services but on the other raising the budget of another business unit. The employees does not believed in KPI competitiveness amongst the management and their business unit as it only brings endless competitions amongst them when comes to cost saving plans. The employees will instead be burdened for a reason to assist the company during bad times. However, will employees be given super bonuses for all these efforts if they were to agree to such cost saving measure. The association has been receiving too many complaints in the past months stating of poor management in flight schedules and leave planning, which is also contributing to lowering of their monthly income and allowances. With further flights cancellations due to company’s “fly by load policies”, we also observed 1 to 3 crewmembers are being reduced on flights with full passengers load. This variable planning should not have been introduced as it compromised the the delivery of our In-Flight Golden Service. How will the company provide full customer’s satisfaction by reducing the numbers of crew on board? How will we raise the bar of satisfaction as requested by MD himself if we were to deprive the full delivery of service to our customers on board? This issue remains the biggest problem for the airline. With the economic situation not so improving and satisfying, life remains the usual for crewmember. Government agencies and banks are not helping to lessen the burden of consumers except making do away with small amount of taxes and service charge. The cost of living and expenses remain relatively high. The price of products in the market is getting steep by the day and as consumers, crew members have to pay even more during the economy crisis. Financial loans and credits needs continuous servicing with not much change in interest rates, children’s education and tutorial fees remains relatively high as always, food products is costlier, health products and medical care remains expensive. These are the basic needs and necessity of every ordinary working person and crewmembers are not subjected from these endless commitments. There are also too

many deductions being made in their salaries, allowances and bonuses as many have not earned equal sharing of pay. MAS Cabin Crewmembers salaries are very much lower compared to other international airlines. This is due to our market salary structure. The drastic change in the monthly income and salaries can only be done once the management understands and have an open mind to the risk involved in the work of a professional Flight Attendant. MAS crewmembers who have been serving the airline more than 10 years deserves a better income as to help them remain loyal and equally performing their best for the airline. They should also be paid accordingly to world airline standards. Crewmembers are no longer an ordinary aviation employees as they are recognized as Safety Professionals by world aviation organizations and airline industries. The profession of a crewmember has changed tremendously over the past many years. The airline’s turnover in business is very huge and that the airline have earned billions in profits over the past many years due to the hard work and contribution of the crewmembers. The crewmembers are also the key force behind the airline business and this is a fact which the management must take notice of through the ratings and awards which the airline has won many times over. Customer’s major satisfaction is based on the delivery of the airline’s many services, which include the In-Flight service. So if the airline business has been prospering over the years, why pay salaries that are not competitive enough with world airline standards and allow one to complaint of his or her salary? Paying less and expecting so much out from crewmembers is similarly ignoring the existence and not recognizing this profession. Why should the company have to pay higher outsourcing management fees, paying several individuals with special allowances and salaries but could not afford to pay their own crewmembers? While crewmembers are bustling flying and sacrificing their own well being and spending precious time away from their loved ones, they continue to be paid lower than other airlines. During this H1N1 outbreak period, crewmembers are not even being paid a form of risk allowances while they work. They are made to fly to higher risk countries and exposing themselves to these viruses with no added change to their income. This is already a sacrificed which money cannot even buy for the company. How will the company expect continuous readiness and commitment if such employees are being paid low? The introduction of KPI’s is also not all improving for crewmembers as many have felt the effects of KPI’s does not justify to their contribution such as this crisis. Will the company be able to raise the crewmembers KPI during such crisis?

Many of them do not care much of what their performance will be worth today as they appear to argue that that their work and continuous commitment towards the airline’s passengers remain strong and productive and that should fit the ratings and rankings which the airline earns. An average crew member today on a Narrow body fleet will earn no more than RM2,000.00 to RM2,500.00 on a normal monthly roster with erratic schedules and a Wide bodied crew will earn no more than RM3,000 today on fewer flights to operate. The drastic change and statistics to the income of such employees will affect more especially those who have families and children to fend. We also must take consideration to the daily expenses and currencies exchange when they are required to operate certain sectors like Europe or to the US, which will require the crewmembers to change local Ringgit currency to a foreign currency. It is no longer a - dollar to dollar-in exchange of currency as the money market have also become too expensive for any exchange. The current exchange Ringgit against world currency is so much lower today. When there is a need to exchange the currencies, Ringgit is at loss. The need to exchange the money is also a contributing factor to indirect losses for the crewmembers. We have always emphasized that the company should pay foreign currencies to the crewmembers upon when they arrive at their overseas destinations to avoid any losses in their exchange rates. With a heavy life long maintenance such as house, vehicle, education, food and family health expenses today, we certainly need to share these sentiments with the management today, urging again to MAS management to provide better salaries and allowances in competitive with other world airlines rather than seeking a pay cut. In comparison to Singapore or any other neighboring airline, a crewmembers of today’s working generation will need to take home at least an average income of RM8,000.00 to RM10,000.00 monthly This is a comfortable figure where each crewmember will learn to value their income with the airline. As long the company pays the crewmembers well, we will see a better set of employees working. Higher salaries will cap existing problems such as high rates of MC’s and high expenditures on medical bills. The recent Air France incident which all of its flight crewmembers have perished is an example. Air France is now undertaking measures to compensate the families of these crewmembers with a minimum compensation of EU100,000.00 each. Will this be equally match in MAS if there were to be such incident to happen to our crewmembers? As it is, our life insurance coverage by the company is merely being paid between RM50,000 to RM90,000. Will that be sufficient for the lives of our crewmembers? We take into consideration of the recent salary adjustment of 10% through the recent signing of CA. The new CA did not bring much change to the crewmembers earnings especially for those who have served the airline more than 10 years. Taking all that into consideration and comparing to what the crewmembers have earned previously,

with the escalating expenditures, many will not have enough to spare by end of the day. The association knows that this may not be a good time to demand anything due to the financial backdrop of the company but we hope the company take serious consideration to not impose any pay cut on the crewmembers. This is their appeal to the company. If a pay cut is necessary, than the company must provide and published a transparent cost saving measures first going further. The employees would want to see that every department head and high earners, contractors, suppliers and out sourcing companies will also received the brunt of this pay cut. Ordinary wage earners like our crewmembers should fall out from this pay cut plan. The association have not observed or even hear of any workable cost adjustments to the company’s spending other than learning that the company has decided to reduce the numbers of crew on board and reducing their stay abroad. Other than the fuel problems and losing of passengers traveling with our airline, we learnt that these are the only leading factors that have cost huge losses to the company. We have so far not heard of anyone coming forward to take a salary cut. There have been plenty of sentiments being aired by the crewmembers with the management in the past few years and one of those is in their low salary. Our concern is seeing more of our crewmembers being forced to accept these drastic pay cuts rather than become happy while they work. We also do not want to see unproductive crewmembers working at the same time complaining of their low income. The management needs to shape up their plans to engage healthier approach with the association and realized this real issues being carried forward. Certain quarters who appears to represent the voices of crewmembers may play down the sentiments with the management as they may be afraid to voiced out these concerns however bottling up the feelings of crewmembers will lead to more problems and disharmony at the workplace in time to come. The consensus of pay cut must be accepted unanimously amongst the 4,000 crewmembers. Half of these numbers are being represented by MAFAA. We hope that the management will take full consideration to the above request as MAS crew members are now dependant on the good management, who should not just focus the business but must also take time to help deal with the employee’s feelings.

Thank You. The Executive Council Members The MAS Flight Attendants Association (MAFAA) CC :: Dato Sri Idris Jala – MAS Managing Director Effendi Abdul Rahman - SGMHR MAS Management & Cabin Crew Executives MAFAA Members