Malaysia Airlines to be overhauled in survival plan

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Malaysia Airlines to be overhauled in survival plan

Malaysia Airlines to be overhauled in survival plan
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Shares of Malaysia Airlines ( MAS) are to disappear from the Kuala Lumpur stock exchange with the announcement of a state takeover and “complete overhaul” for the troubled carrier.

The hope is to revive the loss-making company after it was hit by two devastating disasters.

A government-run investment fund – Khazanah – is to buy the 31 percent of the airline’s shares it does not already own.

Then the bloated workforce of nearly 20,000 would be cut, wages frozen, the size of the fleet of planes reduced and less-profitable routes abandoned under a new management team.

Ticket sales fell sharply after the baffling disappearance of Flight MH370 in March en route from Kuala Lumpur to Beijing.

The airline’s crisis deepened on in mid July when Flight MH17 was shot down over Ukraine, killing 298 people on board.

After those twin tragedies a full-scale rebranding and name change of the airline is probable.

Khazanah said it will need cooperation “from all parties” to undertake the restructuring, covering the airline’s operations, business model, finances, staff and the regulatory environment.

“Nothing less will be required in order to revive our national airline to be profitable as a commercial entity, and to service its function as a critical national development entity,” it said in a statement.

Political problems

Attempts to restructure the airline over the years have been politically fraught due to heavy opposition to job losses from its influential trade union.

“There is no point in going to another airline or getting some private equity team involved or anything like that because the government will effectively have to offer some sweeteners to the union to diminish their power and diminish their size,” said Timothy Ross, Asia transportation analyst at Credit Suisse. “They probably employ 5,000 people too many.”

The head of Malaysia Airlines’ main union said it would support the plan only if the current top management team, led by chief executive Ahmad Jauhari, was replaced.

“Ahmad Jauhari has had three years to turn things around. We’ve made it very clear, we will support a new team that has the aviation knowledge and integrity for the job,” Mohd Jabarullah Abdul Kadir said.

Another industry watcher was sceptical. “If you paint over the rust, the rust is still there,” said Shakeel Adam, managing partner of airline consultancy Aviado Partners, who specialises in airline restructuring and start-ups.

“For more than a decade, they have been facing significant structural difficulties common among all legacy airlines at some stage. Over time, MAS’s costs have risen and productivity has fallen as the business has grown and become more complex with bureaucracy and inefficiency.”

with Reuters