New ways needed to strengthen airline sector

KUALA LUMPUR: There is a need to find new ways to strengthen the airline industry so that it could reach an efficient state of churning profits, said Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan.

The industry provided a huge amount of actual economic benefits, generating spillover income to various sectors of the Malaysian economy such as tourism, he said.

“If you look across the supply chain, plenty of other (industries) make money. We just have to find new ways, essentially, for the airlines themselves to reach a much more efficient state and that may require us to re-look at the industry, potentially restructuring the industry itself.

“I think it (restructuring) is quite conceivable looking at the industry, where demand is not growing as fast as capacity growth,” he said at a panel session titled “New Mandates, New Opportunities” at the Invest Malaysia 2019: The Capital Market Forum.

Shahril Ridza said the airline industry in Malaysia had a vast supply of capacity relative to the actual number of passengers.

“That is why we have to look at homegrown airlines operating out of Malaysia. I do not think in 2018, anyone (in the aviation industry) made any money. It is a really bizarre industry where essentially everybody needs money - airports, service providers, and maintenance, repair and operations - other than the airlines themselves,” he said.

On Malaysia Airlines Bhd, Shahril Ridza said there was a huge value proposition that the national carrier could bring to the country and its economy, notwithstanding its profitand-loss performance.

Malaysia Airlines’ ability to continue as a going concern came into question recently after its losses caused a massive impairment loss for sole shareholder Khazanah, resulting in the sovereign wealth fund reporting a pre-tax loss last year - its first since 2005.

Khazanah took Malaysia Airlines private in 2014 and committed to injecting RM6bil into the business to make it profitable.