ganesh

Sunday, January 04, 2015

AirAsia fuel strategy,in collaboration with GE;Did any of these contribute to the QZ 8501 incident ?

With operations so highly regulated by algorithms ,it needs to be asked whether AirrAsia aircraft can deal with the unexpected , for example ice in the engines. It also needs to be asked whether AirAsia  pilots have the flexibility they require  to react changing circumstances.In the words of AirAsia and GE: 

GE FES collects data generated by the aircraft and its systems and applies proprietary technology to help AirAsia better manage their operations. The best of breed analytical tools deliver actionable insights that save fuel, reduce costs and drive out inefficiencies: One example is the Fuel Management Dashboard, which was rolled out to AirAsia in March 2014.
The Dashboard, supported by other analytical tools within the FES suite, has allowed AirAsia to implement a comprehensive program of initiatives that are truly digitally enabled, including:
  •  Optimization of climb profiles;
  •  Single engine taxi operations
  •  Use of sophisticated statistical algorithms to plan taxi and contingency fuel requirements; and
  •  Optimization of departure tracks; and
  •  Minimization of the use of APU.
Jonathan Sanjay, AirAsia’s Group Head of Fuel Conservation said:
“The GE dashboard is the only analytical platform with the capability to seamlessly integrateflight data with operational, weather, trajectory correction, navigation and terrain data. This allows us to unlock the value of our data, to quickly understand complex operational problems, proactively manage costs and make informed operational decisions for every flight. What this means is that we can log-in to the tool and check the performance of our airline's fuel
efficiency program without having to ask anyone to generate reports. We can even drill down to the performance of each department (flight operations, OCC, engineering, etc.) and even further to check the performance of individual pilots”

http://www.geaviation.com/commercial/services/flight-efficiency-services/docs/case-study-AirAsia.pdf

Saturday, January 03, 2015

Tune Insurance shares dumped:Forget the QZ 8501 conspiracy theories, and listen carefully to what Tony Fernandes has had to say.....

A week before QZ 8501 went down  AirAsia "group chief executive officer"  Tony Fernandes' investment vehicle Tune Group Sdn Bhd  sold a total of 944,800 shares in Tune Insurance Holdings Bhd.
That disposal has led to a slew of conspiracy theories, and probably best treated as such.However, Fernandes has since the crash made some interesting statements which may well explain the reasons for the disposal and provide  some insight into Tune Insurance's medium to long term prospects.
Immediately after the crash Fernandes told reporters that climate change may have been the cause.

As he put it :
"There's a lot of rain, so that is something we need to look at carefully because the weather is changing. The weather is changing.

At this point, readers are reminded of the  duty  of disclosure of all risks, that underlie  any type of insurance contract:


Insurers need information from consumers to decide whether to offer (and renew) insurance, and to decide the price or other terms of the insurance to be offered to the consumer. The law imposes a duty of disclosure on policyholders when they seek to take out new insurance cover or to renew existing insurance cover.

Insurers may be able to refuse to pay a claim or part of a claim under an insurance policy if the policyholder has not complied with their duty of disclosure. However, an insurer must first establish that:

Insurers may be able to refuse to pay a claim or part of a claim under an insurance policy if the policyholder has not complied with their duty of disclosure. 
Fernandes' assertion, indeed insistence, that the weather is changing begs the question; did AirAsia inform its insurers ,including Tune Air, that the "weather is changing", ie that the environment in which it operates, is changing?
Did Fernandes' disposal of Tune Insurance shares have anything to do with a realization that the bad weather was likely to cause mishaps which Tune Air might have to carry on its own, and which its re-insurers would not indemnify for failure of disclosure?
In addition, and quite apart from the above, has Fernandes' attempt to blame the QZ 8501 crash on changing weather provided AirAsia's insurers and re-insurers a way out of any obligation of indemnity?
END 

Friday, January 02, 2015

QZ 8501 -That AirAsia Bhd will escape liability cannot be assumed


Some examples that cast doubt on the assumption this far that because QZ 8501 is registered to AirAsia Indonesia, in which Air Asia Bhd has only a 49% (as opposed to 51% ) interest ,AirAsia Bhd is immune to  any liability that may arise as a consequence of the crash and resulting loss of life.The analyst community has ignored the probability of AA being found to be a shadow director of AirAsia Indonesia:




Holding company directors – potential liability as director of subsidiaries?

By  | 29 Oct 2014

Good Company October 2014 edition


The Court of Appeal has recently considered whether a director of a holding company was liable to one of its subsidiaries for breach of fiduciary duties, despite not having been appointed as a director of the subsidiary company.
The fiduciary and other duties which a director owes to the company which appoints him apply equally to someone who has not been formally appointed but who nonetheless acts as a director (a "de facto director").  Company and insolvency law also impose liability on a “shadow director”, where the actual directors of a company are accustomed to act in accordance with the shadow director's directions or instructions.  In the case of Smithton Ltd v Naggar, the Court of Appeal had to determine whether a director of a holding company was a de facto or shadow director of one of its subsidiaries.
The subsidiary was a joint venture, with the holding company owning just over 50 per cent of the shares and members of the subsidiary's management team holding the balance.  There was a shareholders' agreement in place, which provided that the board of directors was to be made up of various members of the management team and three other directors nominated by the holding company.  As is usual in joint ventures, the agreement also provided for certain information to be provided by the subsidiary to its shareholders, and for certain matters to be reserved for decision by the shareholders rather than by the board.
In the event, nothing much was discussed or decided at formal board meetings of the subsidiary.  Important decisions were in fact taken informally by one of the management team and Mr Naggar, who was a director of the holding company but was not one of the holding company's nominees on the subsidiary's board.
The subsidiary entered into a number of contracts with people connected with Mr Naggar.  It made a loss on those contracts, and brought a claim against Mr Naggar, alleging that he owed duties to it as a de facto or shadow director which he had breached in relation to the contracts.  When the High Court dismissed its claim, it appealed.
The Court of Appeal referred to the leading case of HMRC v Holland, which concerned a number of trading companies which had another company as their sole director (the corporate director).  In that case the Supreme Court decided that Mr Holland, who was a director of the corporate director, was nonetheless not a de facto director of the trading companies.  He had acted only in his capacity as a director of the corporate director, even though he was involved in all the directorial decisions made on behalf of the trading companies.
The Supreme Court held that there was no one definitive test for a de facto director.  The question is whether he was part of the corporate governance system of the company and whether he assumed the status and function of a director so as to make himself responsible as if he were a director.
Although there is no definitive test, in Smithton Ltd v Naggar the Court of Appeal noted a number of points arising out of the Holland case and earlier cases which are of general practical importance in determining who is a de facto director:
  • A person may be de facto director even if there was no purported appointment which was for some reason invalid. The question is whether he has assumed responsibility to act as a director.
  • To answer that question, the court may have to determine in what capacity the person was acting (as in the Holland case).
  • The court will in general also have to determine the corporate governance structure of the company so as to decide in relation to the company's business whether the person's acts were directorial in nature.
  • The court is required to look at what the director actually did and not any job title actually given to him.
  • A person will not avoid liability if he shows that he in good faith thought he was not acting as a director.  The question whether or not he acted as a director is to be determined objectively and irrespective of his motivation or belief.
  • The court must look at the cumulative effect of the activities which are relied on as showing that a person is a de facto director.
  • It is also important to look at the acts in their context.  A single act might lead to liability in an exceptional case.
  • Relevant factors include whether the company considered him to be a director and held him out as such, and whether third parties considered that he was a director.
  • The fact that a person is consulted about directorial decisions or his approval is sought does not in general make him a de facto director because he is not making the decision.
  • Acts outside the period when he is said to have been a de facto director may throw light on whether he was a de facto director in the relevant period.
The court then reviewed the High Court's findings on the allegations relied on by the subsidiary company against Mr Naggar.  It agreed with the High Court that the subsidiary had not demonstrated that Mr Naggar was a de facto director.
The subsidiary claimed that the actual directors nominated by the holding company had simply acted as nominees of Mr Naggar since they took decisions to him for approval.  It was, however, natural for those directors to consult him since they wanted group support for those decisions.
Mr Naggar was shown certain confidential information which would normally only be available to directors, but his interest in this information was justified by his position as a director of the holding company.
Mr Naggar had given instructions to the subsidiary's employees, but these were found to be readily explicable either on the basis of Mr Naggar's role as a client (on behalf of the people connected with him who were counterparties to the contracts with the subsidiary), or as a director of the holding company or because they were one-off incidents arising from a particular situation.
His role as client or holding company director also explained his involvement in making decisions about important aspects of the subsidiary company's business.
In conclusion, although Mr Naggar did not dispute that he had performed "directorial acts" in relation to the subsidiary, he had at all times acted in a different capacity from that of a director of the subsidiary.  He was therefore not a de facto director.  Further, on the basis that he was protecting his or others' interests in some other capacity, he was also not a shadow director.
The case is helpful both in relation to joint venture companies and to groups.  Directors of investing or holding companies will not generally be held to be de facto or shadow directors of joint venture or subsidiary companies unless their actions go beyond what can reasonably be regarded as appropriate to their position as director of the investing or holding company.  For joint venture companies, the management provisions of the shareholders' or joint venture agreement can also be helpful in ensuring that liability as a de facto director is avoided.

Jonathan Brooks is a Partner in Fieldfisher's Corporate Group in London.
- See more at: http://www.fieldfisher.com/publications/2014/10/holding-company-directors-%E2%80%93-potential-liability-as-director-of-subsidiaries#sthash.J5fzaAU1.dpuf


Australia: Are you a shadow director? Determining your liability as an advisor to a company

Corporate Advisory and Governance Alert - 28 Nov 2011
Last Updated: 30 November 2011
Article by Brian Moller and Michael Hansel
By Brian Moller, Partner and Michael Hansel, Partner
A recent decision of the NSW Court of Appeal has clarified when a person will be considered a shadow director of a company.
A shadow director attracts all of the legal obligations, duties and liabilities that attach to any other director of a company. This court decision provides some clarity for those who are unsure how involved in a company's decision making they have to be in order to be considered a shadow director.
Here, partners Brian Moller and Michael Hansel and solicitor Katherine Hammond outline the case in Buzzle Operations v Apple Computer Australia and what company advisors and creditors can learn from it.
Key points
  • If the directors of a company act on a creditor or advisor's instructions because they consider those instructions a sufficient reason to act, the advisor may be considered a shadow director. Because of this, those who have not been formally appointed as a director may still be liable for insolvent trading and other directors' liabilities if the company regularly relies on their advice without first assessing whether the advice should be acted on.
  • However, if the directors of a company make their own decisions in which the instructions given by an advisor or creditor are just one factor taken into account, the advisor will not be considered a shadow director. This provides a level of comfort to those who become actively involved in a company, or who impose conditions which the directors must or feel compelled to follow if they wish to pursue a particular course of action.
What is a shadow director?
According to the Corporations Act 2001 (Cth), the broad definition of 'director' extends beyond those who have been validly appointed as a director to include those not validly appointed, if the appointed "directors are accustomed to acting in accordance with the person's instructions or wishes", rather than just acting on advice given by the person in their usual business relationship with the directors.
The confusion arises in determining "when the directors of the company are accustomed to acting in accordance with a person's instructions or wishes". For example, a creditor who takes a keen interest in and exerts a marked degree of commercial pressure on a debtor company, which the company complies with, may be concerned that they will be considered a shadow director if the company feels that it has no other option but to act in accordance with the creditor's instructions.
Buzzle Operations v Apple Computer Australia
Buzzle Operations Pty Ltd (in liq) and Another v Apple Computer Australia Pty Ltd and Others (2011) came about after Buzzle Operations acquired six Apple product reseller businesses.
The assets of the business - the resellers' Apple products - were transferred to Buzzle. In exchange, Buzzle issued the resellers with shares and was obliged to make cash payments once it had listed on the ASX, or at a time when the directors formed the view, on reasonable grounds, that Buzzle had adequate funds to make a cash payment.
Apple had a charge over the assets, which was granted when Apple had initially transferred the assets to the resellers. As a result, Apple's consent was required for the acquisition to go ahead.
Buzzle made cash payments in November and December 2000, but went into receivership in March 2001. When an order was made for Buzzle to be wound up in February 2002, the liquidator initiated proceedings against Apple on the basis that the cash payments constituted uncommercial transactions and unfair preferences to a related party, and that Apple was liable for insolvent trading.
The liquidator maintained that Apple was liable because it was a shadow director of Buzzle. It argued that the directors of Buzzle had become accustomed to acting in accordance with Apple's instructions or wishes, rather than merely acting on the advice Apple gave them in properly performing functions attached to its business relationship with them.
The basis for this argument was that:
  • Apple participated significantly in the discussions leading up to and after the acquisition, and threatened to withhold its consent to the acquisition unless Buzzle complied with certain conditions, took certain action, and agreed not to incur debts outside the ordinary course of business; and
  • Buzzle's directors felt that they had "absolutely no choice but to agree to Apple's terms" and did in fact comply with many, if not all, of Apple's demands.
The deciding factors
The Court found that Apple was not a shadow director of Buzzle, and its decision clarifies the following points:
  • In order to establish that a person or entity is a shadow director, it must be shown that there is a causal connection between the alleged shadow director giving an instruction or expressing a wish, and the other directors acting on it. However, it is not necessary to show that the other directors exercised no discretion of their own. The ultimate question to be determined is who is making the board's decisions, and where the locus of control sits.
  • The question for consideration is whether the directors are acting in accordance with the alleged shadow director's wishes because the directors have decided that to do so is in the interests of the company or because they wish to pursue a certain course of action, rather than because they have simply deferred to the alleged shadow director's decision making.
  • In Buzzle's case, although the directors felt they had no choice but to follow Apple's instructions, this was not because they were unquestioningly deferential and accustomed to acting in accordance with Apple's instructions, but rather because they knew they needed to follow Apple's instructions in that instance if they wanted to proceed with the acquisition.
  • Being "accustomed to act" requires a pattern of behaviour and habitual compliance over a period of time.
  • Not every person whose advice or instructions are followed by a board is a shadow director. If someone has a genuine interest in giving advice to the board (for example, a bank or mortgagee), the fact that the board will tend to take that advice will not make that person a shadow director. The important factor is the potential for the alleged shadow director to control decisions, viewed in light of the circumstances as a whole. For instance, a lender who is entitled to demand repayment of a loan and appoint a receiver can say, for example, that it will stay its hand only if the borrowing company sells certain assets.
Gold Employer of Choice - ALB magazine, April 2010
Finalist, Brisbane Law Firm of the Year, ALB Australasian Law Awards 2010
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tuesday, December 30, 2014

QZ8501: Comments from Tony Frenandes, founder, AirAsia, on the cost-safety balance:You put a price low enough, they'd risk their lives.




A) Tony Fernandes: "My engineers talk to my pilots about how to fly the plane more efficiently, "We went from 80 landings per set of tyres to 180. We showed them how to brake on the runway, how to use the reverse thrust, how they should descend. We burn just 770 US gallons per hour of fuel. MAS, using a similar plane burns 1100 US gallons.

Vikram Khanna - Business Times Singapore - The no-frills CEO, 5th July 2003



B) 
Cost cutting is an obsession for Mr. Fernandes, who often oversees operations from AirAsia's tiny headquarters at Kuala Lumpur International Airport . He once suggested that pilots avoid using their brakes as long as possible upon landing. "Friction usually does the trick, so our brake pads and tires last a damn sight longer than most," he says.
Discount Airlines Proliferate - 20 July 2004 Source: The Wall Street Journal



Wednesday, November 19, 2014

Air Asia X at 65 sen, as valued by Tony Fernandez;Could it be headed down to 25-40 sen, as valued by Richard Branson?

As reported today,19 November 2014:

AirAsia X, the long-haul low-cost carrier, saw its share price fall to a record low of 65 sen on Wednesday after it sank deeper into the red with net losses of RM210.95mil in the third quarter ended Sept 30, 2014.

At 4.23pm, it was down 4.5 sen to 65.5 sen. There were 48.98 million shares done at prices ranging from 65 sen to 71.5 sen.

As reported on Sahathevan Blogspot, 22 July 2013:

Monday, July 22, 2013


Air Asia X worth between 50-70 sen according to Fernandes, 25-40 sen according to Branson

Maybank's "stabilization" of  Air Asia X's share price, which has not moved beyond the RM 1.25 IPO price , expires in about 2 weeks.

AAX's Bursa filings make  clear that Maybank's support is what keeps the price at even RM 1.25, thus raising the inevitable :what happens in 2 weeks , or less  , when the price is no longer supported?

Given recent past valuations of the company, based on transactions by company insiders (see previous posting below) , and after making some rough and ready adjustments for the IPO proceeds, but bearing in mind that share price is a function of earnings, it does appear that by Tony Fernandes's own reckoning AAX shares are worth only 5-70 sen (ie 40-50% of current price).

Based on the price Richard Branson asked for his shares, AAX is only worth 25-40 sen per share.

Friday, June 14, 2013


Tony Fernandes says AAX is a RM 3.1 B company, that was worth RM 1.25 B in 2008, and which plummeted in value to RM 660 million in 2012

As reported in The Edge Financial Daily, 28 June 2012:

Sir Richard Branson’s Virgin Atlantic Airways Ltd is expected to divest its 10% stake in AirAsia X Sdn Bhd to local existing shareholders for more than RM66 million (US$21 million)


".... investors got an inkling of Air Asia X’s valuation (in 2008)  when Japan’s Orix Group and Manara Consortium took a 10% stake each in Air Asia X for a total sum of RM250 million.
The deal effectively valued Air Asia X at RM1.25 billion."

".....“If it is true that Virgin is disposing of its
10% interest in Air Asia X for RM66 million, then the valuation
of Air Asia X has changed,” said a banker."

Readers are reminded that these were share transactions in a private company involving  long term shareholders to  which the existing  majority  would have had to agree. How much one buys and sells bits and pieces of one's own company is  likely to be more clear indication of how much one thinks the company is worth.

Given the above, Tony's current valuation seems fanciful.
posted by ganesh sahathevan @ 6:58 PM 0 comments

0 COMMENTS:

Tuesday, July 22, 2014

MH 17 anomaly may have an explanation-A diversion from the usual route, tracked by Russian radar

First see article below

Then, this excerpt:

(On Tuesday 22 July, 2 days after MAS denied MH 17 has gone 

off-course ), the embassy played a footage of a briefing by the

 Russian Ministry of Defence, citing its radar evidence on

 Ukrainian troop positions a few days before, during and after

 MH17 was shot down. 

 Its findings revealed that MH17 diverted off course for

 about 14km, before trying to reach the safe air corridor

It also disclosed positions where Ukraine’s Buk missile system 

(the missile platform believed to have shot down MH17) was

 located within a 20km radius.


And next:


Pilots' group president says MH17 shot down after attempt to avoid storms

Malaysia Airlines plane was flying lower than planned and may have diverted on to more northerly course over Donetsk

Bodies of MH17 passengers stored in rail wagons as pressure on Russia mounts - live updates
Malaysia Airlines flight MH17 takes off at 12.31 PM from Schiphol airport near Amsterdam.
Malaysia Airlines flight MH17 takes off at 12.31 PM from Schiphol airport near Amsterdam. Photograph: Fred Neeleman/EPA
Malaysia Airlines flight MH17 was guided off its most recently used course as its pilots hoped to avoid thunderstorms brewing in the south ofUkraine, it has been claimed.
When it was shot down, the doomed jet was many miles north of the flight paths it had used on previous days to Kuala Lumpur from Amsterdam's Schiphol airport.
Nico Voorbach, a pilot who flew the same journey earlier this summer for KLM, and who is president of the European Cockpit Association, said poor weather might have been the reason why flight MH17 found itself in the sights of a surface-to-air missile launcher. The aircraft was shot down in the separatist Donetsk region of east Ukraine.
Voorbach said: "I heard that they were diverting from some showers. I think there were thunderclouds. You would ask air traffic control to divert left or right, and they would give you the permission."
It also emerged that flight MH17 had initially filed a flight plan requesting to fly at 35,000ft above Ukrainian territory. On entering Ukrainian airspace, however, the plane's pilots were instructed to fly at 33,000ft by the local air traffic control due to other traffic. Malaysia Airlines said the pilots had to follow the lead of the local authorities.
Malaysia's transport minister, Datuk Seri Liow Tiong Lai, told a press conference: "MH17's flight path was a busy major airway, like a highway in the sky. It followed a route which was set out by the international aviation authorities, approved by Eurocontrol, and used by hundreds of other aircraft.
"MH17 flew at an altitude that was set and deemed safe by local air traffic control, and it never strayed into restricted airspace. The flight and its operators followed the rules. But on the ground, the rules of war were broken."
In response to claims that weather led to MH17 changing its flight plan, Malaysia Airlines director of operations Izham Ismail said that it had no reports from the pilot to suggest that this was the case. The airline has been keen to stress that after the International Civil Aviation Organisation in April identified an area over the Crimea peninsula as risky, its aircraft had "at no point" flown into or requested to fly into the area. The tragedy has, however, raised questions over the wisdom of commercial airlines continuing to fly over conflict zones.
Airlines currently take their cue on risk from national governments, who are responsible for the airspace over their territories, although states have an interest in keeping flight paths open because they are able to collect overflight fees.
The UK Civil Aviation Authority recently urged UK-based airlines not to fly over a wide area near the Crimea, Black Sea and Sea of Azov, and several airlines, including British Airways, have followed that advice.
Others, however, had been continuing to use the route, which is one of the "aerial motorways" between northern Europe and south Asia. Malaysia Airlines was one of more than a dozen that flew the route on Thursday. Its flight MH17 was only a few miles from an Air India Boeing 787 and a Singapore Airlines 777 when it was shot down. The only restriction placed on the route by the Ukrainian government was that aircraft must remain above 32,000ft.
Voorbach said that the European Cockpit Association, which represents 38,000 pilots at the EU level, would discuss the possibility of more rigorous rules this week at its next board meeting. He added that there might now be an argument for a total ban on flying over conflict zones, but that the repercussions of such a change, including longer flight times and extra costs to airlines, could be huge for the aviation industry.
He said: "Do we stop planes flying over Israel, for example? Looking across the world, stopping flights over conflict zones would add a huge burden to the aviation industry. We need to see what the inquiry into the disaster discovers. I just hope that politics does not get in the way of the inquiry."
Since the crash, all airspace in eastern Ukraine has been closed.

Sunday, July 20, 2014

MH17:Statistics suggest an anomaly that needs to be investigated,and explained-That SQ 351 survived unscathed suggests an anomaly in MH 17's flight path




While Malaysian authorities have rightly argued that MAS is not alone in flying that route over Ukraine, the statistics displayed below suggest  the  question that  should be asked is  why only MH 17 was shot down.

The diagram below is of airlines and their aircraft that transited that route in the week before the incident. 
As the diagram shows, there were almost twice as many Aeroflot flights on that route as there were MAS flights.
Singapore Airlines is the next most frequent.



Displaying overview.jpg


The question then , what was it that made MH 17 stand out from the rest? Did this reported diversion from the norm trigger the  BUK's target acquisition  system?

A total of six targets can be engaged simultaneously by a BUK  battery while they are flying on different bearings and at different altitudes and ranges. A typical battery comprises a Command Post (CP) vehicle, a Target Acquisition Radar (TAR) vehicle and six Self-Propelled Mounts (SPMs) that act as the launcher vehicles. A specialist Loader-Launcher (LL) vehicle that acts both as missile transloader and additional launch unit supports pair of launchers.
(see http://www.janes.com/article/40907/missile-profile-9k37-buk)
Given that SQ 351 was just 25 km  behind MH 17,and given that MH 17 was reported be in the "safe" altitude zone, one must ask how and why   SQ 351 came through unscathed but MH 17 did not.

END






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