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KUALA LUMPUR (February 22): Khazanah Nasional Bhd, the sole shareholder of Malaysia Airlines Bhd, has committed to injecting RM3.6 billion in new capital into the holding company of national airline Malaysia Aviation Group Bhd (MAG), to finance the group’s business until 2025.
Last November, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz was quoted as saying that Khazanah had injected a total of RM28 billion into Malaysia Airlines to date.
The latest commitment follows Malaysia Airlines’ 16 billion ringgit debt restructuring plan that was given the green light by the UK High Court today, and the deal will be completed early next month.
In a statement tonight, MAG said that the UK High Court has sanctioned a settlement scheme under Part 26 of the UK Companies Act 2006 between MAG’s leasing entity MAB Leasing Ltd and the majority of MAG’s aircraft lessors today.
“The scheme received unanimous support from the relevant lessors and represents an important component of MAG’s broader restructuring exercise, which will achieve a reduction in MAG’s liabilities of more than RM15 billion.
“This financial restructuring exercise, which is expected to end in early March, involves all key MAG stakeholders and, in addition to the scheme, will allow the airline to reach bilateral agreements with finance lessors, spare engine lessors, suppliers from maintenance services, lenders and government-related entities, “he said.
“Now that the scheme has been formally sanctioned by the UK court, the airline can proceed to implement its restructuring plan with the support of Khazanah and existing stakeholders,” he added.
Key elements of the restructuring so far include network outages, structural cost savings, cash preservation and deferral initiatives, which resulted in a savings of RM 5.5 billion in 2020. It is targeting another RM 397 million in savings for the first quarter of 2021.
Meanwhile, operating lessors supported the airline with a reset of lease rates to market and deferrals, while deferrals will also be implemented with finance and other lessors.
The lenders of the revolving lines of credit (RCF) and the hedging counterparties also agreed to a cancellation of the lines of credit, while the government-related entities have agreed to various concessions to enable a solvent recapitalization of Malaysia Airlines.
“The conclusion of the legal process together with the comprehensive reestablishment of the operating platform and the balance sheet have paved the way for a more agile and efficient future for the carrier, giving MAG space and capacity to fulfill its Long Term Business Plan improved (LTBP 2.0) and achieving its Vision 2025, “said MAG Group CEO Captain Izham Ismail.
“MAG’s long-term vision is to establish itself as a leading global travel group. This means a paradigm shift in the way we prioritize the different business segments and subsidiaries of the group’s portfolio.
“We seek to expand MAG’s involvement in other travel-related products and services beyond flights, which will go a long way toward helping our customers complete their end-to-end travel experience. Our geographic advantage, solutions and services award-winners plus Unique Malaysian hospitality will also help us diversify our revenue stream by minimizing the need for us to depend on the highly competitive air travel industry for survival, ”he added.
MAG says it will collaborate with policy makers to ensure a positive return on investment for all players in the aviation industry.
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