KUALA LUMPUR, Aug 25 — The restructuring of Malaysia Airlines (MAS) will put to test Datuk Seri Najib Razak’s resolve in finally weeding out ineffective government-linked companies, which are emblematic of the country’s over-reliance on a decades-old system of economic patronage, Financial Times (FT) said.

Citing a source close to Khazanah Nasional Bhd, the sovereign wealth fund currently undertaking MAS’s turnaround, FT said the twin tragedies of MH370 and MH17 had paradoxically provided an unexpected incentive to tackle the airline’s troubles.

“It provided a burning platform for us to do something,” the source was quoted saying.

Quoting analysts, FT said although MAS is not a typical government-linked entity, having been exposed to the harsh standards of the international aviation industry, the flag carrier has been susceptible to “some of the mismanagement associated with government influence”.

“The way the government has overseen Malaysia Airlines, with all its inbuilt inefficiencies and crony contracts, is a microcosm of the entire system in Malaysia,” said Monash University Malaysia’s political science professor James Chin, as quoted in the international business daily.

FT said interviews in Kuala Lumpur with former MAS employees, analysts and bankers had revealed that those who have led the ailing carrier were either government-anointed figures, or those who ended up succumbing to pressure from the airline’s Umno-linked unions.

The daily also quoted Maybank’s aviation analyst Mohshin Aziz as saying that the so-called mismanagement of MAS is comparative to that of national carmaker Proton, which was set up in the later 1980s by former prime minister Tun Dr Mahathir Mohamad.

“They (Proton) never had any incentive to upgrade themselves,” Mohshin told FT, as the carmaker relies heavily on bumiputera contractors and has struggled to maintain quality control.

But, FT pointed out, Najib has made tackling inefficient GLCs the cornerstone of his rule.

In the early stages of Najib’s administration, the daily said, Putrajaya had insisted that the government needs to rationalise its involvement in GLCs to avoid crowding out the private sector. Putrajaya has since exempted some service sector businesses from the 30 per cent bumiputera participation requirement.

However, according to the daily, the government has only managed to divest from 15 out of the 33 targeted GLCs so far since the launch of the initiative by former prime minister Tun Abdullah Ahmad Badawi in 2004.

In MAS’s restructure, however, Najib has been given yet another opportunity to prove his reform pledges, the daily said.

On August 8, Khazanah ― which is the majority shareholder of MAS ― offered RM1.4 billion to buy out all the minority shareholders and privatise the airline.

Putrajaya’s investment arm said it would need six to 12 months to completely overhaul MAS, with a final restructuring plan to be unveiled at the end of this month.

Bloomberg reported today that Khazanah was considering job cuts, a review of aircraft orders and replacing its CEO Ahmad Jauhari Yahya, whose term is due to expire in mid-September.

But FT said these steps would pile pressure on the government to smooth over relations with MAS’s unions, “which have insisted that any restructuring start with the replacement of top management”.

Maseu airline union’s executive secretary told the business daily, however, that his members are “not against” these staff cuts.

However, he said the MAS management “must prove why and where they want to cut”.

A loss of between 2,000 and 2,500 jobs might be acceptable, he was quoted saying.

Jabbarullah observed that the same number of employees were culled when MAS came under the leadership of Datuk Seri Idris Jala. But after the latter’s exit, his successors rehired just as many.

“Why couldn’t they [management] control the situation? This is why we appeal to the government this time to ensure the airline has a strong leader and to consider appointing people who really understand the industry,” Jabbarullah reportedly said.

“This time hopefully the prime minister will listen.”