KUALA LUMPUR, Oct 26 – Plugging leakages is one of the measures that can save Malaysia Airlines, even as the airline prepares for a milestone Extraordinary General Meeting (EGM) for minority shareholders on November 6, says Tan Sri M. Kayveas, Special Advisor to the Minister of Transport.
“The system now gives too much of privileges to people who have been there too long. These leakages and privileges make MAS unprofitable,” said Kayveas who is also President of the People’s Progressive Party (PPP).
With the complex situation that has plagued MAS coupled with the twin air tragedies, Kayveas pointed out that it had become the “responsibility and duty” of the government of the day to turn the national carrier around and restore it to its former glory. MAS posted a net loss of RM1.3 billion for the financial year ended Dec 31, 2013 (FY13). It reported a net loss of RM443 million for the first quarter (Q1) of FY14, and a net loss of RM307 million for Q2 FY14.
At the upcoming MAS EGM, minority shareholders will vote if majority shareholder Khazanah Nasional Bhd can take over the balance 30.4 per cent of MAS shares it does not own, so that Khazanah can infuse fresh capital to put restructuring plans in place to revive the ailing airline, without exposing minority shareholders to the vagaries of the restructuring exercise.
The minorities’ acceptance of Khazanah’s 27 sen offer price will pave the way for the delisting of MAS, allowing Khazanah to take full ownership of the national airline. This will give greater flexibility to execute MAS restructuring plan, as well as putting in place an appropriate capital structure to address the company’s substantial funding requirements for the next few years to sustain its operations.
Clear targets have been laid down in the restructuring plan, including returning to profitability by end-2017 and thereafter relisting by end-2019. Given the current scenario that MAS is in, delisting is the best way to ensure fairness to minorities who are offered an opportunity to exit at a premium to prevailing market price.
The minorities are then not open to the associated risks and uncertainties when MAS executes its restructuring, which the minorities have very little control over. Kayveas said that MAS is a national carrier, just like 90 per cent of airlines globally, and it was crucial for it to survive and remain in service.
“So it is not bailing out nor pumping in more money. (MAS) is a national pride, it has to be done, just like we need roads, trains and Mass Rapid Transit.” Kayveas, who had previously served MAS for 16 years, added, “We need some new innovative ideas to moving MAS forward and a new entity is needed.” However, he noted, saving MAS was not an industry anomaly.
“MAS is not the first in the airline industry nor aviation world to face this. Many airlines have gone through and overcome worse situations than MAS. Japan Airlines had to close down the old airline and transfer assets and form a new company,” he said.
MAS in its circular dated Oct 15, 2014 had called for the minority shareholders to accept majority shareholder Khazanah’s 27 sen offer price as the airline’s revival plan is contingent upon acceptance of this RM1.38 billion privatisation. From July 1, 2015, MAS will become a new company (NewCo), where it would sign contracts with suppliers on terms that are fair and takes into account its financial difficulties.