MAS taken private


MAS taken private

Malaysia Airlines will be delisted from the stock exchange as the Government decides what to do with the beleaguered flag carrier.

In early August Malaysia’s sovereign wealth fund, Khazanah Nasional, which owns 69.4 percent of the airline company, offered MYR 1.38 billion (US$432.5 million) to take the carrier private.

The move was widely anticipated after the loss of two Boeing 777-200LRs this year. The airline was struggling well before that and is now burning through cash.

“We believe our national carrier must be renewed,” Prime Minister Najib Razak was quoted as saying. “Only through a complete overhaul of the company can we deliver a genuinely strong and sustainable national carrier.”

To achieve this, the government must win over, or overcome, the powerful unions that have blocked restructuring efforts in the past, including in 2012, when they effectively scuppered a proposed merger into the AirAsia Group.

One possibility is a break up of the Group’s seven main business units – five of which are profitable according to analysts at Maybank KE. The most lucrative of these would be the engineering unit, which Maybank estimates made a net profit of MYR 127 million last year on revenues of MYR 1,145 million.

Firefly, which operates a fleet of ATR72s, wasn’t too far behind with net profits of MYR108 million on MYR959 million revenues.

Maybank KE believes that the privatization will enable the Government to address the airline’s legacy issue “more convincingly.”

“MAS is overstaffed and struggles to trim down its workforce. The management has mobilised some employees from departments with surplus staff to others which are in a deficit. However, there are many limitations on different skill sets and licensing requirements. A “golden handshake” is a plausible consideration, but has not been talked about due to the highly sensitive nature,” says Maybank KE.

“We believe that if the company is broken up to individual units and restructured with performance based compensation with clearly defined KPIs, the staff will be too busy to focus on union matters.”




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