MALAYSIAN Airline System Bhd (MAS) will present a turnaround plan this week to the government fund that controls it, people familiar with the matter said.
The unprecedented loss of 537 lives and two planes in a span of four months has put MAS’ future in doubt. — Bloomberg photo
The proposals presented to majority owner Khazanah Nasional Bhd (Khazanah)will include taking the company private or allowing it to go bankrupt and then renegotiating union contracts, said one of the people, who asked not to be named as the information is private. Khazanah, Malaysia’s sovereign wealth fund, owns 69.4 per cent of the carrier.
The unprecedented loss of 537 lives and two planes in a span of four months has put MAS’ future in doubt. Even a month before the latest disaster, Khazanah was estimating that the unprofitable airline only had enough funds to last it about a year.
“They don’t have the luxury of time any more,” said Mohshin Aziz, an analyst at Malayan Banking Bhd in Kuala Lumpur. “MAS doesn’t have a huge balance sheet, it’s still struggling from perception issues. We will probably see drastic measures.”
Flight 17 was en route to Kuala Lumpur from Amsterdam carrying 298 passengers and crew on July 17, when it was shot down over eastern Ukraine. The disaster occurred four months after Malaysian Air Flight 370 disappeared with 239 people aboard, leading to the longest search for a missing plane in modern aviation history. The Ukrainian government has blamed the attack on Flight 17 on pro-Russian rebels in the country’s eastern parts.
Asuki Abas, a spokesman for Khazanah, couldn’t immediately be reached on his mobile phone for comment. The Wall Street Journal reported yesterday that Khazanah was increasingly leaning toward taking the carrier private, citing unidentified people.
“Our focus during this very challenging time is to work with the emergency responders and authorities and mobilise full support to provide all possible care to the family members of those onboard MH17,” Malaysian Air said in an e-mailed response to queries about the revival plan. “This is not the right time to address this question.”
Shares of MAS, rated hold or sell by all 15 analysts tracked by Bloomberg, have fallen 35 per cent in Kuala Lumpur trading this year.
Khazanah said last month it had time to come up with a restructuring plan as the carrier has money to last about a year. The fund is expected to make a decision on how to revamp Malaysian Air as soon as next month, said the people. Taking the company private remains the preferred option, rather than a bankruptcy, they said.
Analysts are projecting losses to persist until at least through 2016, according to data compiled by Bloomberg. The carrier last reported an annual profit in 2010. Malaysian Air missed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out the impact of revenue gains.
MAS had cash and cash equivalent of RM3.25 billion at the end of March, down 13 percent from three months earlier. The company may need to raise funds by selling new shares to stay in business, according to Daniel Wong, an analyst at Hong Leong Investment Bank Bhd in Kuala Lumpur.
The airline carried 3.1 per cent fewer passengers in June from a year earlier, and filled 77 per cent of its seats, down from 84 per cent a year earlier, Malaysian Air reported today.
MAS may also modify plans for future plane orders after the disappearance of Flight 370 tarnished its reputation. — BLoomberg