Malaysia Airlines is to shed 30 per cent of its workforce in a tough restructuring plan unveiled by the country's sovereign wealth fund, which will pump €1.44 billion ($1.9 billion) into the airline over three years in to try to restore profitability by 2017.
It is the most radical overhaul since the airline assumed its present form in 1972, and a sign of the Malaysian government’s determination to rescue what has become a national corporate icon in the wake of the loss of two jetliners in tragic circumstances.
Strict conditions were imposed on the money by the fund, Khazanah, which is set to take full ownership of the airline in order to see through the overhaul. That marks a departure from previous attempts to restructure the lossmaking airline, which for years operated with bloated staff numbers amid political pressure from unions and mismanagement too often tolerated by the government, critics have said.
"While it is imperative that MAS [Malaysia Airlines] as a critical enabler in national development is revived, public accountability for the use of the funds mean that it cannot be renewed at any cost," said Azman Mokhtar, Khazanah managing director.
The funds “come with strict conditions, so as to ensure that MAS truly resets its business model and cost structures . . . Success is by no means guaranteed,” he added.
Khazanah, which holds 69 per cent of Malaysia Airlines and is planning to take the carrier private, unveiled a 12-point plan that includes cutting 6,000 of 19,500 staff, and slimming its network – which includes routes to London, Australia and Dubai – to one “principally regionally focused” on Asia.
Existing operations, assets and liabilities will be transferred by July next year to a new company called NewCo.
Chief executive Ahmad Jauhari Yahya will remain until NewCo is formed but a global search is already under way for a successor.
Malaysia Airlines has struggled to cope after the loss of flight MH370 en route to Beijing in March, and MH17 over Ukraine last month.
The two incidents cost the lives of 537 passengers and 29 staff.
But the airline was already struggling and had not made an annual profit since 2010 as its bloated overheads left it unable to compete with nimbler low-cost rivals, such as AirAsia.
- Copyright Financial Times