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 The 42-year-old company will be de-listed by the end of the year
under the broad revival plan announced by state fund Khazanah
Nasional on Friday that aims to bring long-elusive efficiency and
global standards to the loss-making carrier.
The 6,000 job cuts were higher than expected by the industry and
mark a painful new blow for staff after a traumatic year for the
national flag-carrier and the Southeast Asian country. Khazanah,
which owns a majority stake in MAS, said it would invest in "re-skilling"
those who lose jobs and pledged to set up a panel to improve often
rocky relations between unions and management.
"Recent tragic events and ongoing difficulties at MAS have created a
perfect storm that is allowing this restructuring to take place,"
Khazanah Managing Director Azman Mokhtar told reporters in Kuala
Lumpur.
"We believe that the 6 billion is not a bailout, we believe it will
be recovered with re-listing," he said.
Khazanah, which currently holds a 69 percent stake in MAS, will take
100 percent ownership when the carrier is de-listed. The state fund
said this month that it would pay 1.4 billion ringgit to buy out
minority shareholders.
Under the restructuring plan, which was approved by Malaysia's
cabinet this week, MAS' assets and liabilities will be transferred
to a new company with Khazanah injecting up to 6 billion ringgit.
Khazanah aims to return MAS to profit by 2017, and re-list the
airline within five years, by which time it would be a more
regionally focused airline "with lower cost structure and greater
emphasis on revenue yield management," the state fund said in a
statement.
An international search for a new chief executive was underway,
Khazanah said, and the current CEO Ahmad Jauhari Yahya would stay on
until July next year.
Khazanah, which has injected more than 5 billion ringgit into MAS
over the last 10 years, said its new fund injections would be
strictly tied to the new company meeting performance targets.
"Success is by no means guaranteed," Khazanah said.
Airline industry players said the revival plan appeared to be far
more comprehensive and radical than several others that have been
announced since MAS began struggling in the late 1990s after a
period of rapid growth.
"The plan that has just been announced is comprehensive, credible
and adequate even if painful for MAS staff and other stakeholders,"
said Bertrand Grabowski, DVB Bank's managing director in charge of
aviation. DVB is a banker to MAS.
"It is comprehensive because it touches all the key weaknesses that
the airline has not being addressing for years - an overstretched
network and fleet in an ever more competitive environment, short
haul and long haul."
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CUTTING DEBTS, FLIGHTS
The drastic downsizing caps a wrenching year for the airline
following the unexplained disappearance of Flight MH370 en route
from Kuala Lumpur to Beijing in March and the shooting down of
Flight MH17 over Ukraine in July.
Even before those deadly tragedies, MAS had been steadily falling
behind high-end rivals such as Singapore Airlines and been
battered by the rise of Asian budget carriers like AirAsia.
The company hasn't made an annual profit since 2010 and on Thursday
revealed deepening losses and warned of more to come as nervous
travellers steered clear of it after the disasters.
The restructuring is a bold move by the long-ruling government,
which has used state firms such as the national airline as social
tools to create jobs and reinforce policies favouring majority
ethnic Malays over other races.
The main union at MAS has close ties to the ruling UMNO party - and
has successfully resisted previous restructuring attempts.
"If we seek a different outcome from past experiences, we must have
the courage to choose a different method," Malaysian Prime Minister
Najib Razak said in a statement.
"Piecemeal change will not work."
The executive secretary of the main MAS workers union, Jabbarullah
Kadir, declined to comment on the restructuring plan, saying the
union had not yet agreed a position on it.
Khazanah said it aimed to reduced MAS' net gearing to as low as 100
percent from 290 percent currently through debt-to-equity swaps. It
said it had already secured a commitment from Malaysia's civil
servants' pension fund to swap 750 million ringgit of Islamic bonds
for equity.
The state fund did not give details on plans to reduce the carrier's
flight network, but said several of its European destinations would
be reviewed. Malaysia Airlines will retain global flight
connectivity through the Oneworld alliance and code-sharing,
Khazanah said.
(Additional reporting by Anshuman Daga in SINGAPORE and Trinna Leong
in KUALA LUMPUR; Writing by Stuart Grudgings; Editing by Ryan Woo)
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