Malaysia’s Investment Fund Set to Take Malaysia Airlines Private

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Malaysia Airlines has been hit with double disaster this year. In March, flight MH370 en route from Kuala Lumpur to Beijing, disappeared with 239 passengers and crew members onboard. This was swiftly followed by the MH17 strike in July which killed all 298 people onboard. The carrier now faces a long journey to stem losses and repair its image

Deteriorating financial performance has forced MAS to delist as a public enterprise. The carrier has been experiencing financial difficulty for several years now. Even before the first MAS airliner incident of 2014, Malaysia Airlines has racked up RM4.13 billion in losses.

Privatization will facilitate a comprehensive restructuring of the company. “If you leave it as a public-listed company, there’s a lot more regulatory requirements that you have to adhere to” explained Jason Chong, chief investment officer at Manulife Asset Management Services Bhd. In Kuala Lumpur.

Khazanah National Bhd., which is chaired by Malaysia’s Prime Minister, Mr Najib Razah, has offered 27 sen a share to buy the remaining 30.6 per cent of MAS that is doesn’t already own; a total cost of RM1.38 billion. Malaysia Airlines is currently considering this proposal; business operations will remain unchanged until a decision has been made.

If Khazanah National’s bid to take over the carrier is successful, they may decide to install a new management team, trim payroll and sell off profitable engineering and airport services in an attempt to revive finances. Another option would be to file for bankruptcy. It is expected that Khazanah will reveal a detailed plan-of-action by the end of August this year.

“Khazanah will be able to restructure in a good way I believe,” said Mohshin Aziz, aviation analyst at Maybank Investment Bank. “After taking private, [they’ll] probably have to do a lot of restructuring, namely cutting some business units, refinancing some of the loan terms. It’s just the first chapter of the long list they have to do.” 

Sources: The Malay Mail, CNBC

Photo credit: Aero Icarus / Foter / Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)

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