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MARCH 2019

Week 11


Government weighs Malaysia Airlines future

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March 15th 2019

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Options open with capital injection most likely. Read More »

The good news at Malaysia Airlines was short-lived. On Monday the carrier was crowned “Best Airline in Asia” at travel expo ITB Berlin.  Garnering far more publicity was the unwelcome news a day later from the Malaysian government, the airline’s indirect shareholder.

Prime Minister Mahathir Mohamad said the government would “soon” make a decision about refinancing the airline, selling it or even shutting it down. The closure comments naturally captured headlines. Mahathir remarked: “It is a very serious matter to shut down the airline.”

Many expect politics will not allow the airline to be shut down, but raising the option makes a capital injection easier. Like Air India, buyers for the airline are few without guarantees the government will stop intervening.

MAS restructurings have fallen short, typically due to government intervention. Fleet simplification opportunities were lost when it signed a tentative deal for eight 787-9s, which would have overlapped with its existing A350-900 fleet. CEO Peter Bellew announced his departure a month after the 787 deal. MAS cancelled the 787 agreement in 2018. Bellew succeeded Christoph Mueller, who left the airline early for a role at Emirates, which he has since resigned from.

Tan Sri Mohd Sheriff Mohd Kassim from 1994-2003 was the managing director of sovereign wealth fund, Khazanah Nasional Bhd, MAS’s shareholder. He told The Edge about changes to a different government-linked company, but the comments also could be applicable to MAS: "There should be a serious discussion whether or not we need so many GLCs in the country. The governance standards should also be improved and we should ensure that there is no political interference in running the GLCs."

Although it is said MAS never recovered from its “twin tragedies”, its underlying structural problems were pre-existing but were unable to be addressed without government backing and impetus.

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