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Malaysia Airlines’ Survival in Doubt, Says CEO
‘There’s no choice but to shut it down’ if skeptical landlords reject restructuring plan
Malaysia Airlines planes are seen parked at Kuala Lumpur International Airport on October 6 (Reuters Photo)
KUALA LUMPUR: Malaysia Airlines will have to close if its lessors decide not to back its latest restructuring plan, the airline’s group chief executive said on Saturday.
A group of leasing companies has rejected the airline’s restructuring plan, bringing the state airline closer to a showdown over its future, Reuters reported on Friday.
Malaysia Airlines group chief executive Izham Ismail said the group “would have no choice but to shut it down” if the lessors decide not to back the restructuring plan.
“There are creditors who have already agreed. There are others who are still resisting, and another group still 50:50, “Izham said in an interview with The edge weekly newspaper.
“I need to get the 50:50 (on board) with which they have agreed. I understand that a considerable number of creditors have agreed “
Izham said the plan was to restructure the airline’s balance sheet for five years, breaking even in 2023 assuming demand in domestic and Southeast Asian markets returns to 2019 levels for the second and third quarters. of 2022.
The plan will also require a fresh injection of cash from its main shareholder, the state fund Khazanah Nasional, to help the airline over the next 18 months.
Malaysia Aviation Group (MAG), the airline’s parent company, did not immediately respond to an email from Reuters seeking comment.
Lessors who claim to represent 70% of the planes and engines leased to the group have called the plan “inappropriate and fatally flawed” and vowed to challenge it, according to people familiar with the matter and a letter from a London law firm seen by Reuters.
However, some leasing companies backed the plan, said one of the sources, who declined to be named due to the sensitivity of the matter.
The Clifford Chance law firm, which sent the letter on behalf of the landlords, did not respond to a request for comment.
In an email to Reuters, Malaysia Aviation Group (MAG), the airline’s parent company, said on Saturday that it was “satisfied” with the level of support it had received from its lessors and that it was continuing discussions with them.
“(MAG) trusts that there are appropriate legal mechanisms available in case that support is not universal,” he said.
“MAG reiterates that the spirit of its restructuring plan is not intended to create unnecessary pain among its creditors, but is done in good faith to further the long-term survival of MAG and its partner-dependent value chain.”
The airline group is seeking to implement the restructuring plan through a court process in the UK, according to sources.
The law firm’s letter further raises the stakes after Reuters reported that the airline had warned lessors that Khazanah would stop funding the group and force it into a liquidation process if restructuring talks were unsuccessful.
The letter, dated October 8, states that if the group “insists on continuing with the proposed restructuring plan, our clients will use all means at their disposal to challenge it for all possible reasons.”
Izham said the lessors will have to make a decision before Sunday so the airline can decide whether to continue with its restructuring plan or “execute Plan B.”
He said Plan B could involve changing Malaysia Airlines’ air operator certificate (AOC) to a new airline under a different name, or using the certificates from sister airlines Firefly and MASwings.
“If you ask me, is Plan B credible? Of course it is. We have all the skill sets in place, ”he said.
