Malaysian State steps in to save Malaysia Airlines

KUALA LUMPUR- Three years of consecutive losses, two dramatic accidents and new losses expected this year: Ailing national carrier Malaysia Airlines tries to survive but its chances looked dimmer and dimmer, especially after the tragic losses of two aircraft –MH 370 to Beijing and MH 17 from Amsterdam- causing the loss of life for a total 537 passengers and crew.

Rumours have been circulating since March that the carrier is again on the brink of bankruptcy. It lost US$ 87 million for the first three months of 2014, one of the worst results ever seen in the airline’s history. The carrier expects an even worst second quarter, as traffic collapsed in May following the disappearance of MH370.

Experts say that MAS is burning each day US$ 1.5 million. A complete overhaul is then necessary with Malaysia Prime Minister Najib Razak announced that State investment fund Khazanah Nasional will proposed a US$436 million buy-out of the shares of the carrier, a de-facto nationalization of the carrier: Khazanah currently has 69.37% of all shares.

Malaysia Prime Minister already announced that the take-over will be accompanied by a drastic restructuring plan for the airline, requesting sacrifice from all parties. Revamping MAS management, closing unprofitable or less-profitable routes, reducing salaries and the working force – some experts say that up to 30% of the 19,700 employees could be made redundant- could be the first steps of the new restructuring, the third in 12 years. Khazanah will announce details of the overhaul by the end of August.

The airline will need to work on a revamping of its image, severely battered by the crashes, to win back the confidence of customers. The airline will also have to figure out what could be the right way to balance its financial credentials by increasing the yield per passenger which has plunged in the last few years as the carrier lowered its fares to compete with low cost airines. At the same time, MAS is one of the most exposed carrier to competition in Southeast Asia with rival AirAsia continuing its expansion at double-digit rates while Gulf carriers are putting pressures on yields in the long-haul market.

Internally, Khazanah will also have to face strong labour-unions which until now were extremely reluctant to any change, particularly fighting to preserve all jobs at the airline. A position which will now be very difficult to defend as the carrier is fighting for its survival. njected more than 5 billion ringgit ($1.6 billion) into MAS over the last 10 years, as it has increasingly struggled in the face of competition from upstart budget airlines such as AirAsia Bhd.

sourced:traveldailynews.asia