The fate of Malaysia Airlines is expected to be set by 31 December, when the airline’s parent company is due to finalise its restructuring, according to Malaysia’s deputy finance minister.
Deputy minister Abdul Rahim Bakri informed the Malaysian parliament that the troubled airline is approaching the end of its lengthy restructure, the outcome of which will determine whether or not Malaysian Airlines will continue its operations.
“I can see some progress, and the matter is expected to be finalised by the end of the month,” Bakri said.
“The government will hold further talks with Khazanah to ascertain the direction of the company, especially in strengthening its financial position and identifying the best strategic solutions,” the deputy finance minister said.
In a separate parliamentary session, Minister of Finance Zafrul Aziz confirmed that the final decision on whether or not to terminate the operations of Malaysia Airlines’ parent group Malaysia Aviation Group had not yet been made.
Aziz said the decision will be dependent on the outcome of final talks with creditor and lessors.
He added that the group’s only major shareholder, the state fund Khazanah Nasional, has promised to ensure the welfare of the group’s employees are safeguarded through appropriate financial compensation under current labour laws.
To date, Khazanah has injected about MYR28 billion (US$6.9 billion) into the company, while the current total liabilities to be restructured are estimated to be MYR16 billion (US$4 billion).
As at 31 August 2020, the total liquidity owned by Malaysia Aviation Group is about RM366 million (US$90.4 million), aside from about RM578 million (US$143 million) available for use from the funds allocated by Khazanah.
Currently, around 75 per cent of Malaysia Airlines’ fleet is currently grounded.
In October this year, Malaysia Airlines group CEO Izham Ismail threatened that the airline will have “no choice” but to shut down entirely if its lessors decide not to support its restructuring plan.
At that time, Izham said that there are a “sizeable” number of creditors who had agreed to the proposed restructuring plan however a number have outright rejected the plans, while some still remain undecided.
According to Izham, the proposed plan was to restructure the airline’s balance sheet over five years, and would see the company break even in 2023, assuming that demand in the domestic and south-east Asian travel markets hit 2019 levels by the second or third quarter of 2022.
Included in the plan was also a further cash injection from its only major shareholder, Khazanah, which would see the airline through the next 18 months.
Sources have also said the airline has requested “steep discounts” on aircraft rentals as a part of this plan.
MAG has previously warned lessors in a letter that Khazanah, the sole shareholder of MAG, will cease funding the group, which will result in the liquidation of MAG.
Malaysia Airlines has struggled to recover from two unfortunate tragedies in 2014, firstly the mysterious disappearance of flight MH370 and then the shooting down of flight MH17 over eastern Ukraine.
The airline’s struggle has only been compounded by the ongoing COVID-19 crisis, which has decimated international travel demand to an unprecedented scale.
Wow this airline has had a turbulent time over the last 25 years. Restructuring many time, sold, then back into the government now another major Restructuring. This airline has had multiple lives and many billions of cash injections. Each time there is a promise of return to profitability, which lasts a couple of years then goes back to its old ways.
Will this restructure work?
Only thing mysterious about MH370 is the actions (or lack of) the Malaysian government . They know what happened. Boeing 777’s don’t mysteriously disappear. Why has the Malaysian government declinded to accept proposals from third party operations searching for missing aircraft under a no-find-no-fee agreement? What has it got to lose? Nothing. What has it got to gain on the flip side? Alot, unless your’re covering up something. The mind boggles.