Mas faces likely delisting after second disaster

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Malaysian Airline System Bhd (MAS), reeling from its second disaster in four months, is likely near the end of its days as a publicly traded company.

The company plans to present a revival plan to its state-run parent Khazanah Nasional Bhd this week, people familiar with the matter said yesterday, asking not to be identified because the talks are private.

The options range from Khazanah taking MAS private to bankruptcy, according to one of the people, with both routes involving a delisting.

MAS says its focus is on the victims and families of Flight 17, while the loss of 537 lives and two planes since March is straining the carrier’s ability to stay in business.

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,” 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.”

Asuki Abas, a spokesman for Khazanah, couldn’t be reached on his mobile phone for comment.

The Wall Street Journal reported July 20 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,” MAS 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 sell by 13 of 15 analysts tracked by Bloomberg, have fallen 34 percent in Kuala Lumpur trading this year.

The stock gained 15 percent to 23 sen at closing.

Should Malaysian Air choose bankruptcy, it could be the biggest for an airline in terms of assets since AMR Corp in 2011, according to data compiled by Bloomberg.

MAS’ Hugh Dunleavy, the airline’s director of commercial operations, had in May ruled out a bankruptcy.

The carrier’s options also include renegotiations with the labor union, according to a person familiar with the matter.

MAS employees generated an average US$220,000 of revenue in the last three years, compared with US$524,800 at Singapore Airlines Ltd and US$245,000 at Thai Airways International Pcl, according to data compiled by Bloomberg.

Still, taking the company private remains the preferred option, rather than a bankruptcy, with a decision coming as soon as next month, the people familiar with the matter said. Khazanah said last month the carrier had funds to last about a year.

Even before Flight 370’s disappearance, Malaysian Air had racked up RM4.13 billion in losses over the previous three years.

The incident put the carrier under global scrutiny, jeopardising its reputation and prompting boycotts in China, whose nationals accounted for most of the passengers in the March flight that vanished.

Losses at the Subang-based airline widened to RM443.4 million in the January-to-March period, the most in nine quarters, as travel agents in China stopped selling the carrier’s tickets after the disappearance of MH370 and as competition intensified.

Analysts are projecting losses to persist at least through 2016, according to data compiled by Bloomberg.

Malaysian Air had cash and cash equivalents 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 percent of its seats, down from 84 percent a year earlier, Malaysian Air reported.

MAS may also modify plans for future plane orders after the disappearance of Flight 370 tarnished its reputation.

The airline had anticipated ordering as many as 100 jets and was considering a range of models from both Airbus Group NV and Boeing Co, a person familiar with the purchase strategy said in February. The carrier needs fuel-efficient jets to cut costs amid rising competition from discount airlines such as AirAsia Bhd. (AIRA)

Chief executive officer Ahmad Jauhari Yahya said in an interview last month the carrier’s fleet plan was under review.

“Even the strongest airlines would be falling on their knees on these two incidents,” Mohshin at Malayan Banking said. — Bloomberg