Ground crew stand near a Malaysia Airlines aircraft on the tarmac at the Kuala Lumpur International Airport (KLIA) in Sepang, Malaysia. / Vincent Thian,AP
BEIJING â?? The name looks set to stay, despite global misgivings about flying on Malaysia Airlines after two tragedies this year, but major job cuts and route changes are included in the $1.9 billion rescue plan for the money-losing airline announced Friday by its majority shareholder.
About 6,000 staff, representing 30% of the national carrier's 20,000-strong workforce, will be axed and its network shrunk to focus on regional routes rather than its unprofitable long-haul international routes, Khazanah Nasional said in Kuala Lumpur, the Malaysian capital, Friday.
Khazanah, the Malaysian government's sovereign wealth fund, already owns 69% of Malaysia Airlines and will buy the remaining shares to take the business entirely into state hands.
The nationalized airline will be de-listed from the Kuala Lumpur exchange by the end of 2014, but Khazanah plans to return the carrier to profitability by late 2017 and re-list in 2018 or 2019, the fund said in a statement.
The long-planned restructuring program was already being worked on before disaster struck the airline twice this year, with the still unexplained disappearance of flight MH370 in March, and the shooting down of flight MH17 in July, with the likely total loss of 537 lives.
On Thursday, the airline announced a $97 million loss in the second quarter of 2014, its sixth straight quarterly loss, and forecast even worse financial news in the second half of 2014, as the MH17 downing puts off even more customers.
"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 a press conference Friday in Kuala Lumpur. "We believe that the [$1.9 billion] is not a bailout, we believe it will be recovered with re-listing."
Azman said Khazanah will consider selling all or some of its stake to a strategic private sector buyer after the carrier re-lists, and currently has no plans to sell its maintenance and engineering arms, one of many possible moves discussed in local media.
Aviation analysts welcomed the announcement but await important details.
"They've grasped the nettle of over-employment," said Timothy Ross, an Asian aviation analyst in Singapore for Credit Suisse.
"They were heavily over-staffed, which was one of the reasons why successive managements could not turn the ship around," said Ross, who cautioned that the plan remains "skinny on detail, such as which routes to go and which functions to go".
The airline's cultural status, and national pride, mean Malaysia won't let it die, said Ross.
"If it wasn't for loss of face, and you could look at it in a dispassionate manner, the logical move is to close its doors," he said.
But the three-year timetable to profits is "not unachievable," once they cut labor costs and charge more for tickets, said Ross.
"There's a lot of low-hanging fruit there," he said. "They are shrinking to profitability."
Khazanah has begun a search for a new chief executive and will likely complete it by the end of 2014, but current CEO Ahmad Jauhari Yahya will remain in the post until July 2015. The airline will also renegotiate its existing supply contracts, which have been criticized as uncompetitive.
In view of Malaysia's still somber mood, following the twin aviation tragedies, this Sunday's Independence Day celebrations will be toned down, and entertainment and firework displays cancelled, the state news agency Bernama said earlier this month. The Hari Merdeka anniversary marks Malaysia's independence from British colonial rule on 31 August 1957.
Copyright 2014USA TODAY
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