In the wake of two major incidents, as well as falling income, Malaysia Airlines share trading is to be suspended, on the request of Khazanah Nasional – the Malaysian State Investment firm (and it’s largest stake holder).
The investment fund intends to take a 100% takeover over of the Malaysia Airlines to overhaul it, with the investment fund already investing over US $1 Billion into the company.
The airline has been loosing money for the past five quarters, and is need of restructuring to take place over a period of 6-12 months.
Khazanah Nasional in a statement says:
We are pleased to announce that Khazanah Nasional Berhad (“Khazanah”) has today submitted a formal request to the Board of Directors of Malaysian Airline System Berhad (“MAS”) to undertake a selective capital reduction and repayment exercise (“Proposed SCR”) of MAS’ ordinary shares . The proposal will enable minority ordinary shareholders of MASto receive a capital repayment amount of RM0.27 per ordinary share. This represents a 12.5% premium to closing price on 7 August 2014 and a 29.2% premium to the 3-month volume weighted average market price (“VWAMP”). Upon successful completion of the Proposed SCR, Khazanah will become the sole ordinary shareholder of MAS, which wouldlead to a de-listing of MAS.
In June 2014, Khazanah had announced that it was in the midst of undertaking a comprehensive review of MAS, in consultation with the Special Shareholder, the Minister of Finance Incorporated. Khazanah further clarified that subject to the necessary approvals from the relevant authorities,it would announce the proposed restructuring scheme within a period of 6 to 12 months. We reiterate that the proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier on all
relevant aspects of, inter alia, the airline’s operations, business model, finances, human capital and regulatory environment.
Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity.In this regard, today’s proposal for de-listing represents the first stage of the restructuring scheme. Further, Khazanah is in the final stages of completing the overall restructuring proposal, and upon due process and approvals from the relevant authorities, regulators and the Special Shareholder, the Minister of Finance Incorporated, we envisage that additional detailed plans will be announced by the end of this month
The move can be seen as a defence of the flag carrier as it is attacked from other carriers (both Air Asia and Singapore Airlines, as well as other low-cost carriers and full fledged carriers) in an effort to make it fit for purpose. This could mean selling off parts of the airline or re-examining the business model the airline operates in.
Suffice to say, there will need to be change to improve the airlines income and profits.
Malaysia Airlines have operated since 1972 in its current form – with its roots tracing back to 1937. Hopefully the restructure and changes will help the airline continue in its operations.