Malaysia plans overhaul of national airline

KUALA LUMPUR, Malaysia — Malaysia’s state investment company said Friday it plans to make Malaysia Airlines fully government owned, removing it from the country’s stock exchange before carrying out a far-reaching overhaul of the carrier that is reeling from double disasters.

Khazanah Nasional, which owns 69 percent of Malaysia Airlines, said it has proposed to the carrier’s board of directors that it buy out minority shareholders at 27 sen (8 cents) a share, which is 29 percent higher than the airline’s average share price over the previous three months. The takeover would cost 1.38 billion ringgit ($429 million).

Khazanah said the state takeover will represent the first stage of a “complete overhaul” of the loss-making airline, and that detailed plans will be announced by the end of this month.

“The proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier,” it said in a statement. “Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity.”

Malaysia Airlines has been hit by two major disasters this year, which added to its longstanding financial woes.

In March, Flight 370 from Kuala Lumpur to Beijing disappeared with 239 people on board after flying far of course. The plane has still not been found, with a search in the southern Indian Ocean underway.

In July, 298 people were killed when Flight 17 was shot down over Ukraine. It was heading to Kuala Lumpur from Amsterdam and was shot out of the sky over an area of eastern Ukraine controlled by pro-Russian separatists.

Before the disasters, the carrier’s financial performance was among the worst in the industry, putting a question mark over its future even before its brand was tied to two almost unfathomable tragedies.

Some analysts last month said the airline would not survive a year without a substantial cash injection from the Malaysian government.

Crisis and risk management experts have said the Malaysia Airlines must take dramatic steps such as replacing its top executives and changing its name.

Khazanah’s offer to minority shareholders gives them more than what their shares were worth before each of the passenger jet disasters. Even so, the airline’s share price has been in a long-term decline due to several years of losses that partly stemmed from increased competition from discount carriers.

The day before Flight 370 vanished, the airline’s share price was 25 sen. It was 23 sen the day before Flight 17 was downed.

As a state-owned flag carrier, Malaysia Airlines 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.

Khazanah said its plan requires approvals from regulators and Malaysia’s finance minister.

More in Herald Business Journal

Boeing outmaneuvered? Airbus takes Bombardier under its wing

Airbus will buy a controlling stake in Bombardier’s C Series airplane — and build it in Alabama.

Nordstrom suspends buyout after struggling to get financing

A buyout was meant to help the company continue turnaround efforts outside the glare of market scrutiny.

More self-awareness could help build a better medical system

Marcy Shimada of Edmonds Family Medicine writes the second in a series about fixing our health care system.

Scratch-and-sniff brochures aimed to prevent disaster

Puget Sound Energy has distributed more than a million scratch-and-sniff brochures to… Continue reading

Jewelry, accessories store Fuego opens second site in Snohomish County

Northwest-based jewelry, accessories and gifts store Fuego opened a new outlet store… Continue reading

Extreme cleaning company Steri-Clean opens in Mukilteo

The first Washington franchise of the Steri-Clean company will celebrate its grand… Continue reading

Justices to hear government’s email dispute with Microsoft

A lower court ruled emails in a drug case couldn’t be searched because they were in Ireland.

Waiting to upgrade to the iPhone 8? You’re not alone.

The older model iPhone 7 is enjoying a new sales bump while the new iPhone 8 isn’t flying off shelves.

Most Read