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An airline merger or bailout is no longer possible, as airlines are prioritizing their own survival.
by AZREEN HANI & RAHIMI YUNUS / photo by TMR FILE
INVESTORS ‘interest in national carrier Malaysia Airlines Bhd (MAB) has dried up as would-be rescuers fight for their own survival due to a global decline in air travel due to the coronavirus pandemic.
At the beginning of the year there were nine suitors to take over the beleaguered MAB, but today these offers “are no longer viable,” according to a source with knowledge of the matter.
“An airline merger or bailout is no longer possible as airlines are prioritizing their own survival,” the source said. The Malaysian Reserve (TMR).
“There is no new interest from others as well. It’s all about your own survival now. For now, no (offer). Who in their right mind would do it?
The Air Transport Action Group estimated that 46 million jobs are at risk due to the loss of connectivity caused by the Covid-19 crisis. The vast majority of these (41.2 million jobs) are in the travel and tourism sector, which relies on aviation. The remainder (4.8 million jobs) is distributed between direct employment in aviation, including airports and airlines.
Earlier this year, Khazanah Nasional Bhd, the sole owner of MAB, said it received nine proposals and had shortlisted four operators vying to take over the flag carrier.
Among the firms said to have participated were Air France-KLM SA, Japan Airlines Co Ltd and national airlines AirAsia Group Bhd and Malindo Airways Sdn Bhd.
There have been no updates from Khazanah since April, when it was reported that he had turned down a $ 2.5 billion (RM10.38 billion) offer from Golden Skies Ventures Sdn Bhd.
A MAB spokesperson declined to comment when contacted, but said the matter was at the shareholder level.
The lack of suitors has put MAB’s survival back in the hands of the government, analysts said.
Sobie Aviation Pte Ltd analyst and consultant Brendan Sobie said that virtually all airlines that were considering acquiring any other airline prior to the Covid-19 pandemic have left all considerations on hold.
“The focus is now on restructuring the MAB as it should be. If the restructuring at MAB is successful, avoiding MAB having to shut down and the airline restart under Firefly (FlyFirefly Sdn Bhd), Khazanah can then consider what’s next in terms of capital infusions and eventually see a sale again, “he said. Sobie. TMR.
Another analyst said would-be suitors would naturally be better off if they didn’t buy MAB because there is no visibility of government help to save the airline.
“Why would they take that risk? There are so many uncertainties. The biggest question is whether the government will save MAB or not, ”said the analyst who requested anonymity. TMR.
If anything, the analyst said, potential buyers would want to acquire MAB at a bankruptcy value, or else creditors would seek them out as new owners.
“Technically, a new owner would have to clean up the mess at MAB. Why would anyone want to be in such a situation? It could also buy another airline that is likely to have a better value in terms of government support and recovery, ”the analyst added.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz recently reiterated that the government would not provide more cash to MAB and that it was the sole shareholder of the airline, Khazanah, who should make the decisions.
Malaysia Aviation Group (MAG), MAB’s holding company, had warned the leasing companies that Khazanah would stop financing the group, forcing it into a liquidation process if restructuring talks with the lessors failed. Reuters had reported.
MAG has raised the stakes in negotiations for a financial restructuring known as “Plan A” and has established an alternative plan to divert funds to a sister airline, Firefly, according to a document spotted by Reuters.
In a “Plan B” scenario, it was said that Khazanah “would inject funds into Firefly directly to start new jet operations at KL on a much smaller scale, focusing first on domestic services.”
MAB said in a statement earlier that it had contacted its key lessors, creditors and suppliers recently when the company embarked on an urgent restructuring exercise that included reworking the network and fleet plans; and a comprehensive restructuring of MAG’s business and capital structure.
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