Poser on how to keep MAS afloat

A file picture of a visitor looking out from the KLIA viewing gallery on May 27, 2014. – AP

PETALING JAYA: Malaysia Airlines Bhd (MAS) is at the crossroads again, as the government weighs on its continued viability. 

Several options are on the table, including shutting down the troubled national carrier, selling it or keeping it going with more cash infusion from the government. 

Experts believed MAS may report about RM1bil in losses for full-year 2018 after incurring about RM2.4bil losses from 2015 to 2017, as the losses continue despite previous attempts to resuscitate the airline.

For its near-term sustainability, experts reckoned a RM1bil to RM3bil cash injection is needed. Prime Minister Tun Dr Mahathir Mohamad said a decision on the airline’s future would be made soon.

Former Khazanah Nasional Bhd managing director Tan Sri Mohd Sheriff Mohd Kassim, speaking on the sidelines of the Malaysian Strategic Financial Outlook Forum organised by The Asian Strategy and Leadership Institute yesterday, said shutting down the airline was an option the government should consider in light of its repetitive legacy issues, but others felt that shutting down the airline might not be the best option.

An analyst added “since the PM is overlooking this matter, we are assured that he will take a 360 degree view on things. Beyond the national agenda, the financial and economic consideration, the PM will likely want to get insights into the rakyat’s sentiment on whether they are amenable or oppose the cessation of a national icon”.

“Shutting down is an obviously extreme option,’’ added another.

Closing the airline is an option after Khazanah and the government pumped in about RM23bil to keep it flying from 2001. 

However, clipping MAS’ wings would mean shedding over 13,000 employees and the ripple effect of a severely disrupted supply chain may be a big shock to the economy.

“It will be a total shock on the entire supply chain,’’ said an industry executive.
The losses MAS has made is due to the airline still operating on a high-cost base, and all the previous restructurings have not addressed the situation.

In its last restructuring by Khazanah between 2015 and 2018, a total of RM6bil was pumped into the airline and 6,000 people lost their jobs. MAS cut its network and a new company was set up to assume the responsibilities of the airline.

“But it did not go deep enough to address the legacy issues,’’ said CAPA Centre of Aviation chief analyst Brendan Sobie.

“It is hard to say if it will ever make money again. However, there are areas it can look at to improve its long-term position and the airline needs to take another crack at reducing its costs without any political interference.

“For example, some of its aircraft lease rates are still too high. On the revenue side, it needs to decide on a clear commercial strategy and stick with it, and support it with the right marketing. 

“It would seem that it has taken a step back from aggressive sales and marketing and really pushing the brand. 

“It’s a complex combination of problems and factors. It’s not easy to fix, but there should be steps it can pursue to improve its long-term position.’’

But others said a partial sale of its stake may be best instead of a closure, although MAS would need to restructure first, perhaps even declare bankruptcy and enter receivership to reset the airline to be attractive for a buyer.

“Khazanah and the government should take a leaf out of the books of Proton and sell MAS, and then take a backseat and let a commercial entity drive MAS instead,’’ said a source.
In the region, several airlines have been restructured over the past decade the same time as MAS. Some have regained much ground but they have performed better than MAS.

“JAL is doing fantastic although the Japanese market is not comparable. Garuda’s restructuring was done a long time ago and it is doing okay, but certainly not great. PAL’s restructuring was also done a long time ago and it is struggling, but not like MAS,’’ said an expert.

All airlines face the same problems of fuel volatility and competition in their respective markets and MAS is no exception.

He said MAS should also get rid of the six A380 aircraft as they are a liability for he is sceptical that Project Amal would yield the results the airline is looking for.
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