Malaysia Airlines will shed 30 per cent of its staff, cut routes and replace its CEO to stave off bankruptcy after two of its airliners crashed. Stakes may also be sold to outside investors under the plans announced yesterday.
The airline will reduce its payroll by 6,000, to 14,000, to stem long-running losses made worse by the twin disasters this year. A search for a new chief executive officer is under way but there is no move to change the airline's name, something branding experts had said was necessary for a successful makeover.
Khazanah Nasional, the state investment company that owns 69 per cent of the airline, said the overhaul included forming a new company to take over the existing business and its reduced staff.
The revamp and new investment in the carrier will cost about 6 billion Malaysian ringgit (HK$14.7 billion). Analysts say the staff cuts suggest it will reduce flights to Europe and China.
The loss of flight MH370, which vanished over the Indian Ocean in March, and of flight MH17, shot down by a rebel missile over restive eastern Ukraine, "created a perfect storm for the restructuring to take place", said Khazanah managing director Azman Mokhtar. "We need to have a fresh start."
The plan aimed to "strike a balance between Malaysia's desire to revive a national carrier against the prudent use of public funds", he said.
The airline will be taken off the Malaysian stock exchange and put completely under the wing of the government. Khazanah had previously announced it planned to take 100 per cent ownership. It aims to restore Malaysia Airlines to profitability by the end of 2017 and relist it on the stock exchange by the end of 2019.
A substantial revamp has long been on the cards. Malaysia Airlines had struggled with chronic financial problems even before this year's disasters.
Investigators continue to scour the southern Indian Ocean for flight 370, which veered far off course while en route from Kuala Lumpur to Beijing on March 8 with 239 people on board. In July, 298 people were killed aboard flight MH17.
The airline was previously associated with high-quality service, but travellers on recent long-haul flights have posted photos of nearly empty cabins and departure lounges. The airline says passenger numbers fell 11 per cent year on year in July.
Azman said Khazanah's 6 billion ringgit investment "will not be a bailout" and that the investment company would get its money back if the airline followed strict conditions laid out under the 12-point restructuring plan.
Additional reporting by Agence France-Presse