Three international carriers - Qatar Airways, Japan Airlines and China Southern - have reportedly put in bids to buy a strategic stake in ailing Malaysian carrier, Malaysia Airlines. Analysts, however, argue that the recently concluded wide-ranging partnership between Malaysia Airlines and Singapore Airlines (SIA) is the ‘best’ approach amid hurdles in aviation mergers in Southeast Asia’s airline industry, which is dominated by loss-making national carriers, while domestic politics also make airline mergers a tough sell.
At SIA's 2019-2020 half-year financial results meeting last week, CEO Goh Choon Phong was quoted as saying that the airline is aware of "the consolidation taking place elsewhere, (but) I am
not holding my breath in our part of the world owing to various considerations. Many of the airlines involved here are national carriers.” Goh added that he was satisfied that SIA's new
partnership with Malaysia Airlines (MAS), which stopped short of a full merger, would make it more profitable. Goh said the partnership model was “the best way to cooperate, to get a win-win
in the region” and reiterated that his airline had not spoken to its counterpart in Kuala Lumpur about taking a financial stake.
New SIA-MAS pact excludes cargo services
The new SIA-MAS deal includes coordinating schedules, fares and sharing revenue on flights between the two countries and increasing code-share ticket sales on each other’s regional and long-haul
routes. The increased cooperation also includes Singapore Air’s subsidiaries SilkAir and Scoot, and Malaysian’s regional carrier Firefly. The agreement, which follows the signing of a memorandum
of understanding in June this year, did not mention any specific cooperation in air cargo activities of both carriers.
Good interim solution, Goh
Malaysia Airlines already has a deal with Japan Airlines to jointly operate flights between KUL and Japanese cities, with plans to collaborate on cargo, airport ground handling and staff
training.
MAS CEO, Captain Izham Ismail described the new deal as a “significant expansion of the existing codeshare agreement, which will provide Malaysia Airlines with more opportunities to expand
connectivity to and from Malaysia.”
Citing the MAS deal as the best approach under the current circumstances, SIA's CEO Goh noted: “I think until the regulatory environment in this part of the world allows for more liberal
consolidation, this will be a good interim solution.”
MAS is in urgent need of fresh capital
SIA and MAS were previously one company, but Malaysia-Singapore Airlines split in 1972 after Singapore left its union with Malaysia to become independent in 1965.
Business weekly The Edge Malaysia last week quoted Malaysia's government as saying that its sovereign fund Khazanah Nasional Bhd, which owns Malaysia Airlines, has shortlisted four potential
investors for the deal, after having invited initial proposals from a field of 20.
Citing sources, The Edge named Qatar Airways, Japan Airlines and China Southern Airlines as the potential bidders but did not mention the identity of the fourth bidder, nor the value of the deal.
A subsequent Reuters report later quoted a Qatar Airways spokesman as saying that the airline was not among the bidders shortlisted. The report also said that Khazanah is expected to decide on
its preferred candidate soon, as Malaysia Airlines only has enough cash to sustain its operations until April next year.
Nol van Fenema
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