Date
18 August 2017
Malaysia Airlines has been suffering financially for the past three years. Photo: AFP
Malaysia Airlines has been suffering financially for the past three years. Photo: AFP

Malaysia likely to speed up plans to nationalize flag carrier

This is the worst year for Malaysia Airlines. It has lost two Boeing 777 aircraft within a space of four months. The two tragic events have affected customers’ confidence in the airline. The company itself has been experiencing financial distress for the past years. The Malaysian government is likely to speed up its nationalization and restructuring in a bid to cut its losses.

In fact, some quarters are suggesting that Thursday’s horrific incident may be linked to the flag carrier’s financial problems. Before it happened, airline companies have received warning that it might be dangerous to fly over eastern Ukraine in view of the hostilities in the area. However, it is possible that Flight MH17 chose to fly above the danger zone in order to save fuel, according to some British media reports.

All 298 passengers and crew aboard Flight MH17 were killed when the plane was shot down as it was flying near the border of Ukraine and Russia on Thursday. The company’s stock lost 11.1 percent in Friday’s trading session on the Malaysia Stock Exchange. The carrier has lost over 35 percent of its market value since the start of this year.

The disappearance of MH370 in May has already placed huge financial pressure on the carrier. Demand for Malaysia Airlines tickets has significantly dropped since the plane went missing, forcing the company to offer budget carrier prices while bearing the costs of a full-service airline. The crash of MH17 would only further dampen the demand.

Even without the two tragic incidents, the airline’s prospects looked grim. The airline had been suffering financially for three years before the loss of MH370.

For the first quarter this year, the airline posted a net loss of 444 million ringgit (US$138 million), the deficit widening by 72 percent from the preceding quarter.

Earlier this month, it was reported that Malaysian state investment fund Khazanah Nasional Bhd planned to take the flag carrier private as the first step in a major restructuring of the airline.

In fact, the state fund is already the airline’s largest shareholder, holding a little less than 70 percent of the company.

This is not the first time the government has planned to nationalize the airline, but the proposal has been facing strong resistance from the union, which warns of its huge impact on domestic employment.

But the latest tragedy has made the nationalization plan even more urgent and inevitable. The state fund may spin off the profitable businesses such as engineering, airport services and budget airlines, trimming the payroll and installing a new management team, according to Reuters.

Related stories:

Blood on rebel hands?

MH17: Deep shock, a tragic day, a tragic year

Hong Kong man, Malaysian wife aboard MH17

Malaysian airliner ‘shot down’ in Ukraine war zone, 298 dead

– Contact the writer at [email protected]

CG

EJ Insight writer

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