Malaysia Airlines faces complete overhaul
Kuala Lumpur, August 9, 2014
Malaysia Airlines will be taken over by the country's state investment fund and de-listed, as part of plans announced yesterday (August 8) for a 'complete overhaul' to rescue the company from oblivion after two crippling air disasters.
Khazanah Nasional, which owns 70 per cent of the airline, said it intends to purchase all minority shareholdings later pulling the stock from the Kuala Lumpur exchange Ð and finalise a restructuring plan, reported the Gulf Daily News, our sister publication.
The 68-year-old flag carrier has haemorrhaged cash for years as it struggled to cope with intensifying industry competition, and the double tragedies of MH370 and MH17 have further pummelled bookings.
Flight MH370 disappeared mysteriously in March with 239 people aboard, en route from Kuala Lumpur to Beijing. No trace has been found and the airline was widely criticised for its handling of the crisis. On July 17, MH17 was shot down over Ukraine, with another 298 people killed.
Malaysian Airline System (MAS) is burning through an estimated $2 million a day as a result of its crumbling business and disaster-related costs, and speculation had been mounting that Khazanah would step in.
The investment fund said all stakeholders would need to work together to rescue the company via a 'complete overhaul' extending across 'the airline's operations, business model, finances, human capital and regulatory environment'.
'Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity,' a Khazanah statement said.
The widely expected move requires approval from MAS's board. The airline said its operations would be unaffected in the interim.
Saying the carrier was 'a part of Malaysia's history,' Prime Minister Najib Razak called on all Malaysia Airlines stakeholders to support the government fund's move despite the 'painful steps' that may be involved.
'Piecemeal changes will not work,' he said.
Analysts said Khazanah would need to undertake a management purge, painful layoffs and scrap major routes in order to restore the company's bottom line and global reputation.
'It needs a new heart, a new brain. As it exists now, the airline is doomed,' said Shukor Yusof of aviation consultancy Endau Analytics.
'Each passing day is destroying its reputation and bottom line.'
Earlier yesterday, Malaysia Airlines suspended its shares on the Kuala Lumpur stock exchange ahead of the Khazanah statement.
Analysts have long blamed poor management, government interference and powerful, reform-resistant employee unions for preventing the airline taking the steps needed to stay competitive.
Malaysia Airlines previously had a solid safety reputation.
But it lost 4.1 billion ringgit ($1.3bn) from 2011-13, and a further 443m ringgit in the first quarter of this year, blaming MH370's 'dramatic impact' on bookings.
Local media reported that Khazanah would need to spend nearly 1.4bn ringgit to acquire the outstanding shares.
Airline experts said Khazanah should sack MAS management and bring in top-level, possibly foreign, professional managers to restore trust in the company, as Korean Airlines and Garuda Indonesia did in response to past safety-related crises. – TraeArabia News Service