Malaysian sovereign wealth fund Khazanah Nasional Bhd this week declared a massive loss before tax of RM6.27 billion (US$1.5 billion) in 2018 from a profit before tax of RM2.89 billion in 2017 caused by fewer divestments, higher impairments and lower dividend income. The realisable asset value of its portfolio fell to 136 billion ringgit (US$33.4 billion) in 2018 from 157 billion ringgit a year prior. According to the fund’s MD, MAS is responsible for much of the massive losses.

The Edge quoted Khazanah's managing director Shahril Ridza Ridzuan as saying at the company's annual review this week that the sizeable impairment amount was "primarily due to Malaysia
Airlines Bhd (MAS), which accounted for roughly half of the total impairment for 2018."
Huge write down of investment
Reports said that as MAS’s single shareholder, Khazanah had spent RM6 billion (US$1.5 billion) over the last three years trying to put the airline in the black again. Shahril acknowledged
that MAS did not achieve what it had intended in the original turnaround plan, which manifested in a huge write-down of investment.
Khazanah's first loss since 2005 has prompted the sovereign wealth fund to split its US$33 billion portfolio into commercial and strategic holdings involving its investments in over 100 firms
spanning more than 20 countries.
Its investments in companies including 27%-owned CIMB Group Holdings, 36%-owned telecommunications firm Axiata Group and Alibaba would be part of its commercial fund, while firms such as state
utility Tenaga Nasional, struggling Malaysia Airlines - which Khazanah took over four years ago - Malaysia Airports Holdings and Telekom Malaysia will be part of its strategic fund.
Doomsday scenario
Following the loss, some Malaysia-based aviation industry analysts reportedly have suggested that "after years of bleeding money", it was time to shut down or sell off Malaysia's national
carrier.
The New Strait Times quoted Shukor Yusof, the founder of Endau Analytics, a Malaysia-based aviation consultancy as saying that MAS ought to shut down. "There is no economic or financial
rationale in maintaining it in its current condition. A loss-making business can’t continue indefinitely,” he said, adding that if the national airline was shut down, its assets, such as aircraft
and properties, could be used to repay debts while some of its workers could be redirected to other airlines, such as Malindo Airways or AirAsia.

Does Malaysia need a national carrier that’s constantly burning money ?
“What’s more important, in my view, is to take to task the people who have been responsible for ruining MAS. There must be accountability,” Yusof said.
Echoing Shukor Yusof's sentiment, Moshin Aziz, a financial analyst from Maybank, suggested that the best way forward for MAS would be to “discontinue operations” as plans to turn a profit have
been unsuccessful.
“Should Malaysia have a national airline? That argument is becoming weaker because we have been bailing it out many times," Aziz noted, adding that “nowadays, the attachment and sentiment to the
national airline is not as strong as before."
Will the “multiplier effect“ keep MAS in the air?
A report in Coconuts, which bills itself as "Asia's leading alternative media company," quoted some unnamed analysts that MAS might benefit from unloading or shutting down some of its
less profitable subsidiaries, which include Firefly, MASwings, MAB Kargo, AeroDarat Services, MAB Leasing, MAB Pesawat and MAB Academy. Khazanah's managing director has meanwhile dismissed the
doomsday scenarios, saying that the airline has “a multiplier effect of eight to 10 times,” bringing in tourists for each dollar spent on the airline.
“The question really to be asked essentially is for every dollar invested in Malaysia Airlines, is it generating other economic benefits to the country? The government then needs to decide for
itself what is the right level of investment or support for the airline at this point in time,” a Reuters report quoted Shahril as saying.
Nol van Fenema
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