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
ebooksA special investigation by Andy McSmith
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: Graduate / Junior Software Developer

£24000 - £30000 per annum: Recruitment Genius: A Graduate/Junior Software Deve...

Recruitment Genius: Retail Store Sales Executive

£15000 - £20000 per annum: Recruitment Genius: An experienced Sales Executive ...

Recruitment Genius: Night Porters - Seasonal Placement

Negotiable: Recruitment Genius: Night Porters are required to join a family-ow...

Recruitment Genius: Media Sales Executives - B2B

£20000 - £50000 per annum: Recruitment Genius: Recruitment Genius Ltd continue...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn