PETALING JAYA: A severance package of less than one month for every year of service is what probably awaits Malaysia Airlines (MAS) staff who are being let go by the ailing national carrier.

Both the National Union of Flight Attendants Malaysia and the Malaysia Airline System Employees Union have challenged the airline’s handling of the retrenchment exercise at the International Labour Organisation in Geneva but have declined comment for the time being.

It is learnt that the 6,000 who are to be let go will be offered a package of 0.8 months salary for every year of service. However, those who will be absorbed into the new company NewCo, which will run the airline from July 1, will be given a severance package of 0.3 months.

Any victory of a last-minute haggling will be revealed on Wednesday and Thursday, when termination letters will be issued to all 20,000 employees; and offer letters to 14,000 who are being retained in the new company.

They are expected to receive them by June 1. Following this, those who are offered to join NewCo will have until June 12 to accept the offer.

The constitutionality of the severance package — which seeks to trim employees down to 14,000 — will be questioned as the current terms of severance under the Collective Agreement will be discarded.

The Malaysia Airlines System Bhd Act 2015 passed late last year however, protects the airline from any employee or contractual action.

In a meeting chaired by the airline’s newly-appointed chief executive officer Christoph Mueller last week, it was revealed that engineering, cargo and cabin crew will be among the casualties. Some of these employees will also be absorbed into new portfolios.

If this is confirmed, the sincerity of this RM6 billion restructuring plan will be questioned if executives with bloated salaries are retained in what critics of the airlines say is a top-heavy administration.

However, a senior MAS executive tells The Edge Financial Daily that even the senior executives are not safe.

“Everything is decided at Khazanah’s (Khazanah Malaysia Berhad) level. We at MAS do not know what is going on but are required to work as usual,” said the executive.

In an internal memo circulated two weeks ago, an extraordinary employee commencement panel is to convene tomorrow, while the NewCo employee handbook is to be published on Thursday. A Corporate Development Centre for the newly absorbed staff is to be activated on June 1.

Khazanah has even hired popular life counsellor Datuk Mohd Fadzilah Kamsah to give motivational talks and counselling.

In a memo to staff on May 5, Mueller indicated that it will be tough times ahead for the airlines with many unpopular decisions.

“It is my duty to tell you today that the medicine is bitter and that the fitness programme which is required to bring us back into shape will cause a lot of sweat and sometimes tears. But it will be rewarding in the end,” said Mueller.

The former Aer Lingus chief was hired by sovereign wealth fund Khazanah — Malaysia Airlines’ main shareholder — on a two-year contract said to be worth at least some RM5.92 million annually (as that was his salary — €1.5 million annually at Aer Lingus).

Mueller, a German national with 25 years of experience in the aviation industry had said that the turnaround plan will take between three to five years to bear fruit. This will include reducing the operations cost of MAS which is 20% more than its competitors.

Last year’s twin tragedies of MH370 — still missing with 239 people on board after going off the radar on March 8, 2014; and MH17 which was shot out of the sky on July 17 killing all 298 people on board, had literally brought the airline to its knees.

Acknowledging this, Mueller told staff that it cannot be business as usual at MAS.

With Khazanah’s backing, all 4,000 contracts have been reviewed, with caterer Brahim’s — owned by the brother-in-law of former prime minister Tun Abdullah Ahmad Badawi — agreeing to cut its price by 25%.

In his memo, Mueller had posed these questions to illustrate the issues MAS must tackle.

“What will be our key strategic markets? What destinations will we serve? Which type of aircraft, which frequency, which schedule? How will we sell our tickets? What mix of distribution channels, in which markets? Is our pricing proposition right? What is the product offering? What are our main competitors and how to compete with them? In what disciplines are we better, or worse? Can we realistically improve ourselves in such disciplines where we lag?”

The physical changes at the airline have seen 1,300 staff being moved to new premises at the Kuala Lumpur International Airport, and a uniform makeover is in the cards.

Its jewel in the crown, the six Airbus A380 aircraft, have also been put up for sale.

The airlines, which went private last year, will focus on more short-haul sectors and cut unprofitable routes.

This article first appeared in The Edge Financial Daily, on May 25, 2015.