Khazanah unveils Malaysia Airlines’ 12-point restructuring plan

Reading Time: 2 minutes

CH7STV31R1Malaysia Airlines’ majority shareholder, state-owned investment holding Khazanah Nasional Berhad, has outlined its proposed 12-point restructuring plan aimed at developing a new, profitable, market-driven airline by 2017. The announcement came just a day after Malaysia Airlines posted a second-quarter net loss of $95.1million exacerbated by the MH17 and MH370 tragedies.

“At its core, the plan involves the creation of a new company (“NewCo”), which will house the “New MAS” and the migration of the right-sized workforce and work practices and contracts into the NewCo,” the Malaysian sovereign wealth fund said. “It also includes details of the strict conditionality attached to restructuring into current MAS and further Khazanah investment into NewCo.”

The 12 key-elements of the MAS Recovery Plan have been subdivided into four categories: Governance & Financial Framework; Operating Business Model; Leadership & Human Capital; and Regulatory & Enabling Environment.

Concerning Malaysia Airlines’ Governance & Financial Framework; Khazanah intends to complete its previously announced privatization plans of the current airline company (dubbed “OldCo”) by year-end thereby paving the way for the migration of all OldCo’s relevant operations, assets and liabilities to NewCo done by July next year.

The airline’s delistment from the Malaysian stock exchange is expected to cost some $438 million, while restructuring and retrenchment costs will require another $500 million. Restructuring and investment funding to the tune of $1.9 billion will be disbursed in a staggered basis subject to the fulfilment of strict conditions.

Thereafter, once operational, NewCo will allow Khazanah to rebuild the national carrier from the ground up incorporating industry best-practices and norms. Overall, NewCo is targeted to return to profitability within 3 years of delisting, and to relist within 3 to 5 years i.e. between the end of 2017 and the end of 2019.

Concerning the Operating Business Model, Khazanah says it will centralise Malaysia Airlines (and that of its successor) at Kuala Lumpur International as opposed to its present set-up where its headquarters and principal operations are currently located at Kuala Lumpur Subang. Subsidiary Firefly would continue to run its turbo-prop related operations out of Subang.

Malaysia Airlines’ existing route network and fleet will also be thoroughly scrutinised and reshaped to reflect a more regionally-focused network with added emphaiss on building strong global connectivity through the Oneworld alliance and other partners.

“MAS will also re-configure its fleet to better fit MAS’ network and markets, which could include moving to smaller aircraft, retiring specific aircraft types, and/or adding seats to aircraft to reduce unit costs,” the plan said.

In an effort to cut costs, Khazanah will also seek to review and, where appropriate, renegotiate supply contracts such that they are based on market norms and benchmarks.

Concerning Malaysia Airlines’ Leadership and Human Capital, Khazanah says it intends to cut about 30 per cent of Malaysia Airlines’ current 20,000-strong workforce ahead of the inception of NewCo with the 6,000 due to be laid off to be given access to the Corporate Reskilling Centre, to be located in the Subang area.

In terms of management, the transition from OldCo to NewCo will see “significant changes” in the carrier’s leadership with incumbent CEO Ahmad Jauhari Yahya and the group’s current board to remain in place until July 1, 2015. A search for a new prospective CEO for NewCo has already been launched with a decision expected to be made before year-end.

Concerning the regulatory and enabling environment, Khazanah says the Malaysian government plans to put in place legislation to facilitate the restructuring of the airline in a comprehensive and timely manner.

Khazanah added that should NewCo successfully launch, it would also consider either a complete or partial sell-down of its stake to appropriate strategic buyers from the private sector.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 2 minutes

Malaysia Airlines’ majority shareholder, state-owned investment holding Khazanah Nasional Berhad, has outlined its proposed 12-point restructuring plan aimed at developing a new, profitable, market-driven airline by 2017. The announcement came just a day after Malaysia Airlines posted a second-quarter net loss of $95.1million exacerbated by the MH17 and MH370 tragedies.

Reading Time: 2 minutes

CH7STV31R1Malaysia Airlines’ majority shareholder, state-owned investment holding Khazanah Nasional Berhad, has outlined its proposed 12-point restructuring plan aimed at developing a new, profitable, market-driven airline by 2017. The announcement came just a day after Malaysia Airlines posted a second-quarter net loss of $95.1million exacerbated by the MH17 and MH370 tragedies.

“At its core, the plan involves the creation of a new company (“NewCo”), which will house the “New MAS” and the migration of the right-sized workforce and work practices and contracts into the NewCo,” the Malaysian sovereign wealth fund said. “It also includes details of the strict conditionality attached to restructuring into current MAS and further Khazanah investment into NewCo.”

The 12 key-elements of the MAS Recovery Plan have been subdivided into four categories: Governance & Financial Framework; Operating Business Model; Leadership & Human Capital; and Regulatory & Enabling Environment.

Concerning Malaysia Airlines’ Governance & Financial Framework; Khazanah intends to complete its previously announced privatization plans of the current airline company (dubbed “OldCo”) by year-end thereby paving the way for the migration of all OldCo’s relevant operations, assets and liabilities to NewCo done by July next year.

The airline’s delistment from the Malaysian stock exchange is expected to cost some $438 million, while restructuring and retrenchment costs will require another $500 million. Restructuring and investment funding to the tune of $1.9 billion will be disbursed in a staggered basis subject to the fulfilment of strict conditions.

Thereafter, once operational, NewCo will allow Khazanah to rebuild the national carrier from the ground up incorporating industry best-practices and norms. Overall, NewCo is targeted to return to profitability within 3 years of delisting, and to relist within 3 to 5 years i.e. between the end of 2017 and the end of 2019.

Concerning the Operating Business Model, Khazanah says it will centralise Malaysia Airlines (and that of its successor) at Kuala Lumpur International as opposed to its present set-up where its headquarters and principal operations are currently located at Kuala Lumpur Subang. Subsidiary Firefly would continue to run its turbo-prop related operations out of Subang.

Malaysia Airlines’ existing route network and fleet will also be thoroughly scrutinised and reshaped to reflect a more regionally-focused network with added emphaiss on building strong global connectivity through the Oneworld alliance and other partners.

“MAS will also re-configure its fleet to better fit MAS’ network and markets, which could include moving to smaller aircraft, retiring specific aircraft types, and/or adding seats to aircraft to reduce unit costs,” the plan said.

In an effort to cut costs, Khazanah will also seek to review and, where appropriate, renegotiate supply contracts such that they are based on market norms and benchmarks.

Concerning Malaysia Airlines’ Leadership and Human Capital, Khazanah says it intends to cut about 30 per cent of Malaysia Airlines’ current 20,000-strong workforce ahead of the inception of NewCo with the 6,000 due to be laid off to be given access to the Corporate Reskilling Centre, to be located in the Subang area.

In terms of management, the transition from OldCo to NewCo will see “significant changes” in the carrier’s leadership with incumbent CEO Ahmad Jauhari Yahya and the group’s current board to remain in place until July 1, 2015. A search for a new prospective CEO for NewCo has already been launched with a decision expected to be made before year-end.

Concerning the regulatory and enabling environment, Khazanah says the Malaysian government plans to put in place legislation to facilitate the restructuring of the airline in a comprehensive and timely manner.

Khazanah added that should NewCo successfully launch, it would also consider either a complete or partial sell-down of its stake to appropriate strategic buyers from the private sector.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid