Malaysia’s state investment company said Friday it plans to make Malaysia Airlines fully government owned by delisting it from the country’s stock exchange in order to undertake a major overhaul of the beleaguered carrier.
Currently estimated to be bleeding $2 million a day after two major disasters – the disappearance of MH370 and the shoot down of MH17 – this year added to its longstanding financial problems. Malaysia Airlines hasn’t been profitable for the past three years. The Malaysian government has injected more than five billion ringgit ($1.68 billion) over the past decade just to keep the airline flying, even before the devastating blows of the two tragedies.
Khazanah Nasional, which owns 69 per cent of Malaysia Airlines, has proposed to the carrier’s board that it buy out minority shareholders at 27 sen (US8 cents) a share, which is 29 per cent higher than the airline’s average share price over the previous three months. The takeover would cost 1.38 billion ringgit (US$429 million). Khazanah said the state takeover will represent the first stage of a “complete overhaul” of the loss-making airline and that detailed plans will be announced by the end of this month.
“The proposed restructuring will critically require all parties to work closely together,” Khazanah said in a statement. “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.”
Analysts have said the airline needs to significantly cut its 20,000-strong workforce and stop flying unprofitable routes. Last year, each employee generated about US$243,000 in revenue. That compares with $514,000 per employee at rival premium carrier Singapore Airlines for the year ended 31 March and US$410,000 at Cathay Pacific Airways.
Shukor Yusof, founder of aviation research firm Endau Analytics, said yet another restructuring won’t yield positive results if fundamental problems aren’t addressed. “I’m skeptical of the success of it because I’m not sure it will address the root problems of the airline,” he said.
“We believe our national carrier must be renewed. This means wholesale change, to deliver a wholly different outcome,” Malaysian Prime Minister Najib Razak said. Najib said the airline’s overhaul “will involve painful steps and sacrifices from all parties … Only through a complete overhaul of the company can we deliver a genuinely strong and sustainable national carrier. Piecemeal changes will not work.” He added that it would be “carried out professionally, with proper principles of fairness, transparency and compassion.”
Any turnaround plan will need backing from the airline’s influential employee unions, which earlier derailed a share-swap deal with budget carrier AirAsia amid concerns over job cuts. Khazanah’s plan will also require approval from regulators and Malaysia’s finance minister.