The parent company of Malaysia Airlines Berhad, Malaysia Aviation Group Berhad (MAG) has again received a substantial fund injection from Khazanah Nasional Berhad, the sovereign wealth fund of the Government of Malaysia. MAG also manages Firefly Sdn Bhd, MASwings and MAB Kargo Sdn Bhd.
The Edge Financial Daily reported that in March this year, Khazanah pumped RM500 million (close to US$120 million) into MAG, which with the recent injection of RM300 million, brings the
total capital injection to RM800 million.
Citing an unnamed spokesperson from Khazanah, The Edge report said the RM800 million capital injection into MAG is only part of the initial RM6 billion approved funding for the fledgling airline, under the MAS Recovery Plan (MRP) which was announced five years ago.
Break-even by 2022 expected
Management of the carrier last month unveiled a new long-term business plan (LTBP) that, if successful, would see Malaysia Airlines achieving financial break-even by 2022. The plan is currently awaiting approval from Khazanah’s board of directors.
The initial MAS Recovery Plan (MRP), which was unveiled in 2014, with the aim of turning around the loss-making entity into a profitable company by 2018, missed its target amid several setbacks, including stiff competition, rising fuel prices, unfavourable foreign exchange rates, as well as crew shortages.
The Edge report noted that the new LTBP consists of four pillars, which includes rightsizing the airline’s fleet of Airbus and Boeing aircraft and network expansion that is focused on the Asia-Pacific, with the three other pillars are: providing a premium customer experience; having a partnership strategy and diversifying the airline’s revenue.
As earlier reported by CargoForwarder Global, Khazanah (which is the sole shareholder of Malaysia Airlines Berhad), earlier this month hired investment bank Morgan Stanley to look at strategic options for the flag carrier, because the five-year recovery plan didn't materialise and MAB has continued to report losses, resulting in the government’s current intention to sell the carrier off to private buyers.
The investment bank has been brought in as an independent adviser.
Stake sale option is on the government’s table
In a report on the move, Bloomberg quoted Md Farid Md Rafik, a deputy minister in Mahathir Mohamad's department as saying that the Malaysian government is willing to become a minority shareholder in the carrier, implying a stake sale is also among options under consideration.
Suitors for Malaysia Airlines must have expertise in the industry with strong financial standing, Md Farid said. The government will not compromise on the carrier's branding and won't allow any layoffs among its 14,000 local employees, he added.
Governments opposes shut down, supports recovery
Although prime minister Mahathir has indicated the carrier still faces the possibility of being shut down because the government seeks to save money, he has also emphasised that he wants the airline to recover and keep "Malaysia" in its name.
In the meantime, The Edge report said the airline has attracted four suitors, comprising Najah Air Sdn Bhd (a six-man group led by former AirAsia Group Bhd chairman Datuk Pahamin Ab Rajab); tycoon Tan Sri Syed Azman Syed Ibrahim of The Weststar Group; Jentayu Danaraksa Sdn Bhd and a group comprising former employees of the now-defunct Malaysian Airline System Bhd, as well as several private individuals.
Nol van Fenema