With recent disasters such as the March disappearance of flight MH370 and the July crash of flight MH17, the world is eager to see how Malaysia Airlines will recover. As an inevitable result of the disasters, the company has lost a substantial number of customers and money. Nonetheless, the airline as a whole had been losing money long before these disasters struck. Between 2011 and 2013, Malaysia Airlines lost 4.13 ringgit, the equivalent of $1.31 billion. With a fourth consecutive quarter loss predicted, Prime Minister Najib Razak is calling for major changes to take place within the company.
Thursday, the airline company reported a net loss of 307 million ringgit ($97.4 million), which is much greater than the 176 million ringgit lost in the same period last year. In order to prevent further losses and keep the company from going under, the Malaysian government plans to lay off up to a quarter of its workforce as well as cut some long distance flights. Among these layoffs is likely to be CEO Ahmad Jauhari Yahyas, as his term ends in September. Yahyas has received a great deal of criticism in the past for his lack of experience in the airline industry, as he was previously a CEO for a renewable energy company.
Fortunately for investors, the losses will not be a burden to bear for much longer. The sovereign wealth fund Khazanah Nasional plans to delist the company and make it private. Khazanah owns about 70% of the Malaysian Airline system, which is a parent firm of Malaysia Airlines. In the second quarter of this year, revenue fell 5% due to lower yields caused by the MH370 disappearance. This lessened revenue, in addition to a 2% marginal increase in costs, caused an overall net loss once depreciation, finance costs, and unrealized forex gains were taken into consideration.
Despite the recent pitfalls of Malaysia Airlines, its major competitor AirAsia is thriving. The company has bought about $13.75 million in new aircraft from Airbus and will be moving into new markets. July’s announcement of AirAsia partnering with Rakuten was a major success for the airline. In the partnership to create an affordable airline in Japan, AirAsia will take a 49% stake and inevitably make numerous gains. However, with the focus of Malaysia Airlines shifting to shortened flights, competition could heighten even more so between the two companies.
Malaysia Airlines' plan for revival is only the first step to recovery for the airlines. In order for a quarter of the 20,000 member staff to be successfully terminated, the substantial employee’s union will have to back the decision. In regards to a new CEO, a committee will be formed to seek out a qualified successor. Mohsin Aziz, an analyst for Mayback Investment Bank, voiced his disbelief in the company’s ability to survive. Earlier in the summer, he stated that the company would “largely exhaust all their capital and won’t have any money left to continue flying by the middle of next year”.