MAS to review business plan to ensure sustainability

PETALING JAYA: Malaysia Airlines (MAS) has said it is looking at “a thorough review of its business plan” and that “all avenues are being explored to ensure the long-term sustainability of the company”.

StarBizWeek had reported last week that the ailing airline was said to have started plans to “reboot” the company to pave the way for it to start on a clean slate.

“MAS is aware of the intense speculation on the possible course of actions to be undertaken by the company. The management would like to put it on record that at this juncture, a thorough review of the business plan is being undertaken and all avenues are being explored to ensure the long-term sustainability of the company,” the airline said in a statement yesterday.

Despite the review, MAS added that “safety remains an integral part of MAS’ service delivery and the airline ensures maintenance is done in accordance with strict compliance to stringent regulatory requirements and obligations”.

StarBizWeek’s report had further stated that the “reboot-reset” plan crafted by MAS’ core team had been talked about during a townhall meeting held for the airline’s senior management.

The report had speculated that the new plan to resuscitate MAS involved job cuts, new contracts for employees and suppliers, a review of the airline’s network and fleet, and a separation of its non-airline operations from its airline operations.

Spin-offs or a flotation of MAS’ engineering and ground-handling units are also possible.

The airline is also said to be in talks with banks for a strategic overhaul that could include the partial sale of its engineering unit and an upgrade of its ageing fleet. Those in the know claimed that it was looking at buying dozens of new aircraft and phasing out its old planes that suffer from high maintenance and fuel costs.

As at the end of last year, MAS had RM3.8bil in cash.

However, MAS’ unions are already on the alert to oppose the massive job cuts.

Hence, observers are questioning whether there would be sufficient political will to push through such drastic changes.

MAS is 69.4%-owned by Khazanah Nasional Bhd.

On the other hand, MAS has little choice but to opt for drastic measures. It has seen a huge drop in demand, mainly from China, but there are also cancellation of seats on other Asian routes.

“Demand is falling as MAS is suffering from an image issue after the MH370 incident. It needs to reset itself and re-heal. It needs to find new ground and a fresh start would help,” an aviation expert said.

“A shrinking network and the possible sale or flotation of the engineering divisions will automatically see several thousand jobs off its balance sheet and that would hopefully help MAS, which is burning cash every day,” he added.

MAS’ flight en route to Beijing from Kuala Lumpur has been missing since March 8.

Although the announcement of the new plan is expected before month-end and the implementation by July, MAS said yesterday, “As always, the plan will be shared with the relevant stakeholders at the appropriate time when the necessary approval and endorsement have been obtained”.

CIMB Research said in a recent report that the “reboot’’ plan would have a major impact on the industry.

It added that the plan could involve a court order for creditor protection, possibly bankruptcy, to enable MAS to renegotiate its contracts with suppliers and the terms of employment for staff and crew, as well as a general reduction in its headcount.

MAS has not been short of restructuring efforts over the past decade, but yet it has remained in the red for half a decade. Last year, it reported RM1.17bil in net losses. Insiders said that MAS’ losses for its first quarter of financial year 2014 alone could be just under RM500mil.

The airline added in its statement yesterday that since the disappearance of flight MH370 on March 8, its focus has been on supporting and caring for the needs of the families and loved ones of the passengers and crew onboard.

It said more than two months had passed since the tragedy and that the airline continued to work hard to return the company to recovery and to support a sustainable future, albeit on a more challenging outlook.

“Winning back customers and a relentless cost focus will be part of the airline’s recovery plan, and these two exercises are critical enablers to energise its recovery,” it said.