When news broke that the new management of Malaysia Airlines lodged a police report against what they believe to be possible irregularities in its cargo division involving its former chairperson, a former director and several key officials, it did not come as a surprise to many in the industry.

They had known all along what was going on and saw it happen right 'before their eyes' within MAS as well as its cargo arm, MASKargo Sdn Bhd, of which Tajuddin Ramli was chairperson, said sources.

They were only surprised that the new management had decided to act after such a long time.

Several government-appointed directors had told this writer three years ago what had transpired at a board of directors meeting when the issue of expanding the cargo division, especially overseas, was discussed.

Strong reservations were expressed by many directors (not directly connected to Tajuddin in business) about the setting up of a cargo logistics centre in Hahn, a former military airfield in Germany, some 200km from Frankfurt - the country's main international airport and considered as a European hub by major operators. Misgivings were also aired over the shifting of MAS' cargo hub from Dubai to Sharjah in the United Arab Emirates.

Tajuddin's vice-president for cargo Ralph Gotz was sacked towards the end of 2000 after the government regained control of MAS and a new management was put in place to take charge of the cargo division. MASKargo had lost some RM1 billion during this time.

Among the names mentioned in the police report are a former director of MAS Wan Aishah Wan Hamid, described by some as Tajuddins right-hand woman and former company secretary Rizana Mohd Daud, his sister-in-law.

Gotz, a German national who used to work for the company that supplied state-of-the-art equipment costing RM600 million to the MAS Advanced Cargo Centre in Sepang, was brought into MAS to take charge of the cargo division despite lacking experience in this area. He was recommended by Wan Aishah who is also a director of Naluri Sdn Bhd through which Tajuddin held his 27 percent stake in MAS.

The government later bought Tajuddins stake at an inflated price upon approval by then Finance Minister Daim Zainuddin who considered the former his protege.

PM misled

Sources told malaysiakini that Prime Minister Dr Mahathir Mohamad had claimed he felt misled over the deal which he had also sanctioned, allowing Tajuddin to collect a tidy sum of profit despite MAS clocking up big losses at that time. The premier only discovered this after re-opening the files after Daim left the government.

Malaysiakini understands that after the MAS board of directors expressed strong reservations and objected to investment plans by the former management, Tajuddin went ahead all the same by setting up an air cargo firm in Germany in which he held a sizeable stake.

According to sources, the new management is now questioning the source of the funds for developing the cargo logistics centre at the Hahn airport and the loss that MASKargo had incurred by flying to Hahn - which is seriously underutilised.

A top MASKargo official told malaysiakini recently that MASKargo is likely to stop flying to Hahn eventually, citing poor cargo response, as the bulk of international cargo activities centre around Frankfurt.

Using Hahn leads to double handling as cargo has to be trucked to and from Frankfurt which is a distance from the former military airfield thus discouraging shippers.

Although we've reduced weekly services from seven to two, the load factor is minimal and we've been overflying Hahn, the official said, adding it is likely that a decision will be made soon to stop flying to Hahn altogether.

The official said the new management also decided in October last year to shift the Middle East cargo hub operations back to Dubai where most of its clients are located and where most planes fly to.

Players furious

Local airfreight industry players were furious when instead of focusing on improving services at its Advanced Cargo Centre in Sepang, the previous MAS management was more interested in poor overseas investments.

With a new management in place and one that listens to the industry, there is hope that a close rapport and understanding will develop between them and their clients leading to the introduction of high service level standards across the board in the cargo division from March 15.

With the rationalisation of services and operations within its cargo division, MAS is beginning to see better results in its operations and greater support from the industry.

In the past year since the new team took over, MASKargo was able to increase its market share by 20 percent to 55 per cent.

An audit report on MASKargo's financial affairs was ordered by the new management and submitted for police for investigations. While awaiting the outcome, the new management is focusing increasingly on improving service quality and turning the airline into a major player in the global freight industry.

MASKargo owns four B747-200 freighter aircraft and also makes use of the belly space of the airlines's passenger aircraft. It also cooperates with Korean Air, KLM and Garuda for its cargo operations worldwide.

TONY THIEN is malaysiakinis Kuching correspondent and airline industry specialist.