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Contents
2 Notice of Annual General Meeting
4 CHAIRMAN’S MESSAGE
6 MANAGING DIRECTOR’S STATEMENT
10 BOARD OF DIRECTORS
17 Corporate Information
20 Management Committee
23 Statement on Corporate Governance
31 Audit Committee’s Report
34 Statement on Internal Control
36 Group Structure
37 Fleet Status
38 Route Network
40 Calendar of Events
42 REVIEW OF OPERATIONS
42 Evolving the Business
46 Spreading Our Wings
50 Reaching Out to Our Passengers
56 Moving Cargo, Moving the World
60 Keeping on Flying, Safely
66 Investing in Technolgy and Quality
70 GROUP FINANCIAL HIGHLIGHTS
73 FINANCIAL STATEMENTS
146 STATISTICS ON SHAREHOLDINGS
149 LIST OF COMPANY’S PROPERTIES
156 GLOSSARY
157 FORM OF PROXY
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 1
2 ANNUAL REPORT 2002 / 2003
Notice is hereby given that the 32nd Annual General Meeting
of Malaysian Airline System Berhad will be held at Nirwana Ballroom 1,
Lower Lobby, Mutiara Hotel Kuala Lumpur, Jalan Sultan Ismail,
50250 Kuala Lumpur on Monday, 8 September, 2003 at 10.00 a.m.
for the following purposes:-
Notice of Annual General MeetingAgenda
AS SPECIAL BUSINESS
6 To consider and, if thought fit, to pass the following Ordinary
Resolution:-
Authority to issue and allot shares
“That subject always to the Companies Act, 1965, the Articles
of Association of the Company and the approvals of the
relevant governmental/regulatory authorities, the Directors be
and are hereby authorised pursuant to Section 132D of the
Companies Act, 1965, to issue and allot shares in the Company
at any time until the conclusion of the next Annual General
Meeting and upon such terms and conditions and for such
purposes as the Directors may, in their absolute discretion,
deem fit provided that the aggregate number of shares to be
issued does not exceed ten per centum of the issued share
capital of the Company for the time being.”
RESOLUTION 10
7To transact any other ordinary business for which due notice
has been given.
RESOLUTION 11
AS ORDINARY BUSINESS
1To receive and adopt the Report of the Directors and the
Audited Accounts for the financial year ended 31 March, 2003
together with the Report of the Auditors thereon.
RESOLUTION 1
2To approve the Directors’ fees for the financial year ended
31 March, 2003.
RESOLUTION 2
3To re-elect the following Directors retiring under Article 139 of
the Company‘s Articles of Association, and who, being eligible,
offer themselves for re-election:-
(i) Tan Sri Dato’ Seri Azizan Bin Zainul Abidin RESOLUTION 3
(ii) Tan Sri Dato’ Dr. Samsudin Bin Hitam RESOLUTION 4
(iii) Dato’ Md. Nor Bin Md. Yusof RESOLUTION 5
4To re-elect the following Directors retiring under Article 137 of
the Company’s Articles of Association, and who, being eligible,
offer themselves for re-election:–
(i) Datu Hj. Salleh Bin Hj. Sulaiman RESOLUTION 6
(ii) Datuk Hj. S Abdillah @ Abdullah Bin Hassan
@ S Hassan RESOLUTION 7
(iii) Dato’ Gumuri Bin Hj. Hussain RESOLUTION 8
5To re-appoint Messrs. Ernst & Young as Auditors and to
authorise the Directors to fix their remuneration.
RESOLUTION 9
BY ORDER OF THE BOARD
RIZANI BIN HASSAN (LS 05125)COMPANY SECRETARY
Kuala Lumpur, 16 August 2003
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 2
3
Not
ice
of A
nnua
l Gen
eral
Mee
ting
EXPLANATORY NOTES ON ITEM 6 OF THE AGENDA
Resolution pursuant to Section 132D, Companies Act, 1965.
The Ordinary Resolution proposed under item 6 of the Agenda, if passed, will
empower the Directors to issue shares in the Company up to an amount not exceeding
in total 10% of the issued share capital of the Company, subject to compliance with
the relevant regulatory requirements. The approval is sought to avoid any delay and
cost in convening a general meeting for such issuance of shares. This authority, unless
revoked or varied by the Company at a general meeting, will expire at the next Annual
General Meeting.
NOTES1 A member of the Company entitled to attend and vote at the Meeting is entitled
to appoint a proxy to attend and vote in his stead. A proxy may but need not be a
member of the Company and a member may appoint any person to be his proxy
and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply
to the Company.
2In the case of a corporate member, the instrument appointing a proxy shall be
under its Common Seal or under the hand of its officers or attorney, duly
authorised in that behalf.
3A holder may appoint more than two proxies to attend the Meeting. Where a
member appoints two or more proxies, he shall specify the proportions of his
share-holding to be represented by each proxy.
4The right of Foreigners to vote in respect of their deposited securities is subject to
Section 41 (1) (e) and Section 41 (2) of the Securities Industry (Central Depositories)
Act, 1991 and the Securities Industry (Central Depositories) (Foreign Ownership)
Regulations, 1996. The position of such Depositors in this regard will be
determined based on the General Meeting Record of Depositors. Such Depositors
whose shares exceed the Company’s foreign shareholding limit of 45% as at the
date of the General Meeting Record of Depositors may attend the above Meeting
but are not entitled to vote. Consequently, a proxy appointed by such Depositor
who is not entitled to vote will also not be entitled to vote at the above Meeting.
5The instrument appointing a proxy must be deposited at the Registered Office
of the Company at 33rd Floor, Bangunan MAS, Jalan Sultan Ismail, 50250
Kuala Lumpur, not less than 48 hours before the time for holding the Meeting
or at any adjournment thereof.
6Shareholders’ attention is hereby drawn to the Listing Requirements of the Kuala
Lumpur Stock Exchange, which allows a member of the Company who is an
authorised nominee as defined under the Securities Industry (Central Depositories)
Act, 1991, to appoint at least one (1) proxy in respect of each securities account it
holds with ordinary shares of the Company standing to the credit of the said
securities account.
List of General Meetings held during the financial year ended 31 March 2003
EXTRAORDINARY GENERAL MEETINGDate : 5 November, 2002
Time : 10.00 a.m.
Venue : Pacific Ballroom, Level 2, Pan Pacific Hotel
Jalan Putra, 50746 Kuala Lumpur
31ST ANNUAL GENERAL MEETINGDate : 30 September, 2002
Time : 10.00 a.m.
Venue : Dewan Tun Hussein Onn, Level 2
Putra World Trade Centre
41, Jalan Tun Ismail, 50480 Kuala Lumpur
DETAILS OF INDIVIDUAL DETAILS OF ATTENDANCE DIRECTORS AND OTHER
NAME OF DIRECTOR OF BOARD MEETINGS DISCLOSURE REQUIREMENTS
Tan Sri Dato’ Seri Azizan Bin Zainul Abidin Refer to page 23 of the Refer to page 10 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report
Dato’ Md. Nor Bin Md. Yusof Refer to page 23 of the Refer to page 10 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report
Tan Sri Dato’ Dr. Samsudin Bin Hitam Refer to page 23 of the Refer to page 11 of the (Article 139 of the Company’s Articles of Association) Annual Report Annual Report
Datu Hj. Salleh Bin Hj. Sulaiman Refer to page 23 of the Refer to page 12 of the (Article 137 of the Company’s Articles of Association) Annual Report Annual Report
Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan Refer to page 23 of the Refer to page 14 of the (Article 137 of the Company’s Articles of Association) Annual Report Annual Report
Dato’ Gumuri Bin Hj. Hussain Not applicable* Refer to page 15 of the (Article 137 of the Company’s Articles of Association) Annual Report
*Dato’ Gumuri Bin Hj. Hussain was appointed after the financial year ended 31 March 2003
Statement Accompanying the Notice of Annual General Meeting
Directors standing for re-election at the 32nd Annual General Meeting of the Company to be held at Nirwana Ballroom 1, Lower Lobby,
Mutiara Hotel Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Monday, 8 September, 2003 at 10.00 a.m. are as follows:-
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 3
4 ANNUAL REPORT 2002 / 2003
Chairman’s Message
It gives me great pleasure to report that the financial year
2002/2003 closed with Malaysia Airlines chalking a profit of
RM339.1 million. This was a welcome change from the
situation of recurring losses in the past five years. Though
the profits were modest the achievement was all the more
commendable considering the uncertain economic and
political environment. While there were evidence of a
return of confidence in air travel in the first half of the
year compared to the situation immediately after the
11 September terrorist attack on the World Trade Centre,
the travel advisories issued by several governments and the
impending of war on Iraq were major obstacles to a
sustained recovery. Practically every airline was under severe
pressure posed by the reduced demand for air travel. This
depressing business environment was aggravated by the
mounting cost of operations.
For Malaysia Airlines, encumbered by a huge debt, the
situation was hardly tenable. It needed the restructuring to
put it on a firmer footing. The innovative asset unbundling
under the Widespread Asset Unbundling (WAU) scheme
resulted in separation of ownership of assets from operation.
On completion of the restructuring exercise, Malaysia Airlines
was left with a healthier balance sheet.
The innovative assetunbundling under theWAU scheme resulted inseparation of ownershipof assets from operation.On completion of therestructuring exercise,Malaysia Airlines wasleft with a healthierbalance sheet.
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 4
5
A welcome change came in the form of greater
consciousness of the urgency to strengthen the resilience
and the capacity of the Airline to respond quickly and
effectively to the challenges faced by it. The outstanding
performance of MASkargo was a happy outcome of this
new mood and spirit.
I would like to thank the staff, management, shareholders
and stakeholders for their loyalty and support in the difficult
and trying times. In the course of last year we came up with
a new and exciting advertising theme. However, the stakes
have been enormously raised by the convergence of disasters
that were visited upon us. Nevertheless, we remain
undeterred in our commitment to “go beyond expectations”
in the coming year and beyond.
Chai
rman
’s M
essa
ge
Galvanized by a renewed feeling of confidence that came
with the changes in the Board and the management,
Malaysia Airlines undertook several measures aimed at
improving its operations. The initiatives taken by various
departments had set in motion a drive targeted at enhancing
the products offered by the company, the quality of its
services and the overall reliability of the Airline.
Improvements are evident in the cabin service, and in sales,
and passenger handling. Enhanced engineering and technical
support resulted in improved reliability. There were also
notable improvements in processes and procedures that have
contributed to increased productivity and cost saving. We are
proud that once again Malaysia Airlines was the recipient of
the Skytrax Best Cabin Staff award.
Tan Sri Dato’ Seri Azizan Bin Zainul AbidinChairman
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 5
6 ANNUAL REPORT 2002 / 2003
Managing Director’s Statement
The year presently under review was a defining one for Malaysia
Airlines, distinguished above all else by the major reorganisation
of the Group Corporate Structure effected by a financial
stratagem without precedent. WAU, as this was known (the
name is a happy association with our logo), connotes a
widespread asset unbundling exercise that separated balance
sheet management from the operational management. It was a
timely move, which came at a most critical juncture when the
Airline was under siege as never before in its history. It proved
regenerative – transforming the financial standing of the Group,
thereby preserving the national flag carrier – and as such
deserves to be seen as a true landmark event.
Turnaround Faster than Forecast
The reorganisation – the result of long and meticulous
planning, I am happy to report that it is working. Recovery is
already under way – a faster turnaround than expected and
evidenced by the present financial statement, where we record
a staggering profit especially given the temper of the times.
The Group achieved a net profit after tax of RM339.1 million
for the financial year ended 31 March 2003 compared to a
net loss after tax of RM835.6 million in the last financial year.
Total revenue for the full financial year increased by RM199.2
million, while total expenditure in the same period was lower
by RM699.7 million.
The better than expected demand in our passenger and cargo
services was a key factor in the improved financial result. But
WAU also played a significant part. This came into effect on
5 November, 2002. The fourth quarter was the first time
the new cost structure was fully applied and tested.
The Group achieveda net profit after tax ofRM339.1 million for thefinancial year ended31 March 2003 comparedto a net loss after tax ofRM835.6 million in thelast financial year.
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 6
7
This achievement has to be set against an extremely difficult
period in our history when we had to cope with not one but
a series of external shocks, impossible to anticipate which
devastated the entire aviation business. Malaysia Airlines
prevailed. Several of our industry counterparts did not, including
even some of the major players. In relative terms, we came out
well ensuing from our prompt and strategic response with the
impetus coming from the bold step we took in restructuring.
Unconventional Restructuring, yet Commercially Justified
In effect, our aircraft were transferred out from our balance
sheet to PMB – Penerbangan Malaysia Berhad, an entity
set up and owned by the Minister of Finance Inc. that became
our principal shareholder and the designated Government
holding company. The aircraft fleet was leased back and
Malaysia Airlines operates the domestic sector on behalf of
PMB and continues to own and operate the international and
cargo businesses. What was most gratifying – and here we
record our appreciation of the Government’s part in all this –
was its willingness to underwrite our recovery plan.
Commitment on their side and political will make it possible.
For the benefit of the critics – and the sceptics who are always
with us – it is necessary to understand the genuine strategic
intent behind the manoeuvre. It should not be seen as a bailout
but a commercial transaction which, however unconventional, is
capable of being justified in commercial terms. First, the
rationale for separating balance sheet management from the
operations is a pragmatic division of responsibilities in line with
the different core competencies involved. Malaysia Airlines can
now concentrate on the operational side. This follows the
modern trend, towards separate autonomous business units
for greater focus and effectiveness.
There is also a strong case for more Government
participation, which brings unequalled shareholder strength
and staying power, now more than ever relevant in the
context of the volatile environment in which we operate.
This is the airline’s best guarantee of financial security. We
are strongly underwritten – and therefore no longer hostage
to market forces and the vagaries of the economic cycle.
Aviation is a special case. Its financing needs critical mass.
The provision of aircraft is capital intensive. Malaysia Airlines
currently operates 100 aircraft all told – 85 in the jet category,
of which 48 are wide bodied, punitively expensive to fund.
It is very much in the Government’s own interest to see
that the fleet is sustained. Air transport is vital to modern
economic activity. The conventional approach of business in
the past has been to rely on the so-called free market
and to allow market forces to supply the correctives to any
downturn. This just will not suffice, in today’s terms, a lesson
that was underscored in 1997, and especially for an essential
industry like ours. We have to be strategic not just reactive
and ad hoc. Connectivity is indispensable in a global society.
It is critical for the Government’s planning and policy
implementation that the air bridges remain intact. At the
same time, it is fully recognised that this comes at a price.
Man
agin
g Di
rect
or’s
Sta
tem
ent
Dato’ Md. Nor Bin Md. YusofManaging Director
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 7
8 ANNUAL REPORT 2002 / 2003
Managing Director’s Statement
We saw Malaysia Airlines dominating the top league of
Skytrax’ premier survey of international airlines. We moved
ahead of our competitors to take the Award in the category
for World’s Best Cabin Crew 2002. To our delight, just before
this report goes to print, we have received the same Award
for 2003 proving our quality and sustainability.
I commend all those who contributed to this ground-breaking
achievement. It should not come as an entire surprise. This
only confirms our long held belief that the intrinsic Malaysian
grace and charm of our people is a core asset especially in a
service industry. An accolade such as this is a significant factor
in attracting business. Now we are firmly benchmarked against
the best in what may be regarded as the upper elite of the
world’s airlines. This is in line with the new Malaysia Airlines
look. A corollary of the restructuring is the need to reposition
ourselves in the external arena not just to apprise the public of
our new configuration but to project competitive advantage.
It is on this basis that WAU was presented, accepted by the
Board and implemented at the end of the third quarter. A
comprehensive exercise was undertaken to internalise what
was a brand new concept, and to secure employee buy-in at
all levels of the organisation. It was soon accompanied by a
revitalised Business Plan. We were ready to go, and here we
are. It is heartening to see signs of improvement at this early
stage of implementation.
Our Resilience and Quality Consciousness Proving to be Real Assets
It would be wrong however to allow our recovery strategy,
exciting as it is, to overshadow the other very real gains we
made in the course of the year. Malaysia Airlines’
performance was noteworthy. Our EBITDAR achieved a
21.7% margin even before the gain from the aircraft transfer.
This is better than our peers in the market and against
tremendous odds. Management has reason to be proud –
and I would personally like to congratulate them on this –
that they did not allow the pressures under which we had to
operate to diminish in any way the quality of our products or
of the high standards we have set for both our customer
services and our employee welfare. It was a real test of our
resilience and it is more than that. We were not content with
just holding operation. We were even able to excel and set
new performance records for ourselves.
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 8
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We are Undeterred by the Daunting, Volatileand Challenging Risk Landscape
To end, I would like, although it is early days, to take a reality
check on the changes we introduced. As things turned out
and by an extraordinary turn of events, Malaysia Airlines’ new
model was to be almost instantly tested. The very day we
were going public with the restructuring, the Bali bombing
took place. No sooner was the ink dry on the contract, then
rumours of imminent war in Iraq were rife. There was a very
changed psychological climate to contend with. That new
instrument, the travel advisory, made its appearance in our
marketing scenario and crisis management entered the Board
Agenda. This was even before the Severe Acute Respiratory
Syndrome (SARS) had happened. All of these developments
were visited upon us by external forces beyond our control
but not beyond our ability to contain. Happily our new model
proved viable and feasible.
It also proved something else. There is no room for
complacency. Never has the world – and the industry, been so
unpredictable. The level of risk and uncertainty is incalculable.
Going forward undeterred we still see the reorganisation as a
chance of renewal. This will depend on our sustaining the initial
enthusiasm it received and that allows the Plan to work. Our
people have embraced it in a very positive spirit and on behalf
of management, I thank them. They are ready for change. It is
not just the system that will be tested; we will be tested.
We have also to thank our shareholders for their patience
and their staunch support in the bad times. We believe the
recovery strategy has only just began and will continue to
yield continuous improvement. We view the future with
cautious optimism – our confidence being based on the fact
that we now have a stable ownership and an eminently
pragmatic organisation in place, on which we can rely.
The verdict of history may well be that last year laid the
foundation for Malaysia Airlines, going on to achieve its
ultimate destiny in the global aviation stakes.M
anag
ing
Dire
ctor
’s S
tate
men
t
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 9
10 ANNUAL REPORT 2002 / 2003
Dato’ Md. Nor Bin Md. Yusof Non-Independent and Executive Director
Dato’ Md. Nor Bin Md. Yusof, aged 55, is a Malaysian. He graduated
with a Bachelor of Commerce from the University of Otago, New
Zealand and is a qualified Chartered Accountant. He has attended
various senior management training programmes including Advanced
Management Programme at Wharton School and Banking and
Monetary Policies Programme organised by Harvard University. Prior to
Malaysia Airlines, he was appointed the advisor to the Ministry of
Finance in May, 2000 after serving the Commerce Asset Holdings
Berhad Group as a Director since 22 February, 1988. His last position
was President and Chief Executive Officer at the then Bank of
Commerce Berhad (BOC). During his tenure at BOC, Dato’ was also the
Chairman of Commerce International Merchant Bankers Berhad and a
Director on the Board of Bank of Commerce (L) Ltd., Pos Malaysia
Berhad, Cagamas Bhd., Labuan Offshore Financial Services Authority,
Financial Park (Labuan) Sdn. Bhd. and several other organisations. He
was also a member of the Executive Committee of the Association of
Banks Malaysia and the Chairman of the Banking Mediation Bureau.
He was appointed as Managing Director of Malaysian Airline System
Berhad on 14 February, 2001 and was appointed as a member of the
Board Safety and Security Committee. Currently, he also sits on the
board of Labuan Offshore Financial Services Authority. He has attended
twelve (12) out of the twelve (12) Board meetings held during the
financial year.
Tan Sri Dato’ Seri Azizan Bin Zainul AbidinNon-Independent and Non-Executive Chairman.
Tan Sri Dato’ Seri Azizan Bin Zainul Abidin, aged 68, is a Malaysian. He
graduated with a Bachelor of Arts (Hons.) from the University of
Malaya, Malaysia in 1959 and has attended courses in Development and
Administration at Oxford University, United Kingdom, The Royal College of
Defence Studies, United Kingdom and an Advanced Management
Programme at Harvard Business School, United States of America. He
was appointed Chairman of Petroliam Nasional Berhad (PETRONAS) on
10 February, 1995 after serving as President and Chief Executive of
PETRONAS from February, 1988. Prior to joining PETRONAS, he had served
in the Malaysian Civil Service for twenty-eight (28) years and had held
various positions in the civil service including Secretary to the National
Security Council, Principal Private Secretary to three (3) Prime Ministers,
Secretary-General to the Ministry of Trade and Industry and Secretary-
General to the Ministry of Home Affairs. Tan Sri Dato’ Seri Azizan is
also the President and Chief Executive of Perbadanan Putrajaya which is
involved in the planning, development and management of Putrajaya,
the new Federal Government Administrative Centre.
He was appointed as Chairman of Malaysian Airline System Berhad
on 15 February 2001. He is also Chairman of the Nomination
Committee. Currently he sits on the board of several public
companies including Petroliam Nasional Berhad, KLCC (Holdings)
Berhad, KLCC Projeks Bhd. (Formerly known as Kuala Lumpur City
Centre Berhad) and Kuala Lumpur City Park Berhad and also a trustee
of Malaysian Philharmonic Orchestra and Dewan Filharmonik
Petronas. He has attended twelve (12) out of the twelve (12) Board
meetings held during the financial year.
Board of Directors
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 10
11
Tan Sri Dato’ Dr. Samsudin Bin Hitam Non-Independent and Non-Executive Director.
Tan Sri Dato’ Dr. Samsudin Bin Hitam, aged 55,
is a Malaysian. He graduated in 1970 with a Bachelor of Arts (Hons.) in
Malay Studies from the University of Malaya, Malaysia. He later
obtained a Master of Science in Agricultural Economics and a
Doctorate in Land Resources, both from the University of Wisconsin,
United States of America in 1977 and 1986, respectively. He began his
career with the Treasury Department as Assistant Secretary,
Budget Division in 1970 and later became Assistant Director, Budget
Division in 1973. In 1980, he was promoted to Senior Assistant
Director, Budget Division. In 1986, he joined the Economic Planning
Unit (EPU) as the Secretary to the Economic Panel and was
subsequently promoted to Director of Macroeconomics in 1987. In
1992, he was appointed as Deputy General (Sectoral) of the EPU and
subsequently as Deputy Director General (Macro). In 1998, he was
appointed as the Director General of the EPU before moving back to
the Treasury in June, 2000 as the Secretary General.
He was appointed as a Director of Malaysian Airline System Berhad on
21 July, 2000. He is also a member of the Board Audit Committee and
Nomination Committee. Currently, he sits on the board of several
public companies including Petroliam Nasional Berhad, Khazanah
Nasional Berhad and Bintulu Port Holdings Berhad and Group. He is
also a member of the board of several statutory bodies including
Lembaga Hasil Dalam Negeri, Kumpulan Wang Amanah Pencen and
Bank Negara Malaysia. He has attended seven (7) out of the twelve
(12) Board meetings held during the financial year.
Dato’ Zaharaah Binti ShaariNon-Independent and Non-Executive Director.
Dato’ Zaharaah Binti Shaari, aged 54, is a Malaysian. She graduated
with a Bachelor of Arts (Hons.) from the University of Malaya, Malaysia
in 1971 and later obtained a Master of Science in Transport Planning
and Management from the Polytechnic of Central London, United
Kingdom. She began her career with the Ministry of Transport as
Assistant Secretary, Civil Aviation Division in 1971 and later
as Principal Assistant Secretary in Civil Aviation Development, Air
Transport and International Affairs Division. In 1974, she was promoted
to Director of the Air Transport and International Affairs Division and
subsequently to the post of Under Secretary of Aviation in the Ministry
of Transport. She was appointed as Deputy Director of Budget in the
Ministry of Finance in 1989 and subsequently as Director of Budget in
1996 before assuming her present position as Secretary-General to the
Ministry of Transport in 1999.
She was appointed as a Director of Malaysian Airline System Berhad on
1 October, 1999. She is also a member of the Board Audit Committee
and Remuneration Committee. Currently, she sits on the board of
Malaysia Airports Holdings Berhad and Penerbangan Malaysia Berhad.
She is also the Chairman of Bintulu Port Authority, Ipoh Cargo Terminal
Sdn. Bhd. and Railway Asset Corporation and Deputy-Chairman of
Johore Port and Port of Tanjung Pelepas Authority. She has attended
eight (8) out of the twelve (12) Board meetings held during the
financial year.
Dato’ N. Sadasivan a/l N. N. Pillay Director / Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan Director / Keong Choon Keat Director /
Dato’ Md. Nor Bin Md. Yusof Managing Director / Martin Gilbert Barrow Director / Tan Sri Dato’ Seri Azizan Bin Zainul Abidin Chairman /
Dato’ Zaharaah Binti Shaari Director / Datu Hj. Salleh Bin Hj. Sulaiman Director / Dato’ Gumuri Bin Hj. Hussain Director /
Dato’ Mohamed Azman Bin Yahya Director / Tan Sri Dato’ Dr. Samsudin Bin Hitam Director
Boar
d of
Dire
ctor
s
From Left to Right
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 11
12 ANNUAL REPORT 2002 / 2003
Keong Choon KeatIndependent and Non-Executive Director
Keong Choon Keat, aged 59, is a Malaysian. He is a member of the
Malaysian Institute of Accountants, the Malaysian Institute of Certified
Public Accountants and is a Fellow Member of the Institute of
Chartered Accountants in England and Wales. He was attached to
Bristol Myers & Company Ltd. in Middlesex, England as an Accountant
in 1968 and left to join Malaysian Tobacco Company Bhd. as an
Accountant in 1969. From 1974 to 1999, he was attached to UMW
Holdings Bhd. where he held various management positions from
General Manager to Director Group Accounts before being promoted
to the position of Executive Director in 1988. Upon retirement in 1999,
he joined a consultancy firm providing outplacement and career
management consultancy services in Malaysia.
He was appointed as a Director of Malaysian Airline System Berhad on
16 April, 2001. He is also the Chairman of the Board Audit Committee
and a member of the Remuneration Committee. He is a Director of
several public companies including JT International Berhad, Chin Teck
Plantations Berhad, Negri Sembilan Oil Palms Berhad, Pacificmas Bhd.,
The Pacific Insurance Berhad and Crest Builder Holdings Berhad. He has
attended eleven (11) out of the twelve (12) Board meetings held during
the financial year.
Datu Hj. Salleh Bin Hj. SulaimanIndependent and Non-Executive Director.
Datu Hj. Salleh Bin Hj. Sulaiman, aged 53, is a Malaysian. He graduated
with a Bachelor of Science from the University of Malaya in 1973 and
later obtained a Master of Education from the University of London,
United Kingdom in 1980. He is also a fellow of the Kennedy School of
Government, Harvard University, Cambridge, USA. He began his career in
1975 as Education Officer/Teacher. From 1977 to 2001, he had held
various positions including Vice Principal, Principal, Development Officer
in Department of Education, Senior Project Officer and Director
Entrepreneur Development Division (SEDC); General Manager, Borneo
Development Corporation Sdn. Bhd.; General Manager, Bintulu
Development Authority (BDA); Senior Assistant Director and Deputy
Director, Sarawak Foundation; Managing Director, Centre Modern
Management and subsequently to the post of Permanent Secretary of
the Ministry of Infrastructure Development and Communication before
assuming his present position as Deputy State Secretary of Sarawak.
He was appointed as a Director of Malaysian Airline System Berhad on
1 October, 2002. He is also a member of the Board Audit Committee,
Board Safety and Security Committee and Nomination Committee. He
holds no other Directorships in public companies in Malaysia. He has
attended five (5) out of the five (5) Board meetings held during the
financial year since his appointment to the Board of Directors of
Malaysian Airline System Berhad.
Board of Directors
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 12
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Martin Gilbert BarrowIndependent and Non-Executive Director
Martin Gilbert Barrow, aged 59, is British. He graduated with Oxford
and Cambridge Board Examination “A” levels in Science and
Mathematics. He subsequently attended courses in Finance and
Marketing. He joined Jardine Matheson, Hong Kong, in 1965. From
1975 to 1980, he was transferred to Japan as Managing Director of
the Group’s operations in Japan. He was promoted to the position of
President of Olayan Saudi Holding Company, the Group’s affiliate in
Saudi Arabia from 1980 to 1983. He returned to Hong Kong as
Regional Managing Director, Jardines’ operations in Hong Kong and
China, in 1983 and was appointed a Director of Jardine Matheson Ltd.
at the Group Head Office from 1989 to 2001. He was also active in
public service and was Chairman of the Hong Kong Tourist Association
from 1988 to 1996 and a member of the Aviation Advisory Board. He
retired from Jardine Matheson in June, 2001.
He was appointed as a Director of Malaysian Airline System Berhad on
29 August, 2001 and is the Chairman of the Board Safety and Security
Committee. He holds no other Directorships in public companies in
Malaysia. He has attended nine (9) out of the twelve (12) Board
meetings held during the financial year.
Dato’ N. Sadasivan a/l N. N. PillayIndependent and Non-Executive Director.
Dato’ N. Sadasivan a/l N. N. Pillay, aged 63, is a Malaysian. He
graduated in 1963 with a Bachelor of Arts (Honours) degree in
Economics from University of Malaya, Malaysia. He began his career
with the Economics Development Board, Singapore as Economist/Chief,
Industrial Facilities Division in 1963. From 1968 to 1995, he was
attached to Malaysian Industrial Development Authority (MIDA) where
he held various management positions from Director of Division to
Deputy Director – General before being promoted to the position of
Director – General in 1984. Upon retirement in 1995, he set up his
own consultancy firm, SKA Management Consultants Sdn. Bhd.
He was appointed as a Director of Malaysian Airline System Berhad on
1 December, 2001. He is a member of the Board Audit Committee,
Nomination Committee and Remuneration Committee. Currently, he
sits on the board of several public companies including Chemical
Company of Malaysia Berhad, Petronas Gas Berhad, Leader Universal
Holdings Berhad, Amanah Capital Partners Berhad, APM Automotive
Holdings Berhad and Pengurusan Danaharta Nasional Berhad. He is
also a Director of Bank Negara Malaysia. He has attended eleven (11)
out of the twelve (12) Board meetings held during the financial year.
Boar
d of
Dire
ctor
s
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 13
14 ANNUAL REPORT 2002 / 2003
Datuk Hj. S Abdillah @Abdullah Bin Hj. Hassan @ S Hassan Independent and Non-Executive Director
Datuk Hj. S Abdillah @ Abdullah Bin Hj. Hassan @ S Hassan aged 53, is
a Malaysian. He graduated with a Bachelor of Arts (Honours) from the
University of Malaya, Malaysia. He started his career as an Administrative
Officer, Chief Minister’s Department, Sabah Branch in 1974 and was
subsequently appointed as District Officer, Kudat in 1977. In 1980,
he was transferred to the Ministry of Culture, Youth and Sports as
Permanent Secretary. In 1984, he served as Secretary of Internal Affairs
& Research before being posted as Director of Sabah State’s Public
Service Department in 1994. Subsequently, he moved on to serve as
the Deputy State Secretary in 1996 before assuming his present position
as Permanent Secretary, Ministry of Finance, Sabah State Government.
Prior to his appointment as Director of Malaysian Airline System Berhad
on 10 March, 2003, he was the Alternate Director to Datuk Kee
Mustafa. He is also a Director of several public companies including
Sabah Development Bank Berhad, Borneo Housing Mortgage Finance
Berhad, Perbadanan Pinjaman Sabah and Progressive Insurance Berhad.
He has attended two (2) out of the eleven (11) Board meetings as
alternate to Datuk Kee Mustafa and one (1) out of one (1) Board
meeting held during the financial year since his appointment to the
Board of Directors of Malaysian Airline System Berhad.
Dato’ Mohamed Azman Bin YahyaIndependent and Non-Executive Director
Dato’ Mohamed Azman Bin Yahya, aged 39, is a Malaysian. He
graduated with a First Class Honours Degree in Economics from the
London School of Economics & Political Science of the University of
London and is a member of the Malaysian Institute of Accountants and
the Institute of Chartered Accountants in England and Wales and
fellow of the Malaysian Institute of Banks. He is the founder and Group
Chief Executive of Symphony House Berhad, a listed IT and corporate
services group. He also serves as a member of the Malaysian Steering
Committee on Bank Restructuring and sits on the advisory panels for
the Malaysian Financial Sector Masterplan, the Securities Commission
Capital Market Advisory Council and Malaysia Venture Capital
Management Berhad. He is the Chairman of Pengurusan Danaharta.
He was appointed as a Director of Malaysian Airline System Berhad on
1 December, 2001. He is also the Chairman of the Remuneration
Committee. He sits on the Board of several public companies including
Sime Darby Berhad, Pharmaniaga Berhad, Island & Peninsular Berhad,
PLUS Expressway Berhad, AE Multi Holdings Berhad and Symphony
House Berhad. He has attended nine (9) out of the twelve (12) Board
meetings held during the financial year.
Board of Directors
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 14
15
Dato’ Gumuri Bin Hj. Hussain Non-Independent and Non-Executive Director
Dato’ Gumuri Bin Hj. Hussain aged 56, is a Malaysian. He is a
member of the Malaysian Institute of Accountants, the Malaysian
Institute of Certified Public Accountants and is a Fellow Member of
the Institute of Chartered Accountants in England and Wales. He
was formerly a senior partner in PricewaterhouseCoopers Malaysia
and Deputy Chairman of its Governance Board. He had been
with PricewaterhouseCoopers and its predecessor firm, Price
Waterhouse, since 1975. He joined Penerbangan Malaysia Berhad
as the Managing Director and Chief Executive Officer on 16 August
2002 upon his retirement from PricewaterhouseCoopers.
He was appointed as a Director of Malaysian Airline System Berhad on
20 May, 2003. He is a Director of a public company, Kurnia Setia Berhad.
Jusof Bin Ismail(Alternate Director to Tan Sri Dato’ Dr. Samsudin Bin Hitam)
Jusof Bin Ismail, aged 41, is a Malaysian and is an Alternate Director to
Tan Sri Dato’ Dr. Samsudin Bin Hitam. He graduated with a Bachelor of
Economics from the University of Malaya, Malaysia in 1985 and later
obtained a Diploma in Public Administration from the National Institute
of Public Administration, Kuala Lumpur, Malaysia in 1987 and a Master
of Economics at Williams College, Massachusetts, United States of
America. He began his career with the Treasury as Assistant Secretary,
Economic Division (Public Finance Section) in 1988. In 1997, he was
transferred to the Finance Division (Privatisation Section) of Treasury as
Assistant Secretary before his appointment in 2000 as Special Officer to
the Secretary General of Treasury.
He was appointed as an Alternate Director to Tan Sri Dato’
Dr. Samsudin Bin Hitam on 28 August, 2000. He has not attended
the Board meetings held during the financial year on behalf of
Tan Sri Dato’ Dr. Samsudin Bin Hitam.Re
view
of O
pera
tions
Boar
d of
Dire
ctor
s
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 15
16 ANNUAL REPORT 2002 / 2003
Prior to his appointment as Alternate Director to Datu Hj. Salleh Bin Hj.
Sulaiman on 6 January, 2003, he was the Alternate Director to
Datu Dr. Hatta Solhi. He is also a Director of several public companies
including Cahya Mata Sarawak Berhad, Sarawak Enterprise Corporation
Berhad and Group and Rashid Hussain Berhad. He has attended one
(1) out of the nine (9) Board meetings held during the financial year
as alternate to Datu Dr. Hatta Bin Solhi.
Abdul Rahman Bin Abdul Ghani(Alternate Director to Datuk Abdillah @
Abdullah Bin Hassan @ S Hassan)
Abdul Rahman Bin Abdul Ghani, aged 52, is a Malaysian and is an
Alternate Director to Datuk Abdillah @ Abdullah Bin Hassan @ S
Hassan. He graduated with a Bachelor of Arts from the University of
Queensland, Australia in 1977. He began his career in the civil service
as Penolong Penguasa Kastam at the Royal Customs and Excise
Department in 1977 and thereafter served in the State Civil Service
including statutory bodies and agencies during the last 23 years,
holding various senior positions. His last position before joining Warisan
Harta Sabah Sdn. Bhd., a wholly owned investment holding company
of the State Government of Sabah as Chief Executive Officer with
effect from 17 April, 2000 was as Government Printer at the Sabah
Government Printing Department.
He was appointed as an Alternate Director to Datuk Abdillah @
Abdullah Bin Hassan @ S Hassan on 11 July, 2003. He is also a Director
of a public company, Borneo Housing Mortgage Finance Berhad.
Datuk Wan Abdul Kadir Bin Wan Yubi @Datuk Wan Ali Tuanku Yubi (Alternate Director to Datu Hj. Salleh Bin Hj. Sulaiman)
Datuk Wan Abdul Kadir Bin Wan Yubi @ Datuk Wan Ali Tuanku Yubi
aged 53, is a Malaysian and is an Alternate Director to Datu Hj. Salleh
Bin Hj. Sulaiman. He graduated with a Bachelor of Economics degree
from the University of Malaya, Malaysia in 1973 and later obtained a
Master of Education from the University of Birmingham in 1982. He
started his career as an Education Officer at the Department of
Education, Sarawak, a Federal Service appointment, in 1974 and was
subsequently appointed Senior Education Officer. In 1984, he was
transferred to the State Financial Secretary’s Office, Sarawak as
Principal Assistant Secretary (Contracts). In 1987, he served as Resident,
Limbang Division in Sarawak for a year before being posted as
Permanent Secretary to the Ministry of Land Development in 1988
where he held the position for four and a half years. Subsequently, he
moved on to serve as the General Manager of Land Custody and
Development Authority in 1992 and was transferred back to the State
Civil Service as the Deputy State Financial Secretary in 1994. He was
promoted to the position of State Financial Secretary in 1995 where he
held the post for almost six (6) years before opting for early retirement
from the State Civil Service in November, 2000. He was a former
Director of Borneo Housing Mortgage Finance Berhad, Malaysian
International Shipping Corporation Bhd., Amanah Saham Sarawak Bhd.
and Sarawak Oil Palms Bhd. Datuk Wan Ali is currently the Chief
Executive Officer and Director of Sarawak Enterprise Corporation
Berhad, a company listed on the First Board of the Kuala Lumpur Stock
Exchange.
None of the Directors has any family relationship with any Director and/or major shareholders nor conflict of interest with MalaysianAirline System Berhad.
None of the Directors has been convicted for any offences (other than traffic offences, if any).
Board of Directors
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 16
17
Corporate InformationAs at 15 July 2003
Board of Directors
Tan Sri Dato’ Seri Azizan Bin Zainul Abidin(Chairman)(Non-Independent and Non-Executive Chairman)
Dato’ Md. Nor Bin Md. Yusof(Managing Director)(Non-Independent and Executive Director)
Tan Sri Dato’ Dr. Samsudin Bin Hitam(Non-Independent and Non-Executive Director)
Dato’ Zaharaah Binti Shaari(Non-Independent and Non-Executive Director)
Datu Hj. Salleh Bin Hj. Sulaiman(Independent and Non-Executive Director)
Keong Choon Keat(Independent and Non-Executive Director)
Martin Gilbert Barrow(Independent and Non-Executive Director)
Dato’ N. Sadasivan a/l N. N. Pillay(Independent and Non-Executive Director)
Dato’ Mohamed Azman Bin Yahya(Independent and Non-Executive Director)
Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan(Independent and Non-Executive Director)
Dato’ Gumuri Bin Hj. Hussain(Non-Independent and Non-Executive Director)
Datuk Wan Abdul Kadir Bin Wan Yubi @ Datuk Wan Ali Tuanku Yubi(Alternate Director to Datu Haji Salleh Haji Sulaiman)
Jusof Bin Ismail(Alternate Director toTan Sri Dato’ Dr. Samsudin Bin Hitam)
Abdul Rahman Bin Abdul Ghani(Alternate Director toDatuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan)
Senior Management Listing
Corporate Services Division
Dr. Mohamadon Bin AbdullahSenior General Manager, Corporate Services
Dr. Wafi Nazrin Bin Abdul HamidGeneral Manager, Corporate Services
Adnan Bin ShahbudinAssistant General Manager, Safety & Security
Mariah Binti Sheikh HussienAssistant General Manager, Corporate Services
Zawiah Binti Mat ArufAssistant General Manager, Corporate Communications
Sales, Distribution & Marketing Division
Dato’ Ahmad Fuaad Bin Mohd DahalanSenior General Manager, Sales, Distribution & Marketing
Dato’ Abdul Rashid Khan Bin Abdul Rahim KhanGeneral Manager, Sales – West
Danny KondicGeneral Manager, Sales – East
Dato’ Shamin Ahmad Bin Mohamad IshaqGeneral Manager, Sales Planning
Dato’ Tuan Ibrahim Bin Tengku AbdullahRegional General Manager, Middle East
Azlan Bin HussainRegional Assistant General Manager, Australia/New Zealand
Md Saat Bin A SamadAssistant General Manager, Distribution
Corp
orat
e In
form
atio
n
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 17
18 ANNUAL REPORT 2002 / 2003
Corporate InformationAs at 15 July 2003
Iszham Bin IdrisAssistant General Manager, Maintenance Support
Nizuyir Bin BuyongAssistant General Manager, Ground Support Services
Wan Abdul Rahim Bin Hj Wan IshakAssistant General Manager, Maintenance Operations
Yusop Bin JaridiAssistant General Manager, Airport Services
Flight Operations Division
Dato’ Captain Mohd Nawawi Bin AwangSenior General Manager, Flight Operations
Captain Mohd Azharuddin Bin OsmanGeneral Manager, Flight Operations (Operations & Development)
Shulhameed Bin MaricanGeneral Manager, Flight Operations (Services & Infrastructure)
Kamal Azran Bin AdamAssistant General Manager, Manpower (Planning & Productivity)
Captain Ooi Teow SiewAssistant General Manager, Quality Assurance, Project & Processes
Finance Division
Low Chee TengChief Financial Officer
Mohd Sukri Bin HusinGeneral Manager, Group Reporting, Control & Budget
Khoo Ewe PhungGeneral Manager, Accounting Services
Ahmad Ramzi Bin Muhamad BukhariAssistant General Manager, Treasury and Investment
Heng Geok ChinAssistant General Manager, Financial Accounting
Phang Pow IngAssistant General Manager, Sales Management & Planning
Azmil Hisham Bin Abd RahmanAssistant General Manager, Product Developments & Services
Raja Noor Diana Binti Raja Zainal Karib ShahAssistant General Manager, Marketing Support
Suhaila Binti Hj ShamsuddinAssistant General Manager, Customer Management & Service Quality
Shauqi Bin AhmadArea Manager, Sabah & Brunei
Network & Revenue Management Divison
Paul A. MooneySenior General Manager, Network & Revenue Management
Dr. Mohd Amin Bin Mohd Yassin KhanGeneral Manager, Network Planning & Revenue Management
Kym Joylene ClarkeAssistant General Manager, Revenue Management
Liow Ngit SingAssistant General Manager, Operations Planning
Mohd Razali Bin HarunAssistant General Manager, Aircraft Trading
Technical & Ground Operations Division
Tajuden Bin Abu BakarSenior General Manager, Technical & Ground Operations
Mohd Roslan Bin IsmailGeneral Manager, Engineering & Maintenance
Abdullah Bin MudaAssistant General Manager, Flight Management
Hayati Binti Dato’ AliAssistant General Manager, Ground Handling Management
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 18
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Josephine Liew Lup FoongHead of Finance – Sales, Distribution & Marketing Division
Md Yasin Bin BachikAssistant General Manager, Passenger Revenue ReportingManagement/Projects
Subramaniam a/l MunusamyAssistant General Manager, Financial Services
Yoon Chooi WanAssistant General Manager, Financial Systems
Zabariah Binti Md IbrahimHead of Finance – Technical & Ground Operations Division
Cargo Division
Ong Jyh JongSenior General Manager, Cargo
IT Planning & Services
Marzida Binti Mohd NoorSenior General Manager, IT Planning & Services
Project Management & Assurance Division
Mohd. Nadziruddin Bin Mohd. BasriGeneral Manager, Project Management & Assurance
Ahmad Muzzaffar Bin Ahmad MustaphaAssistant General Manager, Centralised Procurement
Ahmad Shamsuddin Bin MuhiyuddinAssistant General Manager, Property Maintenance
Mohamad Fadzil Bin Mohamad AriffAssistant General Manager, Property Development
Internal Audit Department
Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul MohsienGeneral Manager, Internal Audit
Human Resource Division
Mohamed Yusof Bin Ahmad MuhaiyuddinGeneral Manager, Human Resources Management
Company Secretary
Rizani Bin Hassan LS 05125
Registered Office
33rd Floor, Bangunan MASJalan Sultan Ismail50250 Kuala LumpurMalaysiaTel : 603 2161 0555Fax : 603 2161 3472 (Main)Fax : 603 2162 8305 (Company Secretary)Website : malaysia-airlines.com
Share Registration Office
Malaysian Share Registration Services Sdn. Bhd.7th Floor, Exchange SquareBukit Kewangan, 50250 Kuala LumpurMalaysiaTel : 603 2026 8099Fax : 603 2026 3736
Auditors
Messrs. Ernst & YoungLevel 23A, Menara MileniumJalan Damansara, Pusat Bandar DamansaraDamansara Heights, 50490 Kuala LumpurMalaysiaTel : 603 2087 7000Fax : 603 2095 9076 (Main)Fax : 603 2095 9078 (Audit)
Listing
Kuala Lumpur Stock Exchange
Corp
orat
e In
form
atio
n
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 19
20 ANNUAL REPORT 2002 / 2003
Dato’ Ahmad Fuaad Bin Mohd DahalanSenior General Manager, Sales, Distribution and Marketing
Dato’ Ahmad Fuaad Bin Mohd Dahalan graduated from the University
of Malaya with a Bachelor of Arts (Hons) in 1973. He joined the
Ministry of Foreign Affairs in April 1973.
He started his career with Malaysia Airlines in July 1973. Some of his
major assignments include postings to Tokyo, Jakarta, Manila and Paris
as Area Manager. He was appointed Regional Manager, Sarawak in
1984 and Regional Manager Peninsular Malaysia and Singapore in
1987. He was based in Los Angeles in 1990 as Vice-President, Americas
before moving to London in 1997 as Vice-President, United Kingdom
and Europe.
He returned to Kuala Lumpur in June 2001 to take up his present
position of Senior General Manager, Sales, Distribution and Marketing.
Low Chee TengChief Financial Officer
Low Chee Teng joined Malaysia Airlines as an Accountant in 1977.
Since then and until his current appointment as Chief Financial Officer
in September 2002, he has 25 years of in-depth experience in the
company’s financial matters. He holds a Bachelor of Commerce &
Administration from the Victoria University of Wellington, New Zealand
and a Master of Business Administration (MBA) with Distinction from
the International Management Centre, UK. He is a member of the
Malaysian Institute of Accountants and Institute of Chartered
Accountants of New Zealand.
Marzida Binti Mohd NoorSenior General Manager, IT Planning and Services
Marzida Binti Mohd Noor, Senior General Manager IT Planning and
Services holds a Bachelor of Science (Decision Sciences), Indiana
University, Bloomington, Indiana, USA and M.Sc in Management
Information System, United States International University, California,
USA. Prior to joining Malaysia Airlines, she was attached to KPMG from
1989 to 1992 as an IT Management Consultant. She joined Malaysia
Airlines in 1992 as Business Information Controller and was promoted to
Manager IT Management Unit in 1996. In 1998, she was promoted to
Vice President IT Planning and was the Programme Director for the
Malaysia Airlines Year 2000 Project. She was seconded to Trifiniti
Networks Sdn. Bhd. as co-Project Manager from mid 2000 to March
2001. In June 2001, she was given the task to head the IT Division in
Malaysia Airlines, as Senior General Manager IT Planning and Services.
Dr. Mohamadon Bin AbdullahSenior General Manager, Corporate Services
Dr. Mohamadon Bin Abdullah joined Malaysia Airlines in 1972 as
Management Trainee after graduating from the University of Malaya.
His first substantive appointment was in the Human Resources
Division as a Human Resources Executive. In the last 30 years with
the airline, he has served in the Human Resources Division which
included Industrial Relations, Training & Development and
Management Development. He subsequently served in the
Engineering, Passenger Sales, Cargo, Customer Services and Flight
Operations Divisions and his last appointment was Senior Vice
President Flight Operations before undertaking his current position
as Senior General Manager, Corporate Services effective June 2001.
Management CommitteeAs at 15 July 2003
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 20
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Dato’ Capt Mohd. Nawawi Bin AwangSenior General Manager, Flight Operations
Dato’ Capt. Mohd. Nawawi Bin Awang started his flying career with
the Royal Malaysian Air Force in 1970 and joined Malaysia Airlines in
1975. He flew various types of aircraft whilst in service with the RMAF
and Malaysia Airlines, and is currently rated on B747-400 aircraft and
has clocked more than 15,000 flying hours. Prior to his appointment as
Senior General Manager Flight Operations (SGMFO) in June 2001, he
was Vice President Flight Operations since 1996. Dato’ Capt Nawawi
is a member of the UK Chartered Institute of Transport and holds an
MBA from the University of Strathclyde, Scotland.
Ong Jyh JongSenior General Manager, Cargo
Ong Jyh Jong joined Malaysia Airlines in 1984 having graduated with a
Bachelor of Social Science (Hons) from the National University of
Malaysia. He has served in various capacities including District Manager
Phuket, Manager South Australia, Agency Sales Manager and General
Manager Cargo Sales. In 1996 he left Malaysia Airlines to pursue other
business ventures in the cargo industry and rejoined Malaysia Airlines in
January 2001. He was instrumental in introducing freighter services to
Malaysia Airlines and was responsible in developing various world class
initiatives and joint ventures with other airlines. He is currently serving
as an Advisor to Air Cargo Europe and is a regular guest speaker at
major international logistics conferences.
Paul A. MooneySenior General Manager, Network and Revenue Management
Paul A. Mooney graduated with a Bachelor of Science (Aeronautics
(Hons)) and an Associate’s Degree in Aviation Management (Hons),
Saint Louis University, U.S.A. Prior to joining Malaysia Airlines he was
with Qantas Airways gaining experience in sales, revenue planning,
route marketing, revenue management and strategic development of
airline alliance activity. He was appointed as Senior General Manager
Network and Revenue Management of Malaysia Airlines on 2 July 2001.
Tajuden Bin Abu BakarSenior General Manager, Technical and Ground Operations
Tajuden Bin Abu Bakar joined Malaysia Airlines as a licensed aircraft
maintenance engineer in 1976 and had been actively involved in
various fields of aviation technology including aircraft engineering and
maintenance, aircraft production, joint venture project management
and operations management. He also holds a Master’s Degree in
Engineering Business Management from the University of Warwick,
U.K., and was the Vice President of Engineering and Maintenance
before taking up the post of Senior General Manager for Technical
and Ground Operations in 2001.
Man
agem
ent C
omm
ittee
Standing from Left to Right
Seated from Left to Right
Mohd Nadziruddin Bin Mohd Basri / Ong Jyh Jong / Dato’ Capt Mohd. Nawawi Bin Awang / Paul A. Mooney /Tajuden Bin Abu Bakar / Rizani Bin Hassan / Mohamed Yusof Bin Ahmad Muhaiyuddin / Low Chee Teng
Marzida Binti Mohd Noor / Dr. Mohamadon Bin Abdullah / Dato’ Md. Nor Bin Md. Yusof /Dato’ Ahmad Fuaad Bin Mohd Dahalan / Shahnaz Al Sadat
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 21
22 ANNUAL REPORT 2002 / 2003
Management CommitteeAs at 15 July 2003
Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul MohsienGeneral Manager, Internal Audit
Shahnaz Al Sadat Binti Tan Sri Sheikh Abdul Mohsien holds a LL.B
(Hons) from the University of Nottingham, United Kingdom and is a
Certified Public Accountant (“CPA”) with the Malaysian Institute of
Certified Public Accountant (“MICPA”). She is also a Certified Internal
Auditor (“CIA”), with the Institute of Internal Auditors Inc. (“IIA”),
USA. She has over 12 years experience in accounting, auditing and
consultancy. She also had a hand in commercial experience when she
served as the Financial Controller for a Group of Companies that
include a public listed company. She has been with Malaysia Airlines
since September, 2001 as the head of the Internal Audit Department.
She is currently an active member of Institute of Internal Auditors
Malaysia (“IIAM”) and is a member of the Professional Practices
Committee of IIAM.
Rizani Bin HassanCompany Secretary
Rizani Bin Hassan graduated from MARA Institute of Technology (ITM)
in 1984 with a Degree in Law. He was appointed as Legal Officer with
the Legal Unit of the Government Statutory Body. In 1991, he left the
Government Service to join a medium-sized, private law firm as an
advocate and solicitor. He joined the airline in 1994 as Legal Corporate
Counsel and thereafter as General Counsel, and Company Secretary
in 2002. He is also Secretary to the Management Committee.
Mohd Nadziruddin Bin Mohd BasriGeneral Manager, Project Management and Assurance
Mohd Nadziruddin Bin Mohd Basri graduated with a Bachelor of
Economics from the London School of Economics and is a Fellow
Member of The Association of Chartered Certified Accountants
(ACCA). Prior to joining Malaysia Airlines, he was a Senior Manager
with the Assurance and Business Advisory Division of Ernst & Young,
Kuala Lumpur. He was seconded to the Company in July 2001 to assist
management with the turnaround initiatives before joining as a
permanent staff in April 2003.
Mohamed Yusof Bin Ahmad MuhaiyuddinGeneral Manager Human Resources Management
Mohamed Yusof Bin Ahmad Muhaiyuddin became the airline’s
General Manager Human Resources Management in December 2000.
He obtained a Bachelor of Science (Geology) from Indiana University,
Bloomington Indiana, USA. He started his career as a Geologist with
Esso Production Malaysia in 1979, and moved to human resources in
1987. Since then he has held various positions in human resources
management in Esso, UMW and Kumpulan Guthrie. His last position
was in Bank Negara Malaysia as Assistant Governor (Human
Resources Management).
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 22
23
Malaysia Airlines Board of Directors has considered the manner it hasapplied the Principles of the Malaysian Code on Corporate Governance(”the Code”) and the extent to which it has complied with the BestPractices of the Code, the analysis of which is reported in this Statement.
The Board of Directors is committed to adopt the highest standards ofcorporate governance practices in all the Group’s activities around theworld. To this end and in line with the Group’s objective of exceedingbest practices in the industry, every effort has been made to evaluate andapply the relevant Best Practices of the Code for the Group.
ABoard’s Execution of Responsibilities
The Board’s main responsibility is to lead and control the Company in aneffective manner. The Board assures its effectiveness of leadership and itsdischarge of responsibilities as illustrated below:
1 Board Meetings & Attendance
There were 12 Board meetings held in this financial year. The Boardplanned and met every month except in June and December, 2002.
There were two additional Special Board Meetings held during theyear with specific strategic agenda. Prior to each Board meeting,each director received an agenda and a full set of Board Papers foreach agenda item.
2 Board’s Responsibilities
The Board’s principal focus is the overall strategic direction,development and control of Malaysia Airlines Group. Key matters,such as approval of business plans, budgets, major capitalexpenditure, assets’ acquisition and disposal, key human resourcepolicies, approval of annual and interim results, successionplanning for the Senior Management and enhancement of safetyand security measures are reserved for the Board. The Board’sauthority is defined and communicated through the ApprovingAuthority Manual.
In each of its regularly scheduled meeting, the Board reviews themonthly operational and financial performance of the Group. TheBoard receives quantitative and qualitative information relating tothe Group’s performance. The Board is responsible to identifyprincipal risks and provides direction on the appropriate policies,procedures and systems to address the risks. In this regard, the
Statement on Corporate Governance
Stat
emen
t on
Corp
orat
e G
over
nanc
eThe attendance history of each director is as follows:
NO. OF MEETINGSNAME OF DIRECTORS HELD* ATTENDED
Tan Sri Dato’ Seri Azizan Bin Zainul Abidin (Chairman) 12 12Dato’ Md. Nor Bin Md. Yusof (Managing Director) 12 12Tan Sri Dato’ Dr. Samsudin Bin Hitam 12 7Dato’ Zaharaah Binti Shaari 12 8Keong Choon Keat 12 11Martin Gilbert Barrow 12 9Dato’ N. Sadasivan a/l N.N. Pillay 12 11Dato’ Mohamed Azman Bin Yahya 12 9Datu Hj. Salleh Bin Hj. Sulaiman (appointed on 1 October, 2002) 5 5Datuk Hj. S Abdillah @ Abdullah Bin Hassan @ S Hassan (appointed on 10 March, 2003) 2 2Datuk Kee Mustafa (resigned on 25 February, 2003) 11 5Datu Dr. Hatta Solhi (resigned on 30 September, 2002) 7 6
* No of meetings held are applicable meetings for each director and varied based on their dates of appointment
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 23
24 ANNUAL REPORT 2002 / 2003
Statement on Corporate Governance
BEstablishing a Structure for ContinuouslyEffective Board
In executing the responsibilities, the Board’s structure is important toassure its continuous effectiveness. The current structure in place isshown below.
1 Achieving Board Balance
Board Composition
As at the end of the financial year, the Board of Malaysia Airlinescomprises ten (10) members with the following composition:
CATEGORY NO.
Non-Executive Chairman 1Executive Director 1Non- Independent & Non-Executive Directors 2Independent Directors 6
Board is also responsible for reviewing the adequacy and theintegrity of the Group’s internal control system includingmanagement information system and compliance.
In support of its execution of responsibilities, the Board establishedsub-committees with specified terms of references outlining theirresponsibilities. Four (4) key sub-committees that have beenestablished are:
a Board Audit Committee (”BAC”)b Nomination Committee (“NC”)c Remuneration Committee (“RC”)d Board Safety and Security Committee (“BSSC”)
The authority of BAC is described in the Audit Committee’s Reportas set out on pages 31 to 33. The authority of NC and RC aredescribed in B2 and B3 below. The BSSC is established tospecifically address safety and security risks.
The memberships of each of the sub-committees are summarised as follows:
NAME OF DIRECTORS BAC NC RC BSSC (1)
Tan Sri Dato’ Seri Azizan Bin Zainul Abidin CDato’ Md. Nor Bin Md. Yusof MTan Sri Dato’ Dr. Samsudin Bin Hitam M MDato’ Zaharaah Binti Shaari M MDatu Hj. Salleh Bin Hj. Sulaiman M M MKeong Choon Keat C MMartin Gilbert Barrow CDato’ N. Sadasivan a/l N.N. Pillay M M MDato’ Mohamed Azman Bin Yahya M C
C: ChairmanM: Member(1) Members include relevant Senior Management.
Each director has full access to all information within the Group collectively or individually. They are entitled and have direct access to the advice andservices of the Group’s Company Secretary.
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There is a clear division of responsibilities between the Chairmanof the Board and the Managing Director.
The Independent Directors constitute more than one-third (1/3) ofthe Board. The Group considers that its complement of non-executive directors provides for an effective Board with a mix ofrelated industry-specific knowledge and broad government,business and commercial experience. The Directors’ profiles areset out in pages 10 to 16 of this annual report.
All independent non-executive directors are independent ofmanagement and free from any relationship, which couldinterfere with their independent judgement. They arecooperatively working with the Executive Director in the interestof the Group by providing objective and independent judgement.
The Board is satisfied that the Independent Directors representthe interests of public shareholders. Dato’ N. Sadasivan a/l N.N.Pillay is the Senior Independent Non-Executive Director towhom concerns may be conveyed where it could beinappropriate for the concerns to be dealt with by theChairman or the Managing Director.
Board’s Overall Structure and Size
The Board believes that the current size and structure satisfy therequirement to fairly reflect the investment of the shareholdersand that it enables the Board to provide clear and effectiveleadership to the Group.
2 Ensuring Board’s Continuous Effectiveness
A Structure to Evaluate the Board’s Effectiveness
A Nomination Committee was established on 1 December, 2001.The Committee’s membership shall comprise exclusively of non-executive directors, a majority of which is independent. Thepresent membership of the Committee is as shown in A.1 of thisStatement.
The Nomination Committee is authorised to:
(a) annually review the required mix of skills and experienceand other qualities, including core competencies whichnon-executive and executive directors should have;
(b) assess on an annual basis, the effectiveness of the Board asa whole, the committees of the Board and for assessing thecontribution of each individual Director.
(c) make recommendations to Board on Directorship’sCandidates and Board Committees’ Nominees.
In the financial year, the Nomination Committee has held one (1)meeting on 10 March, 2003 to deliberate and make recommendationto the Board of Directors on the nomination of Datuk Hj S Abdillah@ Abdullah Bin Hassan as a Board member in place of Datuk KeeMustafa who resigned on 25 February, 2003. At the said meeting,the Committee also reviewed the Board composition to ensure agood balance of skills and experience amongst its members.
Provision of Directors’ Continuous Education
All the Directors have attended and successfully completed theMandatory Accreditation Programme conducted by the ResearchInstitute of Investment Analysts Malaysia, an affiliate of the KualaLumpur Stock Exchange (KLSE).
In the current year, external speakers were invited as part of theannual Strategic Planning session to share and update the Boardof Directors on industry specific information and development.
The Directors were also invited to the Malaysia Airlines WorldwideBusiness Forum 2003 organised by Sales, Distribution & MarketingDivision where the Regional and Area Management were updatedon the latest development of the Group and as a knowledgesharing session.
3 Determination of Directors’ Remuneration
A Remuneration Committee was established on 1 December,2001. The Committee’s membership shall comprise wholly ormainly non-executive directors. The present membership of theCommittee is as shown in A.1 of this Statement.
The Committee is authorised to review, assess and recommend tothe Board of Directors the remuneration packages of the directorsin all forms, with other independent professional advice or outsideadvice as necessary.
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CContinuous Communication with Shareholders
It is the Board’s responsibility to establish a communication programmewith its shareholders.
1 Dialogue with Investors
Immediately upon announcement of the Group’s quarterly results,briefings with the analysts and the media were held. TheManaging Director and Senior Management were present at thebriefings to clarify and explain on any issues raised by the analystsand the media.
Special briefings were also held for the analysts and the media onany special development of the Group after the necessaryapprovals were obtained and where applicable, the prescribedannouncements to the KLSE were made.
The Managing Director and Senior Management also held briefingswith institutional investors when required.
2 AGM
The Annual General Meeting (“AGM”) is the principal forum fordialogue with shareholders. Notice of the AGM and annualreports are sent out to shareholders at least 21 days before thedate of the meeting.
The Board takes the opportunity in the AGM to present theprogress and performance of the Group and providesopportunities for shareholders to raise questions pertaining to theGroup’s activities. An explanatory statement to facilitateshareholders’ full understanding and evaluation of the issuesinvolved will accompany items of special business included in thenotice of the meeting.
All directors are available to provide responses to questions fromthe shareholders during the meeting.
The Remuneration Committee met one (1) time during thefinancial year to discuss on the remuneration package of thedirectors.
The Executive Director’s remuneration comprises basic salary andother emoluments. Other customary benefits to the Group aremade available as appropriate. Any salary reviews will take intoaccount market rates and the performance of the individual andthe Group.
The non-executive Directors’ remuneration comprises fees andallowances. Their determination is balanced with their expectedroles and responsibilities including any additional work andcontribution required.
The details of the total remuneration during the financial yeardisclosed by category of Directors are as follows:
BASICSALARY &
OTHEREMOLUMENTS BENEFITS TOTAL
(RM) (RM) (RM)
ExecutiveDirector 1,000,000 1,000 1,001,000Non-ExecutiveDirectors 412,900 — 412,900
Total 1,412,900 1,000 1,413,900
The Board opts not to disclose the remuneration by individualdirector as suggested by the Best Practice of the Code. At thisjuncture, the Board believes that the information will not addsignificantly to the understanding and evaluation of the Group’sgovernance.
4 Re-election of Directors
In accordance with the Company’s Articles of Association, alldirectors who are appointed by the Board are subject to electionby shareholders at the first opportunity after their appointmentand are subject to re-election at least once every three (3) years.
Statement on Corporate Governance
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DAccountability & Audit
1 Financial Reporting
The Board ensures that the Group’s quarterly reports to KLSE andthe annual report to shareholders present a fair assessment of theGroup’s position and prospects.
The Board Audit Committee assists the Board in scrutinisinginformation for disclosure in such reports and the overall qualityof the Group’s financial reporting.
2 Statement of Directors Responsibility in Relation to theFinancial Statements
In the preparation of the financial statements as set out in page91 to 145 of this annual report the Directors consider that:
— The Group has used appropriate accounting policies andare consistently applied;
— Reasonable and prudent judgement and estimates weremade; and
— All applicable approved accounting standards in Malaysiahave been followed.
The Directors are responsible for ensuring that the Companymaintains accounting records that disclose with reasonableaccuracy the financial position of the Group and the Company,and which enable them to ensure that the financial statementscomply with the Companies Act, 1965.
The Statement by Directors’ pursuant to Section 169 of theCompanies Act 1965 is set out on page 88 of this annual report.
3 Internal Control
The report on the Group’s internal control is presented in theStatement on Internal Control laid out on pages 34 to 35 of thisannual report.
4 Relationship with Auditor
An appropriate relationship with the Group’s auditors ismaintained through the Board Audit Committee. The role,authority and responsibilities of the Committee are presented inthe Board Audit Committee’s Report set out on pages 31 to 33 ofthis annual report.
The Group has always maintained a close and transparentrelationship with its auditors in seeking professional advice andensuring compliance with the relevant accounting standards.
This Statement is made in accordance with the resolution of theBoard of Directors dated 30 June, 2003.
EAdditional Compliance Information
The following information is provided in compliance with Paragraph 9.25of the Kuala Lumpur Stock Exchange (KLSE) Listing Requirements:-
1 Variation of Results
The Group registered a favourable variance of RM244.9 millionagainst the forecast profit of RM94.2 million as disclosed in therestructuring exercise. This improvement was due to better thanexpected passenger demand towards the end of the year 2002and the first two months of year 2003.
2 Imposition of Sanctions/Penalties
There were no sanctions and/or penalties (that were made public)imposed on the Company and its subsidiaries, directors ormanagement by the relevant regulatory bodies during thefinancial year.
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finance leases, loan agreements or operating leasesentered into by Malaysia Airlines (Encumbered AircraftAssets) and certain payments which Malaysia Airlinesreceives in respect of its aircraft assets, and in relationto specifically identified liabilities of Malaysia Airlineswhich are unbundled. This agreement provides PMBwith an option to purchase the Encumbered AircraftAssets becoming unencumbered to Malaysia Airlines,upon which such aircraft will be leased back toMalaysia Airlines on the same terms as the leasebackagreements for the Unencumbered Aircraft Assetsreferred to under paragraph 3(iv)(d).
(c) Agreement for Domestic Business Unbundling which setout the terms and arrangements under which MalaysiaAirlines agrees to pay PMB the revenue generated fromthe Domestic Business and PMB agrees to pay MalaysiaAirlines expenditure incurred by Malaysia Airlines inrespect of the Domestic Business. Included in thisagreement are the details of the cost allocation of bothvariable and fixed costs/overheads of Malaysia Airlines tothe Domestic Business, including costs of operating andmanaging the Domestic Business. This agreement alsosets out the terms and arrangements under whichMalaysia Airlines will operate the Domestic Business.
(d) Aircraft and Engines Purchase Agreement which setsout the terms and arrangements under whichMalaysia Airlines agrees to sell and transfer title totwenty four (24) aircraft and eight (8) spare enginesowned by Malaysia Airlines (Unencumbered AircraftAssets), to PMB, in consideration of PMB’s obligationto pay Malaysia Airlines certain payments under theAgreement For Aircraft and Finance AgreementsUnbundling. The signing of the leaseback agreementsfor the Unencumbered Aircraft Assets is a conditionprecedent to the Proposed WAU.
(e) Common Terms Agreement which sets out thecommon terms, conditions and provisions that areincorporated by reference into each of the Agreementfor Aircraft and Finance Agreements Unbundling, theAgreement for Domestic Business Unbundling, theGovernance Agreement and the WAU Agreement.Included in this agreement is a description of events ofdefault which apply to the said agreements.
3 Material Contracts
Save as disclosed below, there are no other material contractsentered into by the Company or its subsidiaries, involving directorsand major shareholders interests during the financial year :-
(i) Supplemental Agreement dated 28 May, 2002 betweenthe Company and Aircraft Business Malaysia Sdn. Bhd.(“ABM”), a wholly-owned subsidiary of the Minister ofFinance, Incorporated, to amend certain clauses stated inthe Master Aircraft Purchase Agreement dated 5 February,2002 between the aforesaid parties.
(ii) Eight (8) Operating Lease Agreements, one (1) of which isdated 6 June, 2002 and seven (7) of which are dated 28May, 2002, between the Company and Aircraft BusinessMalaysia Sdn. Bhd. (“ABM”), a wholly-owned subsidiary ofthe Minister of Finance, Incorporated, in relation to thelease of the eight (8) aircraft for a lease period of notexceeding 12 years.
(iii) Eight (8) Supplemental Agreements dated 30 July, 2002between the Company and Aircraft Business Malaysia Sdn.Bhd. (“ABM”), a wholly-owned subsidiary of the Ministerof Finance, Incorporated, to amend the terms of rentalrate/formula stated in the Operating Lease Agreementsbetween the aforesaid parties referred to in paragraph (ii)above.
(iv) Several Agreements dated 30 July, 2002 between theCompany and Penerbangan Malaysia Berhad (“PMB”) such as:
(a) Widespread Asset Unbundling (“WAU”) Agreementwhich describes the general structure of the Agreementfor Aircraft and Finance Agreements Unbundling, theAgreement for Domestic Business Unbundling, theCommon Terms Agreement, the GovernanceAgreement and the Aircraft and Engines PurchaseAgreement.
(b) Agreement for Aircraft and Finance AgreementsUnbundling which sets out the terms andarrangements under which PMB and MalaysiaAirlines must make payments to each other, inrelation to the aircraft assets which are subject to
Statement on Corporate Governance
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(f) Governance Agreement which constitutes anagreement between Malaysia Airlines, as the AssetOperator and PMB, Aircraft Business Malaysia Sdn.Bhd. and Assets Global Network Sdn. Bhd. (AssetOwners) to comply with the corporate and contractualgovernance code in relation to the conduct betweenMalaysia Airlines and the Asset Owners on mattersreferred to in the Agreement for Aircraft and FinanceAgreements Unbundling, the Agreement for DomesticBusiness Unbundling, the Governance Agreement, theAircraft and Engines Purchase Agreement and theWAU Agreement.
(v) Supplemental Agreement dated 11 October, 2002 betweenMalaysia Airlines and PMB, to amend certain provisions ofthe Agreement for Aircraft and Finance AgreementsUnbundling and the Agreement for Domestic BusinessUnbundling.
(vi) Supplemental Agreement dated 11 October, 2002 betweenMalaysia Airlines and PMB, to amend certain provisions ofthe Aircraft and Engines Purchase Agreement.
(vii) Conditional Share Sale Agreement dated 30 July, 2002between the Company and Gubahan Saujana Sdn. Bhd.,LSG Asia GmbH and Fahim Sdn. Bhd. for proposed disposalof 54,600,000 ordinary shares of RM1/- each and 700,000redeemable preference shares of RM0.01 each to be issued,both aggregating 70% of the enlarged issued capital inMAS Catering Sdn. Bhd. for a total cash consideration ofRM175,000,000/-.
(viii) The Lease Agreement dated 6 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of twentyfour (24) aircraft sold by Malaysia Airlines to PMB under theAircraft and Engines Purchase Agreement, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(ix) The Lease Agreement dated 6 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of eight (8)spare engines sold by Malaysia Airlines to PMB under theAircraft and Engines Purchase Agreement, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(x) The Lease Agreement dated 12 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(xi) The Lease Agreement dated 20 November, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(xii) The Lease Agreement dated 3 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(xiii) The Lease Agreement dated 13 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(xiv) The Lease Agreement dated 20 December, 2002 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later dateagreed by the parties.
(xv) The Lease Agreement dated 8 January, 2003 between MalaysiaAirlines and PMB in relation to the lease of one (1) aircraft soldby Malaysia Airlines to PMB pursuant to the Agreement forAircraft and Finance Agreements Unbundling referred to inparagraph 3(iv)(b) above, for a period which expires on 30September, 2005 or such other later date agreed by the parties.
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Statement on Corporate GovernanceStatement on Corporate Governance
4 Utilisation of Proceeds from Redeemable ConvertiblePreference Shares
The proceeds raised from the Redeemable Convertible PreferenceShares issued in financial year ended 2002 has been fully utilisedas at financial year ended 2003.
5 Non-audit fees
The amount of non-audit fees paid and payable to the externalauditors by the Group for the financial year ended 31 March,2003 is RM3.054 million.
6 Revaluation Policy on Landed Properties
Revaluation of landed properties will only be undertaken by theCompany upon the approval of the Board of Directors of theCompany or should there be an intended sale or the marketvalues were materially changed.
7 Profit Guarantee
The Company did not give any profit guarantee during thefinancial year.
8 Share Buyback
There is no share buyback during the financial year.
9 American Depository Receipt (“ADR”) or GlobalDepository Receipt (“GDR”) Programme(as at 31 March, 2003)
The Company did not sponsor any ADR or GDR programme duringthe financial year.
(xvi) The Lease Agreement dated 24 January, 2003 betweenMalaysia Airlines and PMB in relation to the lease of one (1)aircraft sold by Malaysia Airlines to PMB pursuant to theAgreement for Aircraft and Finance Agreements Unbundlingreferred to in paragraph 3(iv)(b) above, for a period whichexpires on 30 September, 2005 or such other later date agreedby the parties.
(xvii) Reimbursement Agreement (In Respect of KLIA Buildings)dated 26 March, 2003 between Malaysia Airlines and AssetsGlobal Network Sdn. Bhd. (“AGN”), a wholly-ownedsubsidiary of the Minister of Finance, Incorporated in relationto the reimbursement of RM1,010,600,000 by AGN toMalaysia Airlines in respect of the Buildings and Infrastructureerected by Malaysia Airlines in KLIA.
(xviii) Sub-Lease Agreement (In Respect of KLIA Buildings) dated 26March, 2003 between Malaysia Airlines and Assets GlobalNetwork Sdn. Bhd. (“AGN”), a wholly-owned subsidiary ofthe Minister of Finance, Incorporated in relation to the sub-lease of the land together with the Buildings andInfrastructure erected by Malaysia Airlines in KLIA for fifty-seven (57) years at a yearly rental payable by Malaysia Airlinesto AGN and contained in a Rent Schedule appended to theSub-Lease Agreement.
(xix) Reimbursement Agreement (In Respect of Subang Lands)dated 26 March, 2003 between the Company and AssetsGlobal Network Sdn. Bhd. (“AGN”), a wholly-ownedsubsidiary of the Minister of Finance, Incorporated inrelation to the reimbursement of RM233,000,000 by AGN toMalaysia Airlines in respect of the Buildings and Infrastructureerected by Malaysia Airlines on Subang Lands. ThisAgreement has been executed but completion is subject tothe approval of the Application for Surrender and Re-alienation of the Lands into four (4) separate portions or unitswith separate documents of title.
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AEstablishment
The Board Audit Committee was established in 1992 as a sub-committeeof the Board. The Committee’s term of reference had been approved, bythe Board.
BMembership and Composition
The terms of reference provide for the Board to elect the Board AuditCommittee members from amongst themselves, comprising no fewer thanthree (3) directors, the majority of whom they shall be independentdirectors. The term of office of the board audit committee members isthree years and may be re-nominated and appointed by the Board ofDirectors. The Board of Directors will review the performance of theBoard Audit Committee and its members at least once every three years.
The present members of the Committee are:
NAME OF DIRECTORS CLASSIFICATION
Keong Choon Keat * Independent Non-Executive Director
Datu Hj. Salleh Bin Hj. Sulaiman Independent(appointed on 1 October, 2002) Non-Executive Director
Tan Sri Dato’ Dr. Samsudin Bin Hitam Non-Independent Non-Executive Director
Dato’ Zaharaah Binti Shaari Non-IndependentNon-Executive Director
Dato’ N. Sadasivan a/l N.N. Pillay Independent Non-Executive Director
* Chairman
The Chairman of the Board Audit Committee is a member of MalaysianInstitute of Accountants. The Directors’ profiles are set out in pages 10to 16 in the Annual Report.
CMeetings
The Board Audit Committee meetings shall be conducted at least four(4) times annually, or more frequently as circumstances dictate.
In this financial year, the Committee had nine meetings. The attendancehistory of each member is as follows:
NO. OF MEETINGSNAME OF DIRECTORS HELD* ATTENDED
Keong Choon Keat 9 9Tan Sri Dato’ Dr. Samsudin Bin Hitam 9 3Dato’ Zaharaah Binti Shaari 9 6Datu Hj. Salleh Bin Hj. Sulaiman 4 4Dato’ N. Sadasivan a/l N.N. Pillay 9 9
* Number of meetings held are applicable meetings for each director and varied
based on their dates of appointment
The Senior Management’s representatives, General Manager of InternalAudit and External Auditors’ representatives attend the meetings whenappropriate. Minutes of each meeting are kept and distributed to eachmember of the Board Audit Committee and also to the other membersof the Board of Directors. The Board Audit Committee Chairman reportson each meeting to the Board of Directors.
DObjectives
The principal objectives of the Board Audit Committee are to assist theBoard of Directors in discharging its statutory duties and responsibilitiesrelating to accounting and reporting practices of the holding companyand each of its subsidiaries. In addition, the Board Audit Committee shall:— evaluate the quality of the audits performed by the internal and
external auditors;— provide assurance that the financial information presented by
management is relevant, reliable and timely;— oversee compliance with relevant laws and regulations and
observance of a proper code of conduct; and— determine the quality, adequacy and effectiveness of the Group’s
internal control environment.
Audit Committee’s Report
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— the adequacy of the scope, functions and resources of theinternal audit functions and that it has the necessary authority tocarry out its work;
— the internal audit programme, processes, results of the audit andwhether or not appropriate action is taken on the recommendationsof the internal audit function;
— the quarterly results and year end financial statements prior toapproval by the Board of Directors on:-i) major accounting policy changes.ii) significant and unusual events.iii) compliance with accounting standards and other legal
requirements; and— To monitor any related party transactions that may arise within
the Group and to report, if any, transactions between the Groupand any related party outside the Group which are not based onarms-length terms and which are disadvantageous to the Group.
GActivities in this Financial Year
In this financial year, apart from reviewing the quarterly announcements andannual financial statements, the BAC undertook the following activities:-— Review of the external and internal audits’ plans and budgets;— Review of the external and internal audits’ reports and subsequent
follow up of outstanding issues;— Review of identified key processes requiring internal control
enhancements with Management; and — Review of the relevant related party transactions.
EAuthority
The Board Audit Committee shall, in accordance with a procedure to bedetermined by the Board of Directors and at the expense of the Company,
(a) investigate any activity within its terms of reference. All employeesshall be directed to cooperate as requested by members of theBoard Audit Committee.
(b) have full and unlimited/unrestricted access to all information anddocuments/resources which are required to perform its duties as wellas to the internal and external auditors and senior management ofthe Company and Group.
(c) obtain independent professional advice or other advice and tosecure the attendance of outsiders with relevant experience andexpertise if it considers necessary.
(d) be able to convene meetings with the auditors, external orinternal, without the attendance of the Executive Director,whenever deemed necessary; and
(e) be able to make relevant reports when necessary to the relevantauthorities if a breach of the Listing Requirements has occurred.
FDuties and Responsibilities
The duties and responsibilities of the Board Audit Committee are toreview and report to the Board of Directors as follows:— with the external auditors, the audit plan;— with the external auditors, the evaluation of the system of internal
controls;— with the external auditors, the audit report;— the quality of external auditors and make recommendations concerning
their appointment, termination and remuneration and to consider thenomination of a person or persons as external auditors;
— the liaison between the external auditors, the management and theBoard of Directors and also the assistance given by management tothe external auditors;
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HInternal Audit Function
The Group has an established internal audit function which reports tothe Board Audit Committee. The function has an approved Charter thatprovides for its independence in the review of the internal control systemof the Group. In ensuring effectiveness of the internal control system, thefunction also partners with the Senior Management of the Group inenhancing internal control for high-risk areas.
The General Manager of Internal Audit Department is a Certified InternalAuditor (CIA) and Malaysia Airlines is a Corporate Member of Institute ofInternal Auditors Malaysia. The function strives to adopt establishedstandards of auditing to maintain its proficiency and ensuring its dueprofessional care.
The Board Audit Committee approves the Annual Internal Audit Plan.The risk-based plan is developed to cover key operational and financialactivities that are significant to the overall performance of the Group ona cyclical basis.
The risk areas are classified against the following objectives:— Revenue Protection and Enhancement— Expenditure Containment— Human Resources Management— Operational Efficiency at Multi-location— Information System Integrity
The function also includes audits on an ad-hoc basis based on specialrequests either by Board of Directors or Senior Management.Additionally, the Internal Audit works closely with the External Auditorsto resolve any control issues raised by them and to assist in ensuringappropriate management actions are taken.
In this financial year, Internal Audit undertook 31 audit assignmentscovering selected locations at Corporate Headquarters and Stationsworldwide for both passenger and cargo business. It also coordinatedthe follow-up review on the implementation status of the recommendedactions based on External Auditor’s Memorandum on Internal Controland previously issued internal audit reports. It also project-managedinternal control enhancements initiatives in the organisation. The AuditCommittee receives regular reports from the General Manager ofInternal Audit on the results of audits performed and progress of theinternal control projects.
The Board Audit Committee reviews and approves the Internal AuditDepartment’s annual budget to ensure that the function is adequatelyresourced. As at the end of the financial year, the Department consistsof 33 auditors of varying levels with approximately 55,000 availableman-hours per annum.
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Statement on Internal Control
ii) Integrated business planning and budget process driven by thecommercial objectives. In December 2002, enhancement of theprocess was made by assigning a single driver focusing onrevenue targets and aligning the operational budgets towardsachieving the targets;
iii) The establishment of a Management Committee comprising theSenior Management with responsibilities that include theexecution of the following controls:
a. Monthly performance review of actual performanceagainst expectations and budget
b. Quality assurance on key information and performancereports to Board of Directors
c. Partnership with Board Audit Committee and Internal Auditto address any internal control issues
iv) Clear definition of responsibilities and authority throughApproving Authority Manual (“AAM”). The consolidated AAMapproved by the Board is continuously reviewed to be updatedand enhanced;
v) Procedures with embedded internal control are documented inseries of Standard Operating Manuals. Structure for organisation-wide control and custodian of the Manuals has been established.Continuous efforts are undertaken to ensure the alignment,standardisation and comprehensiveness of these manuals. Theobjectives of these efforts are to improve communication on keyinternal control procedures including authorisation, accountability,monitoring and reconciliation processes;
vi) Continuous education to employees on the importance ofgovernance, risk management and internal control as part of theirdevelopment programme;
vii) The Internal Audit Department, reporting to the Board AuditCommittee performs systematic reviews of key processes relatingto high-risk areas and assesses the effectiveness of internal controlincluding compliance. Areas for improvement and proposedrecommendations are highlighted to Senior Management andBoard Audit Committee with a periodic follow-up review onactions taken;
AThe Board’s and Management’s Responsibility
As stated in the Statement on Corporate Governance, the Board ofDirectors has an overall responsibility for the Group’s system of internalcontrol including the review of its effectiveness.
The Board recognises the importance of maintaining a sound system ofinternal control to safeguard shareholders’ investments and the Group’sassets. In executing this responsibility, the Board has instituted an internalcontrol system, details of which are set out below. Further, the Board hasinitiated steps to formalise a risk management framework to identify thekey significant risks, to evaluate the impact and to set the policies relatingto the risks and the relevant control thereof.
The Management is responsible to implement the Board’s policies on risksand control.
BMalaysia Airlines Internal Control Processes
The Board and Management of Malaysia Airlines are committed inimplementing an internal control system to manage risks that mayaffect the Group’s continuous growth and financial viability.
As such, continuous actions are being taken to improve the policies,processes, people and structure as key elements of internal control. Thiscontinuous improvement is not only to enhance the management ofexisting risks but also to anticipate and manage potential risksconsidering the changes in the risk profile experienced by the industryand the Group.
Key elements of Malaysia Airlines internal control system including theprocesses in place to review its adequacy, are:
i) An organisation structure that is aligned to businessand operations requirement headed by accountable DivisionalHeads;
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viii) The Board Audit Committee, on behalf of the Board, regularlyreviews with Senior Management internal control issues identifiedin reports prepared by the internal auditor and external auditorand the related measures taken. Internal auditors also assist theBoard Audit Committee in the periodic review of measures takento address external auditors’ concerns on internal control. Thescope of this review includes any significant internal controlaspects of issues identified in the financial statements as disclosedin this annual report;
ix) In its monthly meeting, the Board of Directors reviews theoperational and financial performance of the Group. The scope ofthis review also covers any significant internal control aspects ofissues identified in the monthly performance reports and thisinclude any areas disclosed in this annual report;
x) The Senior Management has continued the initiative to formalise arisk management framework in the organisation with the followingobjectives:
a. To systemise a continuous process for identifying,evaluating and managing the significant risks faced by thecompany;
b. To provide a platform for communication of risk andcontrol profile between Senior Management and Board ofDirectors;
c. To inculcate an organisation-wide culture of risk awarenessand management; and
d. To establish a documented process of control monitoringand improvement plans
A Risk Management Coordination Unit was formed in this financialyear to facilitate the development of the risk management frameworkorganisation-wide.
Malaysia Airlines Risk Management Framework and MalaysiaAirlines Risk Model have been formulated. The Framework andModel are being operationalised organisation-wide on aprogressive basis with the objective to draw up the Corporate RiskProfile and the related risk management policies. It is envisagedthat the profile will be documented and monitored through theCorporate Risk Scorecard, which has been obtained. Continuousefforts are being made to integrate the results progressively intothe monthly reports to Board of Directors.
CDesign of Internal Control System
The Board and the Senior Management endeavour to maintainan adequate system of internal control organisation-wide with consistentintegrity designed to manage rather than eliminate risk.
However, it is recognised that the evaluation and implementation of thesystem will only provide reasonable assurance of the Group achieving itsobjective. The system will not provide absolute assurance against anymaterial loss occurrence.
Malaysia Airlines Internal Control System is not applicable to itsassociated companies as they fall within their majority shareholders’control. Notwithstanding this, Malaysia Airlines interest is served throughrepresentation on the Board of the respective associated companies andreceipt and review of management account and enquiries thereon.These representations also provide the Board with information for timelydecision-making on the continuity of the Group’s investments based onthe performance of the associated companies.
The Board confirms that the system of internal control with the keyelements highlighted above is in place during the financial year, exceptwhere it is stated otherwise.
The system is subject to regular reviews by the Board.
Stat
emen
t on
Inte
rnal
Con
trol
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 35
36 ANNUAL REPORT 2002 / 2003
Group Structure1 August 2003
100%
MAS Catering Sdn Bhd
49%
Aerofine Meat Sdn Bhd
100%
Malaysia Airlines Cargo Sdn Bhd
100%
MAS Aerotechnologies Sdn Bhd
100%
Syarikat Pengangkutan Senai Sdn Bhd
80%
Abacus Distribution Systems (Malaysia)
Sdn Bhd
51%
Aerokleen Services Sdn Bhd
100%
MAS Golden Holidays Sdn Bhd
100%
Pengangkutan Kargo Udara MAS
Sdn Bhd
56.7%
Macnet CCN (M) Sdn Bhd
100%
Aircraft Engine Repair and Overhaul (M)
Sdn Bhd
100%
MAS Hotels And Boutiques Sdn Bhd
25%
Signforce Sdn Bhd
100%
MAS Academy Sdn Bhd
100%
MAS Properties Sdn Bhd
100%
MAS Wings of Gold Sdn Bhd
100%
Tiara Malaysia Airlines Sdn Bhd
100%
Kelas Services Sdn Bhd
100%
MIR Technologies Sdn Bhd
60%
MAS Catering (Sarawak) Sdn Bhd
100%
Sepang Berhad
100%
Malaysia Airlines Capital (L) Limited
Investment in Associates
30%
Honeywell Aerospace Services Sdn Bhd
30%
GE Engine Services Malaysia Sdn Bhd
33.33%
Asian Frequent Flyer Pte Ltd
49%
Hamilton Sundstrand Customer Support
Centre (M) Sdn Bhd
23.53%
Pan Asia Pacific Aviation Services Limited
20%
Taj Madras Flight Kitchen Limited
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 36
37
Fleet StatusAs at 31 March 2003
Flee
t Sta
tus
AS AT 31 MARCH 2003NO. OF AIRCRAFTIN MALAYSIA AIRLINESOPERATION AVERAGE AGE
AS AT 31 MARCH 2002NO. OF AIRCRAFTIN MALAYSIA AIRLINESOPERATION AVERAGE AGE
MALAYSIA AIRLINES OWNED AIRCRAFT
B747-4H6P — — 14 6.3
B747-4H6C 1 13.8 2 12.6
B747-3H6C — — 1 15.7
B777-200 — — 2 4.6
B747-236 Frt (MASkargo) — — 2 20.0
A330-300 — — 9 6.8
B737-700 (BBJ) — — 1 1.6
B737-400 — — 35 8.6
F50 — — 10 12.0
DHC6 — — 5 15.9
TOTAL AIRCRAFT 1 13.8 81 9.2
LEASED AIRCRAFT
B747-4H6P 17 — 1 —
B747-200 Frt (MASkargo) 4 — 2 —
B777-200 15 — 11 —
A330-300 9 — — —
A330-200 2 — — —
B737-400 37 — 4 —
F50 10 — — —
DHC6 5 — 1 —
TOTAL LEASED AIRCRAFT 99 — 19 —
SYSTEM WIDE 100 13.8 100 9.2
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 37
38 ANNUAL REPORT 2002 / 2003
Route Network
DOMESTIC NETWORK
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 38
39
Kuching77 times per week from Kuala Lumpur
Hanoi5 times per week from Kuala Lumpur
INTERNATIONAL NETWORK
Rout
e N
etw
ork
*To be launched
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 39
40 ANNUAL REPORT 2002 / 2003
Calendar of Events
27 March 2002
Tan Sri Azizan opened the Malaysia Airlines Worldwide
Business Forum 2002 at Malaysia Airlines Academy.
18 June 2002
Malaysia Airlines received the Skytrax’s World’s Best Cabin Staff
Award 2002.
30 July 2002
Dato’ Md Nor announced the reorganisation of the Group
Corporate Structure where the reorganisation involves a
landmark plan to restructure the company’s business model,
designed to fast-track the national carrier’s return to
profitability by unbundling assets.
09 August 2002
Malaysia Airlines Golden Lounge at KLIA was awarded the
World’s 3rd Best Airline Lounge 2002.
03 September 2002
Tan Sri Azizan launched the second phase of MAS Gemilang
campaign at Malaysia Airlines Academy.
2002
1
3
2
4
5
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 40
41
Cale
ndar
of E
vent
s1
5
2
6
3
7
01 October 2002
Malaysia Airlines celebrated its 30th Anniversary of its
establishment.
10 January 2003
Penerbangan Malaysia Berhad (PMB), the holding company of
Malaysia Airlines, signed a Memorandum of Understanding
(MoU) with Airbus to acquire six Airbus A380-800 passenger
aircraft for delivery scheduled to commence in 2007.
March 2003
Malaysia Airlines was voted one of the top five airlines in the
“Airline Of The Year 2003” award in an international airline
survey conducted by Skytrax Research of London. It was also
voted 2nd position in the international airline ranking for the
“Best Economy 2003” and 3rd position for Asia’s “Best Airline
2003” award.
06 March 2003
Malaysia Airlines launched the Worldwide Reservations
Conference at Malaysia Airlines Academy from 6-7 March
2003.
29 March 2003
Tan Sri Azizan flagged off Malaysia Airlines International Travel
Hunt 2003 which was held from 29-31 March 2003.
The hunt was from Malaysia Airlines Academy to Bukit Merah
Laketown Resort, Perak
2003
7
9
8
6
10
MAS 00519 CORPORATE_ENG_FINAL 2/1/04 5:07 AM Page 41
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