Malaysia Airlines shareholders approve nationalisation plan

Malaysia Airlines shareholders approve nationalisation plan

Malaysia Airlines' shareholders today voted to approve a takeover bid by Khazanah Nasional, paving the way for the nationalisation of the airline.

However, the proposal still needs to be vetted by the High Court of Malaysia before the buyout can proceed.

The move comes as part of an upcoming dramatic restructure of MAS including a 30% cut to its workforce – representing 6,000 workers – in a drive to return the airline to profitability by 2017.

Cuts to international routes are on the cards, with MAS rationalising its network towards a regional focus while relying on partners, including fellow members of Oneworld, for connections further afield.

The carrier will now focus on its local Asian routes and rely on its Oneworld partners to fly passengers in from Europe and elsewhere.

Once the transaction takes place, MAS will also disappear from Malaysia's stock exchange, with the company being delisted by the end of 2014 if the motion receives High Court approval.

The 'new MAS' will receive A$2 billion from 2014 to 2016 for the ambitious transformation.

The overhaul follows a A$104.3 million quarterly loss posted by the airline earlier this year.

PREVIOUS | Malaysia Airlines will be taken into full private ownership as part of a plan to turn the airline around in the wake of the MH370 and MH17 disasters.

The proposal could also see Malaysia Airlines rebranded to help rebuild public confidence.

MAS' state-run parent Khazanah Nasional already holds 69.4% of the airline, and will buy the remaining 30.6% of shares for an estimated $470 million in an effective state take-over.

The airline would then be radically restructured to improve cash flow.

"We reiterate that the proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier on all relevant aspects," Khazanah said in a statement.

"Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity."

Malaysia Airlines was in dire financial straits before the loss of flights MH370 and MH17.

The airline has racked up debts approaching $1.5 billion since 2011 and earlier this year analysts were not expecting Malaysia Airlines to break even until 2016.

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David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
 

32 comments

  • P.B.

    mr_pb

    8 Aug, 2014 01:22 pm

    It sure will be an interesting few weeks to see what direction Khazanah Nasional takes to restructure the company. A transformation to an LCC model? Courting a merger with AirAsia? Or will they double down on the full service flag carrier model using govt funds (highly unlikely)?

    It seems like AusBT has plenty of MH loyalists - let's see if the airline will still be appealing after the restructure.

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  • sagidec

    sagidec

    8 Aug, 2014 01:29 pm

    Speculation:

    1. International Operations
    2. Domestic Operations
    3. Enrich Program
    Thinking this could be the option, based on what we've seen in lots of airlines structure. They could even consider bringing Enrich to be on par with American Airlines style of winning loyal members, international partnerships and earning money on their frequent flyer program as funding for operations.
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  • watson374

    watson374

    8 Aug, 2014 01:33 pm

    Aha, I see it's Turnaround Plan time.

    MH has had so many turnarounds it's going around in circles. Hopefully this will be the one to set it free.

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  • Robert Eden

    reno
    Banned

    8 Aug, 2014 01:41 pm

    The appear to be going the way QANTAS.

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  • Lifestobelived

    Lifestobelived

    8 Aug, 2014 01:52 pm

    Sheeesh, its not that bad is it?!?!?!  :)

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  • Bert_Hinkler

    Bert_Hinkler

    8 Aug, 2014 02:27 pm

    I thought it was past it's Point of No Return.

    Who will invest?

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  • watson374

    watson374

    8 Aug, 2014 02:30 pm

    Expect a lot of two things: the Malaysian government getting the debt written/paid off (think BA when HM Government flogged it off), and/or everything being shunted sideways into a regional subsidiary that 'becomes' a new carrier (think Swiss when they went under and came back as SWISS).

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  • SaltyJ

    SaltyJ

    8 Aug, 2014 02:39 pm

    Swiss to SWISS, it's brilliant!

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  • P.B.

    mr_pb

    8 Aug, 2014 02:45 pm

    SWISS is an interesting case study, especially compared to MH's potential future. While SWISS did get back up their feet financially, it's a completely different airline through and through - it could be argued that the airline lost a lot of its soul during the rebirth.

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  • P.B.

    mr_pb

    8 Aug, 2014 02:45 pm

    SWISS is an interesting case study, especially compared to MH's potential future. While SWISS did get back up their feet financially, it's a completely different airline through and through - it could be argued that the airline lost a lot of its soul during the rebirth.

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  • Robert Eden

    reno
    Banned

    8 Aug, 2014 02:45 pm

    Are you serious.Why would any carrier invest in Qantas.The carrier is of no value other than flying  P class Tranpacific.

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  • watson374

    watson374

    8 Aug, 2014 02:48 pm

    This is about MH, not QF!

    SWISS is a good case study of how to revive an airline that has had a stake run through it. MH can be fixed, and the crashes won't stain them forever - look at all the carriers that have had brutal crashes and still fly today, e.g. all three big stateside legacies, KL, AF...

    But this is the time for them to do the 'deep clean' they've needed for decades.

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  • Bert_Hinkler

    Bert_Hinkler

    8 Aug, 2014 05:12 pm

    What about Pan Am? rest it soul

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  • whipper

    whipper

    29 Aug, 2014 06:41 pm

    Robert, QF made a domestic profit last year, Virgin didn't.  Their FF program isn't being sold off - Virgin's is... I know which airline I would stand behind...   

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  • TheRealBabushka

    TheRealBabushka

    8 Aug, 2014 03:02 pm

    Trivia of the day: When is Privatisation not Nationalisation?

    It is when the buyer is not the government only in name! It's Salomon v Salomon all over again! Hurrah for the veil of incorporation!

    N.B: 

    1. Nationalisation may occur with or without compensation to the former owners.
    2. Khazanah is the investment holding arm of the Government of Malaysia, incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company.

    Source: Wikipedia

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  • Robert Eden

    reno
    Banned

    8 Aug, 2014 03:15 pm

    I am glad you said Khazanah.and they have holdings in others carriers.Well done.And khazanah is alive and well.

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  • moa999

    moa999

    9 Aug, 2014 06:07 pm

    Khazanna is paying for the shares it doesn't own (and paying a premium to the current market value)...

    A classic nationalisation is we are taking all of your shares and not paying you for them, and if you complain we will also lock up your management etc

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  • woganfan

    woganfan

    8 Aug, 2014 06:17 pm

    I hope MH survive, privatised or not.  BA had massive restructuring after privatisation, as did most former nationalised companies.  However, MH are beyond bad luck as one media outlet put it.  To loose an aircraft is tragic and unlucky, to have another brought down by some of Putins goons less than six months later is just despairing as well as tragic.  MH surviving would be good and excellent for 1W.  But whatever happens my thoughts go to all the families of people on both aircraft and hope they find some way to assuage the anguish of their loss.

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  • Serg

    Serg

    9 Aug, 2014 12:19 pm

    And who told you that it is “Putins goons” fault? Perhaps Poroshenko goons? Up until now no-one knows what exactly happens to the plane and matter of fact that Ukrainian forces start fire effectively prevent commission to work. And matter of fact those “Putin goons” not benefits at all from disaster (actually quite on the contrary) and even if they shoot the plane (my odds they did it by mistake aiming on Ukrainian military plane that reportedly flying nearby), it was terrible accident and not planed act. From other hands Ukrainian forces indeed benefits from disaster because it became easier for them to take control over territory where the plane went down. For thinking mind it should arise quite a few questions.

    But how you say it regardels what happens I am with you on one thing - all my condolences to families from both unfortunate planes. Also hope that MA eventually recovers.

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  • TheRealBabushka

    TheRealBabushka

    9 Aug, 2014 02:47 pm

    Wow. You're buying the Russian spin on this? Interesting...

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  • Serg

    Serg

    9 Aug, 2014 03:32 pm

    I reading and listen to IN ORIGINAL English, Russian and Ukrainian news. Also I have plenty of relatives and friends in Ukraine and Russia to whom I am talking to. Believe me it is not as black and white as State Department like you to believe to.

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  • woganfan

    woganfan

    9 Aug, 2014 09:21 pm

    Serg, just to clarify I never said in my statement that Putins goons deliberately brought down MH17. In fact, evidence suggests that it was a case of wrong aircraft wrong time but also the evidence suggests that Russian backed separatists were behind the disaster and Putin is supplying hardware to them, hence calling them Putins goons.  And while the state tempt is not squeaky clean, I will listen to them more than Russia Today, as does my lady friend originally from Donetsk, and her family. 

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  • Serg

    Serg

    9 Aug, 2014 11:40 pm

    Wogafan, my post was about that there is no evidence that “Putin goons” shoot it down. As well as no otherwise. However US order their civilian aircraft not to fly over Ukraine since the beginning of the crisis. You may call it coincidence.

    PS it is funny to see minuses in my posts – zomby-box indeed zombing people. LOL.

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  • Scott Wilson

    Libertyscott

    8 Aug, 2014 08:00 pm

    It is being nationalised, not privatised.

    It is being taken off of the stockmarket and its private shareholders bought out by a state owned investment firm.

    Hardly surprising, as who would buy it on a commercial basis?

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  • Merc25

    Merc25

    8 Aug, 2014 08:53 pm

    I wish them good luck during there restructure as they were a great airline and I think the fist 5 star airline or one of the first .it would be sad for them to disapare through no fault of their own!!

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  • aaflyer

    aaflyer

    9 Aug, 2014 12:21 am

    fix your headline, please.    privatisation is when the government sells off a property, not when they take one out of private citizens' hands completely.

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  • TheRealBabushka

    TheRealBabushka

    9 Aug, 2014 02:39 pm

    That is the spin the Malaysian Government is going with. Nationalisation sounds very bad and anti-business. But we all know what they're really doing.

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  • GregXL

    GregXL

    30 Aug, 2014 09:51 am

    If MH is going to quit their LHR and CDG routes, will they have 6 near new A380s on the market ?  QFi?  A shame that MH staff will be faced with job losses after the tragedies of 2014.

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  • eminere

    eminere

    31 Aug, 2014 01:15 am

    I certainly hope they don't exit LHR and CDG!

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  • GuyBetsy

    GuyBetsy

    1 Sep, 2014 08:38 am

    Its going to be hard for MH to rely on OW partners to fly passengers from Europe to KUL as BA/QF don't fly there, and although QR does, people may be more inclined to fly them through to/from Australia. It will be sad to see MH being relegated to a regional carrier. I think MH should keep at least LHR and CDG as these flights are quite full throughout the year and are best suited for the A380. Sad that AMS and FRA might go even though the former is generally full throughout the year.

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  • abudhabi1

    abudhabi1

    7 Nov, 2014 08:58 am

    will Australian to Kuala Lumpur services be staying?

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  • charlieg

    charlieg

    7 Nov, 2014 10:52 am

    I should certainly hope so! However wouldn't be surprised if ADL gets dumped - the A330 is often very empty on both sectors.

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