Carrier to trim route network and replace CEO under plans announced Friday to stave off bankruptcy following two air tragedies
Malaysia Airlines will slash 6,000 jobs, trim its route network, and replace its CEO under plans announced Friday to stave off bankruptcy after two air tragedies plunged the already troubled carrier deeper into crisis.
State investment fund Khazanah Nasional, which controls the failing flag carrier, said it would pump 6 billion ringgit (Dh6.9 billion, $1.9 billion) into the airline, hoping the changes will return the company to profitability within three years.
Khazanah’s Managing Director Azman Mokhtar said, however, there were no plans to change the carrier’s name — now deeply tarnished by its association with the MH370 and MH17 tragedies, which have pummelled bookings.
“The combination of measures announced today will enable our national airline to be revived,” Azman said.
Aviation analysts, however, said it was far too early to predict success, citing a lack of details in the plans, intense industry competition, and the airline’s sullied image.
Malaysia Airlines (MAS) has bled money for years, with analysts blaming poor management and a failure to keep up with industry competition.
But the outflow has become a torrent due to this year’s disasters.
MH370 mysteriously vanished on March 8 with 239 passengers and crew aboard. MH17 went down July 18 — believed hit by a surface-to-air missile — in rebellion-torn eastern Ukraine, killing all 298 on the plane.
MAS previously had a solid safety record.
Smaller staff, regional focus
The airline released a statement saying its flights would operate as normal during the restructuring.
Azman said the company will shed about 6,000 — or 30 per cent — of the airline’s nearly 20,000 employees.
Esmail Nasaruddin, head of Malaysia’s flight attendants union, said the union was awaiting details on how the layoffs would be carried out.
“The numbers are pretty high,” he said. “A lot of frustration is in the air. That’s obvious.”
MAS also will “rationalise” its flight network — a term it has used previously for cutting unprofitable routes — to become a “principally regionally focused” carrier, Azman said, giving no further details.
A new CEO would be chosen by end-2014, though current under-fire boss Ahmad Jauhari Yahya would stay in charge until July 2015 to ensure a smooth transition.
Azman added that Khazanah may sell stakes in the carrier to strategic buyers from the private sector in the future.
Khazanah Nasional, which already owns 70 per cent of Malaysia Airlines, announced plans in early August to acquire all remaining shares and de-list the company’s stock as it works to revive it.
That process is still under way, and it remains unclear whether Khazanah will be able to carry out its plans.
Even before this year, aviation analysts have long said the airline needed wholesale reform.
Some also have complained that MAS CEOs have come from non-aviation sectors, blaming that for a series of poor business decisions over the years.
The carrier has controversially been kept aloft for years by transfusions of public money, and Azman stressed that “public accountability for the use of the funds” means the carrier cannot remain on life support “at any cost”.
But Shukor Yusof of aviation consultancy Endau Analytics said Khazanah’s plans were essentially a government bailout.
Throwing good money after bad
“This is throwing good money after bad,” said Shukor, who called the plans “piecemeal.”
“Returning to profitability in three years is wishful thinking. Its brand is now severely damaged.”
He said Khazanah was part of the problem, noting that previous turnaround strategies under it have failed.
Adrian Ng, analyst with Kenanga Research, said too little was known about the company’s future focus to say whether MAS can become self-sustaining.
“The industry is tough, and the competition is very stiff,” he said.
On Thursday, MAS announced that it posted its sixth straight quarterly loss in the April-June period and predicted more losses this year as the disasters’ impact on bookings intensifies.
MH370 inexplicably diverted from its Kuala Lumpur-Beijing course. The Malaysian government believes it went down in the Indian Ocean, but no trace has been found.
The government and Malaysia Airlines came under fierce global criticism over their failure to account for the jumbo jet, a slow-footed response and accusations of secrecy.
Western leaders say MH17 was shot down by pro-Russia rebels in Ukraine. An investigation is ongoing.