Flat Cargo essay

Flat Cargo essay

Flat Cargo Berhad was one of the largest airfreight companies in Malaysia, servicing several government linked companies including Freight Malaysia Berhad. FCB was a public listed Company operating primarily as an air cargo carrier. It was registered as an investment holding company with several subsidiaries with principal activities ranging from air freight services and ground handling services. One of FCB’s major shareholder in 1997 had been Bangor Berhad, which was part of a diversified international family owned conglomerate, the Miri Group. In 2004, they bought controlling interest of FCB from the founders, Lim Loon Sim and Ali Bin Ahmad. Both remain as Non Independent Executive Director.

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FCB actually started operations in 1997 with just 2 aircraft but soon became the only dedicated Intra-Asian overnight express cargo operator based in Malaysia and was the nation’s leading air cargo carrier. This is due to fast growing Intra-Asian air express market. In fact, FCB was able to promptly handle large shipments to meet customer demands due to its expansion in freighter fleet size for its Boeing 737s, 727s and MD11. It also had access to an international cargo complex covering 24-hour custom facilities at the Sultan Abdul Aziz Shah Airport. With an array of landing rights in the Asia Pacific Region including China, Japan, Taiwan and Korea, as well as the ASEAN countries. FCB was in the ideal niche position to offer express air services to international integrators, freight forwarders and major airlines within the Asian Region. Due to this, they were able to secure agreements with well established companies such as Worldwide Express, United Parcel Services, Nationwide Express, Citylink, Bax Global and Nippon Express. Cargo Malaysia Services and Bangor Berhad, being FCB major shareholders, also used FCB’s aur freight forwarding services.

SWOT ANALYSIS OF FCB
Strengths
FCB’s core competency is flexibility and speed. With the 24-hour custom facilities, various landing rights throughout the Asia pacific region and the expanded air freighter fleet. They able to offer quality customer service and are able to satisfy customer demand. Being the only dedicated Intra-Asian overnight express cargo operator based in Malaysia gives them a distinct advantage over competitor in this market. FCB have stable revenue as they have secured agreement with well-established companies, servicing several government linked companies as well as constant business from their shareholders Bangor Berhad and Cargo Malaysia Services. Miri Group also has a China based company called Miri Logistics Ltd which owns logistic business extensively in the Asia region. FCB is able to call upon these resources at need. Ranked 4th in terms of capital gains and dividends to shareholders in 2005, the company have seen turnover increased greatly in recent years. Despite the rising oil prices, Analysts were expecting FCB’s revenue to increase for the next year by 54%.

Weaknesses
FCB’s high gearing ratio at 99% and their weak debt servicing is one of their biggest weaknesses. It even resulted in Rating Agency Malaysia (RAM) rating FCB’s RM150 million Commercial Papers or Medium Term Notes to AA3/P1 and downgraded the company’s long term rating from stable to negative. Which negatively impact FCB’s company image. This affects their ability to generate funds other than issuing shares. In fact, the high gearing ratio means that FCB is not able to handle market downturns and periods of low sales. Weak internal controls are another weakness. Inconsistencies in the financial statements such as the miscalculation of either the profits or operation costs for the years 2001 to 2004 are prime examples of negligence that could be avoided with proper control. Although FCB adhere to the Malaysian Code on Corporate Governance regarding the composition of board members. They failed to ensure that the Audit Committee consisted of non executive director. Ali bin Ahmad an Executive Director either is the Audit Committee Chairman or had been the Chairman.

Opportunities
Extensive growth in e-business activities is an opportunity for air cargo industry. When demand for express transportation services raise, FCB will have the chance to expand their business. Years after low-cost carrier like AirAsia started to fly in Asia Pacific region, small and medium enterprises businessmen have the chance to travel to different countries to do business and build business contacts. Inter-Asian business network became stronger and businessmen needed air cargo to deliver their goods, so there wil