MoF: Govt not ‘saving’ any airlines to avoid bailout perception, hasn’t decided on Malaysia Airlines

AirAsia planes are pictured on the tarmac of the Kuala Lumpur International Airport in Sepang August 20, 2019. — Picture by Miera Zulyana
AirAsia planes are pictured on the tarmac of the Kuala Lumpur International Airport in Sepang August 20, 2019. — Picture by Miera Zulyana

KUALA LUMPUR, Nov 26 — The Malaysian government is not involved in plans to “save” any airline company to avoid being seen as giving bailouts or discriminating against rival airlines that do not receive such aid, the Finance Ministry has said.

In a written parliamentary reply yesterday, the Finance Ministry said it was committed to help all who have been affected by the Covid-19 pandemic, but indicated it is unable to help “save” airlines.

“For now the government is not involved in any plans to save any companies including commercial flight companies, since the government has to ensure any aid that is given especially from the financial aspect has a clear framework and objective to avoid discrimination occuring to other companies that are also affected by this pandemic.

“Besides that, financial assistance to any company will be considered as a bailout and will indirectly further affect the performance of other companies that are competitors and who did not receive financial assistance from the government.

“Furthermore, the government does not have any shares in any of those airline companies,” the ministry said.

The Finance Ministry went on to indicate that companies would have to work out their own recovery plans, stating: “Therefore, any proposals for the company’s financial recovery is subject to the consideration and approval of the board of directors and shareholders of the respective companies.”

The Finance Ministry was responding to DAP’s Seremban MP Anthony Loke’s request for the finance minister to state the type of aid that have been channelled to the country’s airlines that are currently facing a huge challenge due to the Covid-19 pandemic.

In responding to Loke’s question, the Finance Ministry also pointed out that the government is of the view that the giving of government assistance should be extensive and “not limited to airline companies only” in light of the extensive effect on the current economic crisis caused by Covid-19.

The ministry went on to list the assistance it has given through several economic stimulus packages worth a total RM305 billion, including a loan moratorium and the subsequent targeted loan repayment assistance.

The ministry also highlighted the Danajamin Prihatin Guarantee Scheme where government guarantee is provided for up to 80 per cent of the financing facility for companies seeking to raise working capital, with this facility available to all companies operating in Malaysia in all sectors including the aviation industry subject to the conditions.

The ministry said the government had also through Budget 2021 allocated RM50 million to train and provide placements for 8,000 employees of airline companies in Malaysia.

Airport staff works beside a Malaysia Airlines plane at Kuala Lumpur International Airport in Sepang July 22, 2019. — Reuters pic
Airport staff works beside a Malaysia Airlines plane at Kuala Lumpur International Airport in Sepang July 22, 2019. — Reuters pic

No decision yet on Malaysia Airlines’ fate

Separately, the Finance Ministry also responded to PAS’ Pasir Mas MP Ahmad Fadhli Shaari who had asked if the government would help Malaysia Airlines through capital injections to allow it to continue operating, and also responded to DAP’s Kampar MP Thomas Su who had asked the finance minister to state the direction of the Khazanah Nasional Berhad-owned airline and whether the government would consider recovery steps or closing down the airline’s operations.

In similar responses to the duo, the ministry said that there has been no decision yet to close the airline down, which is currently operating via Malaysia Airlines Berhad (MAB) which in turn is held by Malaysia Aviation Group Berhad (MAGB). MAB was set up in 2014 to take over the airline’s operations, assets and liabilities, while MAGB is fully-owned by Khazanah Nasional.

“To overcome MAGB’s and MAB’s financial problems, the government will hold further talks with Khazanah to determine the company’s direction particularly in strengthening its financial position and identifying the best strategic solution for the aviation group.

“The decision to close down or stop MAGB’s operations has not been made and depends on the outcome of MAGB’s negotiations with creditors and lessors for the company’s restructuring. At the same time, Khazanah’s management will also carry out the best effort to ensure the welfare of MAGB’s employees are taken care of, including, if necessary, payment of commensurate compensation that complies with labour laws,” the ministry said in its written parliamentary replies yesterday.

According to the Finance Ministry, Khazanah Nasional has to date injected RM28 billion into Malaysia Airlines, with MAGB’s current liabilities that are set to be restructured estimated to be RM16 billion.

In the data provided by the ministry for 2015-2018, MAGB has been making losses every year, namely losses of RM1.1 billion in 2015, losses of RM0.7 billion in 2016, and losses of RM1.2 billion (2017) and RM1.3 billion (2018).

As of August 31, 2020, MAGB’s liquidity is around RM366 million, apart from around RM578 million that is ready to be used out of funds allocated by Khazanah Nasional.

With the Covid-19 pandemic hitting the global aviation industry hard, Malaysia Airlines has also been affected, and is now operating with around 75 per cent of its aircraft unable to fly due to travel restrictions and had also seen its capacity and income being affected, the ministry said.

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