Malaysia Airlines: State fund plans overhaul of national airline

Two major disasters this year added to carrier's long-standing financial woes

Malaysia's state investment company said Friday it plans to make Malaysia Airlines fully government owned, removing it from the country's stock exchange before carrying out an overhaul of the carrier that is reeling from double disasters.

Khazanah Nasional, which owns 69 per cent of Malaysia Airlines, said it has proposed to the carrier's board that it buy out minority shareholders at 27 sen (8 cents) a share, which is 29 per cent higher than the airline's average share price over the previous three months. The takeover would cost 1.38 billion ringgit ($429 million).

Malaysia Airlines has been hit by two major disasters this year, which added to its longstanding financial woes.

In March, Flight 370 from Kuala Lumpur to Beijing disappeared with 239 people on board after flying far of course. The plane has still not been found, with a search in the southern Indian Ocean underway. In July, 298 people were killed when Flight 17 was shot down over Ukraine. It was heading to Kuala Lumpur from Amsterdam and was shot out of the sky over an area of eastern Ukraine controlled by pro-Russian separatists.

Khazanah said the state takeover will represent the first stage of a "complete overhaul" of the loss-making airline, and that detailed plans will be announced by the end of this month.

Wreckage from Malaysia Airlines flight MH17 lies in a field in Grabovo, Ukraine. (Photo by Rob Stothard/Getty Images) "The proposed restructuring will critically require all parties to work closely together," it said in a statement. "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."

Before the disasters, the carrier's financial performance was among the worst in the industry, putting a question mark over its future even before its brand was tied to two almost unfathomable tragedies. It has lost money for the past three years and been through several episodes of restructuring, instigated by Khazanah, over the past decade.

As a state-owned flag carrier, Malaysia Airlines is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.

Shukor Yusof, founder of aviation research firm Endau Analytics, said another restructuring won't yield positive results if fundamental problems aren't addressed.

"I'm sceptical of the success of it because I'm not sure it will address the root problems of the airline," he said.

A family member cries as she and other relatives pray during a candlelight vigil for passengers onboard the missing Malaysia Airlines Flight MH370 at Lido Hotel in Beijing A family member cries as she and other relatives pray during a candlelight vigil for passengers onboard the missing Malaysia Airlines Flight MH370 at Lido Hotel in Beijing Its biggest problems are $4 billion of debt accumulated since 2002, unprofitable routes and bloated staff numbers, Shukor said.

Some analysts say the airline wouldn't survive a year without a substantial cash injection from the Malaysian government. Crisis management experts have said Malaysia Airlines must take dramatic steps, such as replacing its top executives and changing its name, to win back customers.

Khazanah's offer to minority shareholders gives them more than what their shares were worth before each of the passenger jet disasters. Even so, the airline's share price has been in a long-term decline due to its losses.

The day before Flight 370 vanished, the airline's share price was 25 sen. It was 23 sen the day before Flight 17 was downed.

Khazanah said its plan requires approvals from regulators and Malaysia's finance minister.

AP

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Project Coordinator

£28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

Recruitment Genius: Area Sales Manager - Midlands

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: PHP Developer - 3-4 Month Fixed Contract - £30-£35k pro rata

£30000 - £35000 per annum: Recruitment Genius: This is a 3-4 month pro rata fi...

Recruitment Genius: Telesales Executive - OTE £26,000+

£16000 - £26000 per annum: Recruitment Genius: A Telesales Executive is requir...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map