Page 4 - AAA, 9 May 2015

BUSINESS A25
Saturday 9 May 2015

New Malaysia Airline CEO vows Your Money: Credit Cards Offering
turnaround for battered airline 2% Rebates, While (or if) They Last

EILEEN NG RON LIEBER amounts. Annual fees from flier miles or can be trans-
Associated Press © 2015 New York Times cardholders are consistent, ferred into a frequent-flier
KUALA LUMPUR, Malaysia (AP) — The new CEO of Ma- For years, the holy grail but the number of people program. They cannot.
laysia Airlines said its financial situation is more chal- for many seekers of credit paying late fees may not The Barclaycard puts 10
lenging than anticipated and it will shrink in size as it card rewards has been be. The banks also can’t percent of your points back
tries to overcome a tarnished image with the travel a guaranteed 2 percent be sure what percentage into your account when
industry and the public. back on every dollar they of cardholders will carry a you redeem, giving it an ef-
Malaysia Airlines was battered last year by double spend. balance and pay interest - fective yield of 2.2 percent
jet disasters. Its government owner has brought in a The problem for startups and for how long. on every dollar you spend.
new CEO, former Aer Lingus chief Christoph Mueller, and for financial services Ron Shevlin, director of re- Its annual fee, however,
to oversee a 6 billion ringgit ($1.7 billion) turnaround. companies both large search at the consulting is $89, while the Venture
In a memo dated Tuesday, Mueller thanked Malay- and small is that it’s diffi- firm Cornerstone Advisors, card’s is $59.
sia Airlines staff for a warm welcome since he started cult to make the product points to another emerging The Fidelity Investment Re-
work at the airline on May 1 but also noted parts of the profitable. The fees that source of revenue: infor- wards American Express
organization seemed “depressed” and customers say merchants pay to accept mation on how we spend. offers 2 percent cash back
service is deteriorating. cards won’t cover all of Card companies know on all purchases with no
Malaysia Airlines, Mueller said, is “suffering badly from those rewards. And it’s in- who, for instance, shops at annual fee. Fidelity helps
a heavily damaged brand reputation” in key markets tensely annoying for con- Office Depot, and Staples American Express pay for
with many people avoiding the carrier because “they sumers who have moved may well pay good money the reward on this card,
are frightened.” all their spending to find to be able to send offers which has paid out $925
The carrier is moving ahead with a previously an- out a year later that their to them. “These guys are million in its history, accord-
nounced overhaul that will involve cutting its staff by issuer is cutting the reward making bets that they can ing to Fidelity. There are
6,000 or about 30 percent. because it couldn’t make monetize the data stream,” two catches here. First, it’s
“Since the new airline will be smaller in size, we simply the numbers work. he said. an American Express card,
have not enough work for all of you,” Mueller said. Still, a handful of grown-up Against this backdrop, 2 which means you won’t be
The airline had a good safety and service record be- operators like American Ex- percent cards available able to use it in as many
fore last year’s disasters but the tragedies, and the
airline’s handling of the first one in particular, hurt Credit cards with 2 percent rebates are popular with reward seekers, but making them profitable
its brand. A Malaysia Airlines jet with 239 people on for issuers has been difficult. Now four companies are trying them again.
board went missing March 8 last year while en route
to Beijing and no trace of it has been found. In July, a (Robert Neubecker/The New York Times)
Malaysia Airlines jet was shot down over Ukraine, kill-
ing all 298 people on board. press (and its partner, Fidel- now differ just enough from places as you can use a
Mueller said the airline will soon mail out termination ity), Barclays, Capital One one another to make it Visa or MasterCard. Sec-
letters and new job offer letters to those who will re- and Citigroup now have hard to say for sure which ond, the rebate has to go
main in the airline. That approach is being taken be- cards that offer this level one is the best - and which, into a Fidelity account of
cause staff requested privacy in the handling of em- of generosity. Are they if any, may be unsustain- some sort.
ployment matters, he said. the ones that have finally able. The newest entrant is Citi’s
The CEO’s memo was shown to reporters on Friday figured out how to make The Capital One Venture Double Cash MasterCard,
by the National Union of Flight Attendants Malaysia, money on these cards - Visa Signature and the Bar- which offers 1 percent
which protested the termination exercise by mail as and make them last? claycard Arrival Plus World back when you make a
“obnoxious and arrogant.” The central challenge for Elite MasterCard are the purchase and another 1
It said its 3,500 members were now stressed and wor- these card issuers is that most similar. With both, you percent when you pay
ried. The union has written to Prime Minister Najib they can’t always be sure get two of their proprietary the bill. There is no annual
Razak, asking him to intervene and urging the airline how customers will be- rewards points for every fee on this card. So how
to offer short and medium-term layoffs as well as sal- have. Their costs are pretty dollar you spend. Then, do they afford it without
ary cuts before a final termination exercise is carried clear: Banks need to pay you trade them for a state- a partner like Fidelity? The
out. for marketing the cards ini- ment credit against any lack of a big sign-up bonus
Mueller comes to the Malaysian job from a stint reviv- tially, pay for the rewards, travel purchase you make helps the product’s num-
ing Ireland’s Aer Lingus. He’ll be the first foreigner to service the accounts and on the cards. Trading in bers, a Citi spokeswoman,
head the Malaysian state-owned company. Analysts cover losses when people 5,000 points would yield a Emily Collins, said in an
say he’s an industry veteran “battle-hardened” from don’t pay their bills. $50 statement credit, for in- email, as does the fact that
his work carrying out corporate restructurings at other The revenue, however, is stance. An important point: most new customers come
state-owned airlines, including failed Belgian carrier not always predictable. Both issuers refer to their in through low-cost digital
Sabena. Merchants pay fees to ac- points as “miles,” which channels.
He was dubbed “The Terminator” in Ireland because cept cards, but different can confuse people into
his German accent made for easy comparisons to Ar- merchants pay different thinking they are frequent- Continued on page 27
nold Schwarzenegger in assassin robot mode as he
outlined his plans to remorselessly fix Aer Lingus.
Mueller said in the memo that the airline’s new busi-
ness plan will focus on cutting overall costs, which
are up to 20 percent higher than its competitors, and
withdrawing from markets where it cannot be com-
petitive. “Sometimes you have to retreat and regroup
before growing again. And that is the ultimate target.
We want to grow again in the last phase of restructur-
ing,” he said.
Mueller said he envisioned a new airline that is “safe,
on-time and friendly” that will be the new pride of Ma-
laysia.