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Carrier says it told aircraft lessors, creditors and suppliers that it is conducting an urgent restructuring exercise.
Malaysia Aviation Group, the holding company for Malaysia Airlines Berhad, said in a letter to the lessors that the group is unlikely to be able to make payments due after November unless it receives more funds from the state Khazanah fund.
The letter, reviewed by the Reuters news agency, follows a request by the troubled airline for deep discounts on jet rentals from its lessors as part of a comprehensive restructuring plan, three sources with knowledge of the matter said.
Malaysia Airlines later confirmed in a statement on Friday that it had reached out to its key lessors, creditors and suppliers recently as it embarked on an urgent restructuring exercise.
According to the letter, the aviation group was experiencing “an average monthly operating cash burn of $ 84 million,” but only had $ 88 million in liquidity as of Aug. 31 and an additional $ 139 million available from Khazanah, its sole shareholder.
“Based on the current execution rate, without further funding from shareholders, it is likely that the group will not be able to meet its obligations, including payments to lessors, after November 2020,” he said.
The letter was sent to the landlords last month, but the exact date was not immediately clear.
Khazanah, the country’s sovereign wealth fund, said it supported the airline’s restructuring efforts, but if they are unsuccessful, it will have to weigh options on how to maintain connectivity for Malaysia.
Malaysia’s national airline has struggled to recover from two tragedies in 2014: the mysterious disappearance of Flight MH370 and the downing of Flight MH17 over eastern Ukraine.
Khazanah took the company privately that year as part of a $ 1.5 billion restructuring program, but efforts to turn its business have been further affected by the coronavirus pandemic.
‘More drastic measures’
Malaysia Airlines said its current plan was “highly dependent on individual contributions from all relevant stakeholders to support the group.”
“This restructuring exercise is expected to be completed in the coming months. However, if that result is not possible, the group will have no choice but to take more drastic measures, ”he said.
The sources told Reuters that Malaysia Airlines plans to negotiate the big discounts with its lessors through a restructuring plan that it is trying to implement through court proceedings in the UK.
The sources declined to be identified due to the sensitivity of the matter.
In addition to Malaysia Airlines, the group of holding companies includes other companies and local entities involved in aircraft leasing and ground handling services.
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