Malaysia Airlines plans radical overhaul

KUALA LUMPUR, Malaysia — Malaysia Airlines’ CEO said Wednesday that business has improved four months after one of its jets went missing, but the beleaguered flag carrier needs a radical overhaul to survive.

Chief Executive Ahmad Jauhari Yahya said the airline, which kept a low profile after Flight 370 disappeared on March 8, began to boost its marketing again this month.

“We are seeing a significant recovery in all markets, with the exception of China. We are not there yet, but close to where we were before” the plane’s disappearance, he said in an interview with The Associated Press.

The airline has been in the red for the last three years. Last year, its losses ballooned to 1.17 billion ringgit ($363 million), nearly three times larger than its 433 million ringgit loss in 2012.

As a flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.

The disappearance of Flight 370 with 239 people on board — about two-thirds from China — further compounded the airline’s woes by affecting public confidence and damaging its business with China.

“We need to operate far more efficiently. We cannot simply go on with incremental improvements. Our only option at this point is radical or sweeping change,” Jauhari said. “We have had a lot of financial reset but we have never had an operational reset.”

Jauhari declined to say what the changes will entail, but said the airline is looking at all avenues, including a possible downsizing. A detailed business plan will be rolled out later, he added.

Jauhari said the airline will retire more than a dozen Boeing 777 planes in three years as part of a fleet renewal. Before that, the planes will be sent for refitting in October to add more seats to help boost capacity and revenue, he added.

Flight 370 went missing while flying from Kuala Lumpur to Beijing. It is thought to have crashed in the southern Indian Ocean but no trace has been found.

Officials said the underwater search for the jet will shift to an area south of the first suspected crash site in the Indian Ocean.

Malaysia Airlines Chairman Mohamad Nor Yusof said the carrier is still “grappling with (repairing) confidence and reputation” after the plane’s disappearance but that the company is not currently thinking of bankruptcy as part of a restructuring.

“We will consider bankruptcy if we are insolvent but we are not. We will consider bankruptcy if we cannot meet our obligations to creditors but we are not in that state,” he said, adding that the airline still has a strong cash flow of more than 3 billion ringgit ($931 million).

Officials said the airline’s earnings were also hit by last year’s depreciation of the Malaysian currency, the ringgit, because 60 percent of its costs were denominated in U.S. dollars.

The government has said it has no plans to provide any financial assistance to bail out Malaysia Airlines.

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