KUALA LUMPUR: Khazanah Nasional Bhd has accounted for half of its whopping RM7.3 billion impairments registered last year in sustaining Malaysia Airlines Bhd (MAS).
The country’s sovereign wealth fund recorded a pre-tax loss of RM6.3 billion last year, bogged down by higher impairments, lower dividend income and fewer divestments.
MAS was taken private by Khazanah as part of a five-year turnaround programme, which began in 2014.
"The key question on MAS is actually what is an acceptable cost to the government to maintain the benefits of MAS and its spinoff to other tax receipts from the tourism industry, connectivity, businesses and economic activities.
"However, that is not to discount the fact that MAS should be operating as efficiently as it possibly can but we all know that the airline industry is a brutal one,” Khazanah managing director Datuk Shahril Ridza Ridzuan said at a briefing on the fund’s 2018 results yesterday.
"As a shareholder, we think that the important question to be asked is whether every dollar spent on MAS is generating other economic benefits to the country, which the government needs to answer to determine the right level of support for the airline," he added.
On MAS’ missed target to break even last year, Shahril Ridza said it was waiting a review on the national carrier and leaving it to the government to decide the airline’s fate.
He, however, said it was wise to think whether it would make sense for Khazanah to continue investing in MAS as the latter did not meet its objective.
"Overcapacity and oversupply in the aviation industry is an issue in a country with a small population of 30 million people.
"We are also not a financial hub such as Singapore and Hong Kong, which carry a high proportion of business travellers. The Malaysian consumer market had also gravitated towards low cost travel and those are the realities.
"So we are waiting for them (MAS) to complete the review and we will then decide on the strategies and support required and whether the government wants to continue the investment," he said.
On Telekom Malaysia Bhd, he said it may need time to rebound from the regulatory change in consumer pricing and restructure its costs to cater to the new consumer pricing.
Shahril Ridza said profitability may return once TM had adjusted to the new pricing.
"TM's substantial fall in market value was due to the change in regulatory environment where there was a sudden shift to drive down consumer price as soon as possible.
“Therefore, the affected companies will take time to restructure their costs and cater for the new revenue base and reflect the lower consumer prices. For TM, it will have to work on its cost strategies in order to have reasonable profit margin. For regulators, it is also important to ensure that businesses have enough incentive to invest in the industry," he added.
Among Khazanah’s strategic businesses, TM registered the biggest drop of 56.9 per cent or RM3.5 billion in net worth adjusted.
Meanwhile, Shahril Ridza said it was up to PLUS Expressway Bhd to handle discussions with the government in regards to the latter’s decision to abolish tolled highways.
“From our point of view, we understand part of the reasons that the priority right now is the fact that some of those highways (negotiated by the government) basically are perceived to be ones causing the public’s difficulties in the sense that those highways (have) no alternatives.
“PLUS by comparison has plenty of alternatives for users to think about. You don’t necessarily have to use PLUS. We actually see people making choices whether they want to use PLUS and pay for the convenience or basically use the upgraded roads,” he added.