Malaysia Airlines failed to break even last year because Malaysians prefer budget airlines, Khazanah managing director says

Khazanah managing director Datuk Shahril Ridza Ridzuan said at a financial briefing that the airline failed to break even last year, adding that continued investment in MAS would have to be carefully considered given this failure.

Malaysia’s national carrier isn’t doing so well.

The airline accounted for half of the RM7.3 billion impairments reported by sovereign fund Khazanah Nasional Bhd in its recent financial briefing, the New Straits Times (NST) reported on Wednesday (Mar 6).

In finance, an impairment means that the market price of an asset is less than the value figure listed by the company.

Malaysia Airlines (MAS) was privatised under Khazanah, which set a five-year turnaround goal for the airline in 2014, NST said.

In a separate report, NST added that the fund had since injected RM6 billion into the airline, of which RM1.6 billion was used to delist the carrier from the stock exchange, and another RM1.6 billion was spent on restructuring and retrenchment.

Bernama reported previously on Mar 1 that MAS had had a “challenging 2018” and suffered losses due to crew shortages, “intense” competition, and volatile fuel and forex prices.

The company did not disclose its exact loss figure, the report added.

NST quoted Khazanah managing director Shahril Ridza Ridzuan as saying at the briefing that the airline had failed to break even last year, adding that continued investment in MAS would now have to be carefully considered.

The Government will review the airline’s financials before deciding on its fate.

According to NST, Shahril cited “overcapacity and oversupply in the aviation industry”, and Malaysians’ preference for low-cost carriers, as the primary reasons MAS failed to take off.

Calling the airline industry “brutal”, he added that Malaysia had fewer business travelers than countries like Singapore and Hong Kong, as well as a “small population” of just 30 million.

According to an aviation expert, other major issues were MAS’s “internal management troubles” and the loss of two planes, including the high profile MH370, NST said in a third report published on Thursday (Mar 7).

According to NST, Malaysia’s flight attendant union (nufam) had submitted “many” proposals pointing out the problems plaguing the airline, but none of them had been acted upon, nufam president Ismail Nasaruddin said.

He added that the union was “not shocked” by the state of the MAS’ finances.

“We relayed our concerns about MAS’ problems in the past, and many of them have been proven correct,” he added.

According to NST, an MAS spokesman said that the airline was currently “in discussions” with stakeholders and management about rolling out the second phase in its turnaround plan this year.

Source : BusinessInsider