Malaysia Government Now Weighing Options For Shutdown or Sale of Malaysia Airlines, Has The Time Come To Pull The Plug?

6 Comments

Days after industry analysts declared Malaysia Airlines a hopeless case the Malaysian Government, including the Prime Minister, are now seriously considering to either sell or shut down the airline entirely.

This measure is being considered after Malaysia Airlines tried for years to be profitable again and went through numerous CEO’s who tried to make it happen.

All management that attempted to push harsh measures through and publicize the grave problems of Malaysia Airlines have been met with opposition and eventually left their post including two foreigners – Christoph Mueller and Peter Bellew – who both left roughly a year after taking their post.

Bloomberg just reported that this resistance of MAB to undergo change could now be their downfall.

Prime Minister Mahathir Mohamad said he’s studying options for flag carrier Malaysia Airlines Bhd., including whether to invest more funds, sell it off or even shut the company down.

“It is a very serious matter to shut down the national airline,” he told reporters at parliament. “We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or whether we should refinance it. All these things are open for the government to decide. We have to decide soon.”

Malaysia Airlines has sought to turn itself around since being taken private by sovereign wealth fund Khazanah Nasional Bhd. in 2014. That followed tragic incidents involving one of its planes disappearing over the Indian Ocean and another being shot down over Ukraine. Khazanah is demanding the carrier come up with a strategic plan to compete in the industry, after pouring in 6 billion ringgit ($1.5 billion) into the airline to make it profitable.

Malaysia Airlines is facing increased pressure to revive its performance after its parent Khazanah swung into a 6.27 billion ringgit pretax loss last year. The carrier accounted for about half of the impairments that weighed on the wealth fund’s portfolio,

A representative for Malaysia Airlines didn’t immediately respond to requests for comment. …

To actually turn a company such as Malaysia Airlines around is a massive undertaking with way too many disturbing outside factors that interfere with rational management decisions of which not many were made in recent years.

Every year that the carrier continued to write losses and underwent changes in leadership bought time which resulted in the company being taken advantage of by the various powerhouses in Malaysia. Particularly, the previous government was guilty in that regard as corruption was pretty much their trademark. At this point there is very little Malaysia and Khazana can do except seriously considering winding down the operations or selling the airline for one Ringgit.

More critical input came from a former Khazanah MD as reported by The Edge Markets:

Former managing director (MD) of Khazanah Nasional Bhd Tan Sri Mohd Sheriff Mohd Kassim has also expressed concern for the going concern of Malaysia Airlines Bhd.

Speaking to reporters at the sidelines of the Asian Strategy and Leadership Institute’s (ASLI) Malaysian Strategic Financial Outlook Forum here today, Mohd Sheriff agreed that it could be an option for the government to consider closing the national airline down.

“More and more people are talking about closing Malaysia Airlines down… maybe that’s an option for the government to consider,” said Mohd Sheriff, who is also the chairman of PLUS Malaysia Bhd.

“There are a lot of people saying that we may have to re-examine whether we still need a national airline, and I think we should really look into it, if we really need a national airline,” he added.

He pointed out that Malaysia Airlines has been “bailed out” not once, but two or three times before, and yet it has never been successful, noting that it has not been easy for Malaysia Airlines to become profitable.

The entire controversy started earlier last week with an interview of aviation analysts who suggested that it’s time to shut down the airline after years of dramatic losses:

… Mr Shukor Yusof, the founder of Malaysian-based aviation consultancy firm Endau Analytics, said there would be no capacity issue if MAS were to close shop as its void would be filled by other airlines.

“MAS ought to shut down. There is no economic or financial rationale in maintaining it in its current condition. A loss-making business can’t continue indefinitely,” he told the New Straits Times. …

Once Pandora’s Box had been opened the discussion then spiraled upwards to the high echelons of Malaysia’s political elite, which is now looking at the case more seriously.

Conclusion

As Malaysia Airlines now weighs heavily on the portfolio and overall performance of Khazanah I doubt the political will to keep the airline alive at all cost is going to remain intact. No country likes to lose it’s official national carrier but Malaysia has a very reliable network with Air Asia and even Malindo so there wouldn’t be an infrastructure catastrophy if MAS were to shut down.

For frequent fliers and those who like to fly on full service airlines, however, it will be a severe loss. The days where one can fly for cheap on Malaysia Airlines tickets would be numbered. Considering the prices at which MAS sold their premium tickets were way too low at times and we covered them frequently. It’s impossible that the airline makes any profit on US$350 Business Class tickets.

If you enjoyed this article, get our blog updates for free!

Previous articleMarriott Bonvoy London Up To 5,000 Bonus Points For Weekend Stays Through December 31, 2019
Next articleIHG Rewards Club Kimpton Mid-Atlantic 30% Off Flash Sale For Stays Through July 7, 2019 (Book By March 20)

YOU MIGHT ALSO LIKE