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Last chance for Malaysia Airlines

KUALA LUMPUR: Khazanah Nasional, Malaysia's sovereign wealth fund and majority owner of Malaysia Airlines (MAS), has announced a restructuring plan that includes a new CEO, cutting 6,000 jobs and launching a replacement company by July 2015 with a regional focus.

Managing director of Khazanah, Tan Sri Azman Hj. Mokhtar, said the "New MAS" would receive RMB6.0 billion over a three-year period in order to return to "sustained profitability" by 2017.

malaysia 1Announcing the recovery plan that also includes moving the company's headquarters and renegotiating supplier contracts, Mokhtar said the new airline would only require a workforce of 14,000 – a reduction of 30 percent from current levels. As a result, Khazanah will invest in a "Corporate Reskilling Centre" to retrain laid off MAS staff.

Between 2001 and June 2014, MAS reported net losses of RMB8.4 billion. The company acknowledges that its "core problem" has been higher unit costs than its competitors. Revenue per employee is only 51 percent of Cathay Pacific, and 38 percent of Singapore Airlines. And its small revenue advantage versus low-cost carrier competitors is "dwarfed by a large cost disadvantage of approximately 40 percent".

Noting that MAS plays a critical role in Malaysia's development - contributing an estimated RMB6.9 billion toward the country's GDP – Khazanah says the success of the national airline remains an imperative for the government and the nation.

The proposed restructuring plan calls for the new carrier to operate short-haul services within 15 percent of Air Asia costs, to equal the costs of Gulf airlines, and be below those of Cathay Pacific. It also requires the "New MAS" to build scale on routes that have a high proportion of O&D traffic; increase operational efficiency and network connectivity at Kuala Lumpur; and "re-configure its fleet which could include moving to smaller aircraft".

Khanazah concludes with a stark warning for the future: "The plan outlined in this document is just that – a plan. Success will depend on thorough and collective action, as well as on execution by each and every stakeholder – if any one fails, the whole plan will fail. This is an outcome that the government and Khazanah are willing to accept. It would be irresponsible to commit the Malaysian people to further supporting MAS if it is not on a clear path to sustainable profitability and self-sufficiency."


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