Hemorrhaging cash after almost unfathomable double disasters that killed 537 people, Malaysia Airlines will be brought back under the wing of the Malaysian government as a prelude to a comprehensive overhaul of the airline. It will be the latest in a string of restructurings of the carrier over the past decade, all of which failed...
Hemorrhaging cash after almost unfathomable double disasters that killed 537 people, Malaysia Airlines will be brought back under the wing of the Malaysian government as a prelude to a comprehensive overhaul of the airline. It will be the latest in a string of restructurings of the carrier over the past decade, all of which failed to put it on a steadier flight path. Some analysts doubt the airline will be in a much improved position in another five years. Here are some questions and answers on what lies ahead:
– WHY DOES THE AIRLINE NEED AN OVERHAUL?
Malaysia’s struggling national airline continues to lose money in spite of four major restructurings in 12 years. Two disasters within months of each other– the disappearance of flight MH370 and the downing of MH17 over Ukraine — may have dealt a fatal blow to the airline’s finances.
– WHAT IS THE PLAN?
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Few details have been released by Khazanah Nasional, the Malaysian sovereign wealth fund that has a controlling stake in the airline and wants to mop up the minority of shares it doesn’t own. The fund said that after it owns all the shares it will carry out a “complete overhaul” including operations, business model, finances, staff and regulations. “Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity,” it said.
– WHAT NEEDS TO BE DONE?
Malaysian Airlines needs to cut costs to stem the red ink that amounted to 1.3 billion ringgit ($405 million) in losses last year alone. Top of the list is trimming staff, which at nearly 20,000 is “relatively sizeable” compared with other full service carriers such as Singapore Airlines and Cathay Pacific Airways, analyst Jerry Lee of RHB Bank wrote in June. But staff cuts have always been a politically sensitive issue because the airline is state-owned. Experts say the airline could also reduce its fleet. Passenger capacity has risen in recent years as the airline brought in new planes, forcing it to discount airfares aggressively to fill enough seats. There’s also talk the carrier could sell its profitable maintenance division.
– WHAT COULD THE AIRLINE LOOK LIKE IN 5 YEARS?
Malaysian Airlines could be slimmer, have new executives, and fly less often to some destinations. Some have suggested a new name is needed but don’t expect radical changes. It’s unlikely to expand heavily into the discount market to compete with AirAsia, the country’s highly successful low-cost carrier, said Brendan Sobie, analyst at CAPA The Centre For Aviation. Other analysts are doubtful that its fifth restructuring will do the trick. “I’m skeptical of the success of this new measure,” said Shukor Yusof, founder of aviation research firm Endau Analytics. “The root problems are not being looked into seriously, things like the strategy, the business model and what they want the company to be in the long term.”
– HOW HAVE OTHER NATIONAL AIRLINES FARED AFTER RESTRUCTURINGS?
Following bankruptcy in 2010, Japan Airlines Co. returned to solid profitability. The airline, once a Japanese icon, was saddled with a bloated workforce, unpopular routes, safety lapses and mountains of debt. New management trimmed a third of the payroll, invested in budget carriers, retired big jets in favor of smaller ones and focused on international routes instead of less profitable domestic ones. The company returned to the stock market with an $8.5 billion IPO in 2012. Swissair International Air Lines was created out of the ashes of Swissair, which went out of business in 2002, becoming the first airline to collapse after the Sept. 11 attacks. The new airline suffered financial problems for several years but subsequently returned to profit. It’s now owned by Lufthansa.