Mahathir Mohamad weighs shutdown or sale of national carrier Malaysia Airlines

The fate of Malaysia’s flag carrier is hanging in the balance as Prime Minister Mahathir Mohamad said on Tuesday he was studying his options, including whether to invest more funds, sell the company off or even shut it down.

“It is a very serious matter to shut down the national airline,” he told reporters at parliament. “We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or whether we should refinance it. All these things are open for the government to decide. We have to decide soon.”

Malaysia Airlines, which was recently named the best airline in Asia by the Pacific Area Travel Writers Association at international tourism trade fair ITB Berlin, has sought to turn itself around since being taken private in 2014 by Khazanah Nasional Berhad – the Malaysian government’s sovereign wealth fund.

That followed two deadly incidents involving its planes, with one disappearing over the Indian Ocean and another being shot down over Ukraine.

The wealth fund is demanding the carrier come up with a strategic plan to compete in the industry, after pouring 6 billion ringgit (US$1.47 billion) into the airline to make it profitable.

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Mahathir’s announcement on the country’s flag carrier comes amid renewed safety concerns about the Boeing 737 MAX aircraft, which has been involved in two fatal crashes in the past six months.

While Malaysia Airlines currently has none of the model in its fleet, it was expecting to receive deliveries in 2020.

The government has asked Khazanah and Malaysia Airlines to revisit the agreement with Boeing to ensure the safety of passengers, said Minister of Economic Affairs Azmin Ali on Monday, adding that they are closely monitoring the investigation into Sunday’s Ethiopian Airlines crash that killed all 189 passengers and crew.

Malaysia Airlines is facing increased pressure to revive its performance after Khazanah swung into a 6.27 billion ringgit pre-tax loss last year. The carrier accounted for about half of the impairments that weighed on the wealth fund’s portfolio, Khazanah’s Managing Director Shahril Ridza Ridzuan said earlier this month.

Future options for the airline were discussed at the last board meeting involving the carrier and Khazanah, who are “taking up this matter seriously,” Azmin told reporters in parliament on Tuesday. He added that the airline could explore new markets from Indonesia and Thailand to support its turnaround strategy.

In an interview with South China Morning Post in October, the carrier’s CEO Izham Ismail predicted 2019 would be “challenging”.

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“If you ask me if it’s been smooth sailing in our transformation, definitely not. It’s hard work, going home frustrated every day,” he said.

At the time, the airline was looking to grow “cautiously” and focusing on markets in the Asia-Pacific to boost its financial health.

But it has struggled to compete with the low-cost carriers that saturate the region, with more than half of all flights out of Malaysia being operated by such airlines, according to Izham.

“In Penang, low-cost controls 67 per cent of the market; the remaining 23 per cent is premium airlines,” he said.

A trend of poor growth in the region, even amid an Asia-Pacific aviation boom, has further added to the carrier’s woes.

Additional reporting by Danny Lee