Khazanah Nasional to discuss MAS future today

26 Aug 2014 by Clement Huang

Khazanah Nasional, the investment holding arm of the Malaysian government, is having a board meeting in Kuala Lumpur today.

Main point on the agenda will be the ongoing search for quick-fix, and long-term, solutions aimed at turning the embattled carrier around.

The losses of MH17 and MH370 have depressed the carrier’s forward bookings and paint a bleak results outlook for second-half 2014; years of financial woes have amounted to a loss of USD1.3 billion over the past three consecutive years.

The government's latest effort to resuscitate ailing flag carrier Malaysia Airlines (MAS) is likely to go the way of previous failed attempts unless it shows an appetite for difficult but necessary decisions, said the Financial Times.

In an analysis titled “Malaysia Airlines seeks change of fortune”, the UK business daily pointed out that a lack of political will to push through a radical overhaul of the airline has seen three such attempts to turn its fortune around falling short. Nevertheless, the paper remained moderately optimistic things could change this time.

Khazanah Nasional currently holds 69.4% of MAS shares, but has announced it is looking to purchase the remainder for 0.27 ringgit (US$0.08) per share. In total, the move will cost Khazanah almost 1.4 billion ringgit (US$435 million).

“We reiterate that the proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier on all relevant aspects,” Khazanah said.

“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.”

Khazanah said a “complete overhaul” will take six to twelve months. It will announce MAS’ first-half 2014 results on August 28.

K. Ajith, an analyst at UOB Kay Hian Pte in Singapore, today told Reuters that “the airline needs fleet rationalization.” Ajith went on to say: “The question is where, how and what type of aircraft. The long-haul European routes might be cut. The European routes have been money-losing for Malaysia Airlines.”

Meanwhile, Malaysia’s The Rakyat Post has earlier reported “it’s very clear that the Kangaroo route (Europe to Australia) and flights to India will not be touched” as these were the most profitable for MAS. The Malaysian news daily obtained this information from an unnamed source within MAS.

MAS is facing resistance to change from within its powerful workers union, which contested the merger over concern for their jobs and welfare.

MAS keeps almost 19,500 people on its payroll to operate its fleet of 108 aircraft. This is nearly 50% more than Singapore Airlines employs to fly just five fewer planes.

The high payroll count – alongside lopsided contracts with suppliers – has been identified as one of the main reasons bogging the airline down.

MAS is said to lay off between 3,000 to 4,000 employees as part of its restructuring.

Khazanah is also talking to as many as three people as possible candidates to replace Malaysia Airlines Chief Executive Officer Ahmad Jauhari Yahya, whose term is due to expire in mid-September, says Reuters.

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Dominic Sebastian Lalk

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