KUALA LUMPUR, Feb 24 — Malaysia Airlines’ (MAS) RM1.17 billion loss in 2013 despite a 9 per cent rise in revenue shows that the ailing flag carrier is saddled with “legacy issues” — despite a touted turnaround — that may require a drastic bankruptcy to jettison, Singapore’s Business Times said today.
The business daily said that the option may be needed for MAS to break out of the doldrums from which it has lurched to one after another, given that owner and national asset manager Khazanah Nasional has ruled out selling off the airline.
“Khazanah should come to terms with the fact that MAS, as it is with its current cost structure, cannot hack it. Its only option is to close it under creditor protection,” it wrote in a commentary piece on the Malaysian carrier today.
Pointing out that MAS is bogged down by overstaffing and “lopsided procurement contracts” that run the gamut of operations — from maintenance to catering — the BT said filing for bankruptcy under Section 176 of the Companies Act would allow its replacement the fresh start it needs to resuscitate the airline.
The business paper highlighted the cutthroat competition MAS is facing both in Malaysia and from abroad, with new budget carrier Malindo Air now joining AirAsia in whittling away at MAS’s profits.
“For MAS to succeed, it must be given every opportunity to compete on a level playing field. Overstaffing, ridiculous union demands and outlandishly skewed procurement contracts are the financial equivalent of having to fight with one hand tied behind one's back,” the BT added.
It added that there was “no shame” in the route, noting that it was employed successfully by Japan Airlines (JAL) in 2010 when it was able to turn around its fortunes in six months.
Last Tuesday, MAS announced a worse-than-expected fourth quarter result for 2013 that saw it rack up another RM343 million in losses, putting the airline RM1.17 billion in the red for the entirety of 2013.
In 2011, it chalked up a record loss of RM2.5 billion.
The result led investment houses to recommend to downgrade shares in MAS to “Sell”, forecasting that the nation’s flag carrier was headed for further turbulence.
In 2005, it underwent a business turnaround plan under Datuk Seri Idris Jala, now minister in the Prime Minister’s Department in charge of the country’s economic performance, which reversed the losses that traced back to the 1997 Asian Financial Crisis.
But despite the publicised turnaround, the airline soon fell back into the red and registered its worst loss in 2011.
In the same year, MAS carried out controversial share-swap with rival AirAsia that was brokered by Khazanah, which was later unravelled following vociferous complaints from lawmakers, airline employees and consumers.
The deal was also ruled to be unlawful by the Malaysia Competition Commission (MYCC) last September, when it fined both airlines RM10 million each under the Competition Act 2010.
MAS is also facing a protracted battle with new employees union, Nufam, which has threatened to picket the airline over alleged union-busting tactics.
The airline’s shares closed on Friday at 28 sen.