Arab Today, arab today state fund to take over crisishit malaysia airlines
Last Updated : GMT 02:24:40
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State fund to take over crisis-hit Malaysia Airlines

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Arab Today, arab today State fund to take over crisis-hit Malaysia Airlines

A Malaysia Airlines plane
Kuala Lumpur - AFP

Malaysia Airlines will be taken over by a state investment fund under plans announced Friday, ahead of a "complete overhaul" aimed at saving the company from oblivion.
Khazanah Nasional, which already owns 70 percent of the flag carrier, said it intends to de-list the company, purchase all minority shares and finalise a restructuring plan by the end of the month.
Speculation had been mounting that Khazanah would step in and steer Malaysia Airlines (MAS) off the stock exchange to give the fund a freer hand as it works to resuscitate a carrier in crisis after the double disasters of MH370 and MH17.
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.
Khazanah said all stakeholders will need to work together to save 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," the fund said.
The step, widely expected, requires approval from MAS's board. The airline said its operations would be unaffected in the interim.
- Future in doubt -
The 68-year-old flag carrier has hemorrhaged cash for years as it struggled to cope with intensifying industry competition.
Its future solvency is now in peril as the twin tragedies have pummelled bookings.
MAS is burning through an estimated $2 million a day as a result of its crumbling business and disaster-related costs.
Analysts said Khazanah will need to undertake a management purge and 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, an analyst with Malaysia-based aviation consultancy Endau Analytics.
"Each passing day is destroying its reputation and bottom line."
Earlier Friday, Malaysia Airlines had its shares suspended on the Kuala Lumpur stock exchange ahead of the Khazanah statement.
Analysts had long blamed poor management, government interference, a bloated workforce, and powerful, reform-resistant employee unions for preventing the airline taking the steps need to stay competitive.
- 'Sick airline' -
Malaysia Airlines previously had a solid safety reputation.
But it lost 4.1 billion ringgit ($1.3 billion) from 2011-13, and a further 443 million ringgit in the first quarter of this year, blaming MH370's "dramatic impact" on bookings.
Analysts said taking the company private will allow Khazanah to make deep changes without shareholder interference.
But Shukor noted that previous Khazanah-sanctioned turnaround plans have failed.
"I don't take comfort in Khazanah overhauling the sick airline. I am very skeptical about it," he said.
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.
"It needs to take steps to restructure itself internally for safety considerations and procedures, and transparently communicate this to consumers. Probably new management is needed to carry all this out," said Scott Hamilton, managing director of US aerospace consultancy Leeham Co.
Costs must be slashed, possibly through staff downsizing and accelerating a pull-back from unprofitable long-haul routes that the airline has clung to for prestige, analysts add.
MAS has struggled against intensifying competition from nimble, upstart budget carriers, particularly Malaysia's AirAsia.
"They may as well shut down international routes which are not making money, cut staff and sell planes. Just concentrate on the profitable domestic and key regional routes," said Mohshin Aziz, aviation analyst with Maybank.
Resistance is expected from politically powerful unions. The airline employs 19,500 staff.
Ismail Nasaruddin, president of the National Union of Flight Attendants, said indications are that "a few thousand" could be laid off.
"There must be an amicable solution. There must be open discussions with us on matters involving job cuts," he said.

 

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