Report: CAAM should play a role, MAB unlikely to go bankrupt


According to an industry expert who wanted to remain anonymous, CAAM needs to sit down with industry players and deliberate measures where it can assist within the scope of its regulatory limits, considering the sector is currently grappling with a grim outlook on its operations and profitability.

KUALA LUMPUR: Aviation regulator, the Civil Aviation Authority of Malaysia (CAAM), needs to step up its game and assist affected airlines and industry players in weathering the impact arising from the Covid-19 outbreak.

According to an industry expert who wanted to remain anonymous, CAAM needs to sit down with industry players and deliberate measures where it can assist within the scope of its regulatory limits, considering the sector is currently grappling with a grim outlook on its operations and profitability.

“As the regulator, CAAM should be able to do many more things. It has to understand the pain airlines feel. (For example) Charges may be reduced during this period. Few technical exemptions, with risk assessment, may be granted.

“The industry did help CAAM during its difficult times, now it’s the regulator turn to help them, ” he told Bernama.

CAAM is the civil regulator tasked with safeguarding the safety, security and efficiency of aviation services in Malaysia.

The industry expert cited the very thin margin facing the airlines that any marginal increase in costs, taking into account the steady demand, would affect their profitability thus jeopardising growth as a whole.

“Now the scenario has brought to its worst-case scenario (where) the demand drastically drop due to the pandemic. Any decrease in cost, jet fuels, for example, will not help as the revenue base has collapsed, ” he explained.

This is especially true for privately-owned airlines such as Malindo Air and AirAsia, which are at risk of collapse as opposed to the Malaysia Airlines Bhd (MAB).

He said as a government-linked company, the impact of COVID-19 towards MAB should be lesser as it has strong support from Khazanah Nasional Bhd, the national sovereign wealth fund that has 100% ownership of the airline. “Khazanah will have to put aside funds to bail out Malaysia Aviation Group (MAG)/MAB. MAB have back-up, Khazanah, ” he said.

It was reported the ailing national carrier has warned its 13,000 staff of potential bankruptcy due to travel bans and plummeting demand around the world following the Covid-19 outbreak. — Bernama

In an internal email, MAG group chief financial officer Boo Hui Yee said the situation has deteriorated rapidly over the weekend with governments around the world implementing stricter travel restrictions which pose greater challenges in the airline’s operations.

The industry expert opined that air cargo business would not be heavily affected and could very well be in a better position as a result of COVID-19, which was recently categorised as a pandemic by the World Health Organisation (WHO).

The outbreak that has put investors and ordinary people in ‘panic and fear’ mode, could present opportunity and serve as a catalyst for the development of online businesses that require less human-to-human interaction as many consumer goods are air transported.

Based on this analysis, he believed airlines like Raya Airways and MAB Cargo, the cargo arm of MAB, are not expected to be affected by the current predicament thus cushioning the impact on the airlines.

As at noon March 16, a total of 125 new positive COVID-19 cases have been reported in Malaysia, bringing the cumulative total of confirmed cases to 553.

-- BERNAMA

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3
   

Did you find this article insightful?

Yes
No

Next In Business News

TDM says CEO Zainal Abidin resigned over disagreement with chairman�
Petronas posts RM3.4bil net loss in Q3
Boustead appoints former Telekom boss Shazalli Ramly as new Group MD
Public Bank 3Q net profit higher at RM1.39b
CIMB's 3Q pre-tax profit improves sequentially on higher operating income
Kenanga IB profit up tenfold as brokerage, trading income soar
Palm oil’s stunning rally is set to boost supermarket prices
Alliance Bank posts lower 2Q net profit of RM103.94m on higher reserves
Pandemic and travel curbs hit Datasonic Q2 earnings�
Higher net profit for Hong Leong Bank

Stories You'll Enjoy