TURBULENT TIME FOR MALAYSIA AIRLINES
Malaysian Airline System (MAS), which lost two jetliners in air disasters this year, will cut 6 000 jobs as the national carrier restructures. CEO Ahmad Jauhari Yahya, whose contract was due to end next month, will continue to lead the carrier until July 1 next year, according to Azman Mokhtar, the managing director of majority owner Khazanah Nasional, on Friday. Malaysia Airlines posted a sixth quarterly loss and said the full financial impact of the disasters will be seen only in the second half of the year.
Khazanah is the Malaysian government’s strategic investment fund. It made a $436.5 million (R4.6 billion) buyout offer this month to take Malaysia Airlines private, saying it will invest $1.9 billion as it seeks to return the carrier to a profit in three years.
Prime Minister Najib Razak has said “painful steps” need to be taken to overhaul the airline, which has racked up $1.5 billion in losses since the beginning of 2011.
Khazanah will invest on a “staggered and conditional basis” over the next three years, it said.
“While funds have been made available, they come with strict conditions to ensure MAS truly resets its business model and cost structures to be truly sustainable,” said Mokhtar.
The national carrier – which traces its beginnings to the 1930s – will cut its workforce to 14 000 from 20 000. It is struggling to repair its image after MH370 vanished in March and MH17 was shot down over Ukraine last month.
“The need to restructure the company was accelerated” after the disasters damaged the brand, according to Ahmad Jauhari.
“Our company has had to undergo a thorough re-examination and re-evaluation to reposition ourselves as a stronger and more sustainable Malaysia Airlines for the future.”
The March 8 disappearance of flight MH370, en route to Beijing from Kuala Lumpur with 239 people on board, sparked street protests in Beijing and prompted boycotts by Chinese travellers.
No trace of the plane has been found in the world’s longest search for a missing jet in modern aviation history.
The airline’s yields, or measure of ticket prices, fell 4% in the second quarter, the company said. It filled 73.7% of its seats in that period, 6.7 percentage points lower than a year earlier.
Ahmad Jauhari said they “expected the impact of MH370” on secondquarter performance. “Given that, our team put in much hard work and effort to regain market confidence and rebuild sales.
“Tragically, just as we were beginning to see signs of recovery in all regions, we were dealt the blow of MH17.”
Flight 17 carried 298 people and was shot down in Ukraine on Thursday, July 17, on a route Malaysia Airlines said was declared safe by the International Civil Aviation Organisation. The Ukrainian government blamed the downing on pro-Russian rebels in the country’s eastern region.
Average weekly bookings fell 33% immediately after the incident, the airline said.
Malaysia Airlines retired its older Boeing 737-400 aircraft at the end of June, six months earlier than planned, to save fuel costs and increase productivity. It had a fleet of 127 aircraft in mid-August.
Unverified images of near-empty Malaysia Airlines planes have circulated on social media since MH17 crashed. The airline will review its European routes, Khazanah said.
The carrier will probably lose more than $316.8 million this year and continue to report losses throughout next year into 2016, according to analyst estimates compiled by Bloomberg.
Malaysia Airlines has lost 19% of its market value this year. The shares were suspended on Friday. Khazanah’s buyout will result in the company’s delisting, targeted for completion by the end of the year.
CATASTROPHE Australian and Dutch investigators examine pieces of the Malaysia Airlines flight MH17 plane crash in the village of Hrabove, eastern Ukraine