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Malaysia Airlines has plans to close if the lessors do not accept its restructuring offer. The deadline for accepting the restructuring plan is Sunday, which means that we may soon know the fate of the airline. The sole owner of the airline has also said that it will no longer finance the troubled airline if the plan is not approved. So will Malaysia Airlines survive?
The financial situation reaches a critical point
Malaysia Airline’s financial problems date back to the current crisis. The airline had been operating at a loss for a while and was expected to need nearly $ 5 billion to continue operations through 2025. However, the pandemic has decimated the business of the ailing flag carrier, with bookings falling rapidly and the airline burning a staggering $ 84 million every month.
Last week, the owner of the airline, Khazanah, said that he intends to stop financing the airline and plan an alternative airline if Malaysia cannot restructure. This has caused the airline to struggle to approve its restructuring plans by creditors, who would also see it renegotiate contracts with aircraft lessors.
Malaysian CEO Izham Ismail is quoted in The Edge Malaysia as saying this week that the operator will have no choice but to shut down unless the plan is approved, according to Bloomberg. He also added that the airline has considerable support, but needs to switch a few more hesitant creditors to approve the restructuring plans.
However, according to Reuters, a major group of creditors has rejected Malaysia’s plans, calling them “fatally flawed”. Claims from this group comprise nearly 70% of the airline’s lessors, which could spell trouble for Malaysia Airlines. Khazanah has a plan if the airline closes, known as “Plan B”.
Plan B to go into effect
Malaysia Airlines parent company Khazanah has a plan to ensure continuity of air operations. If the airline fails, Khazanah will put Malaysia into liquidation and transfer its Air Operator Certificate (AOC) to another airline. This airline would then fly the essential air routes as needed.
Time seems to be running out for Malaysia Airlines as it struggles to stay afloat without rescue from its owner. The airline is reportedly asking for a 75% discount on its leases, an exceptionally high figure. If this is true, it is unlikely that landlords will back such an arrangement that would only result in losses.
Malaysian carriers in trouble
The flag carrier is not the only Malaysian airline in trouble. Asian low-cost giant AirAsia is also in talks to restructure its long-haul subsidiary AirAsia X. This decision comes just days after the airline closed its subsidiary in Japan and plans to cut its 24,000 staff by 10% soon. .
The next few days will be critical for Malaysia Airlines as it tries to avoid liquidation. The crisis also underscores the importance of a strong balance sheet or generous state aid in this recession. We will make sure to keep you informed of any developments in the agreement.
What do you think about the future of Malaysia Airlines? Will the carrier survive this crisis? Let us know your thoughts in the comments.
