Malaysian Airline System Bhd, the state-backed carrier whose jet was shot down over Ukraine on July 17, will present turnaround plans this week to the government fund that controls it, people familiar with the matter said.
The proposals presented to majority owner Khazanah Nasional Bhd will include taking the company private or allowing it to go bankrupt and then renegotiating contracts with the workers’ unions, said one of the people, who asked not to be named as the information is private. Khazanah, Malaysia’s sovereign wealth fund, owns 69.4 per cent of the carrier.
The carrier’s shares tumbled 11 per cent the day after Flight 17 was shot down, killing all 298 people on board. The incident came four months after the disappearance of Malaysian Air Flight 370 spurred the longest search for a missing plane in modern aviation history.
Asuki Abas, a spokesman for Khazanah, couldn’t immediately be reached on his mobile phone for comment. The Wall Street Journal reported yesterday that Khazanah was increasingly leaning toward taking the carrier private, citing unidentified people.
“Our focus during this very challenging time is to work with the emergency responders and authorities and mobilise full support to provide all possible care to the family members of those onboard MH17,” Malaysian Air said in an e-mailed statement. “This is not the right time to address this question.”
Khazanah said last month it had time to come up with a restructuring plan as the carrier has funds to last about a year. The fund is expected to make a decision on how to revamp Malaysian Air as soon as next month, said the people. Taking the company private remains the preferred option, rather than a bankruptcy, they said.
Malaysian Air, which has lost RM4.57 billion (US$1.4 billion) since the start of 2011, had been speeding up an overhaul of its business since the disappearance of Flight 370.
The Subang Jaya, Malaysia-based carrier last reported an annual profit in 2010. Malaysian Air missed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out the impact of revenue gains. Analysts project losses through 2016 for the airline, according to data compiled by Bloomberg.
The Ukrainian government has blamed the attack on Flight 17 on pro-Russian rebels in the country’s eastern parts.-- Bloomberg