AirAsia to take over struggling Malaysia Airlines?

Masakatsu Ukon, (CC BY-SA 2.0)

Recent reports in the Malaysian news media indicate the ailing national carrier Malaysia Airlines may be put up for sale or possibly taken over by its low-cost competitor AirAsia, unless the country’s government comes up with a feasible turnaround plan for the airline.

According to The Edge Markets, on July 3, 2019, a delegation of businessmen, led by the former AirAsia Group chairman Datuk Pahamin Ab Rajab, met with Malaysian Prime Minister Tun Dr Mahathir Mohamad to discuss proposed plans to take over Malaysia Airlines. The report says Pahamin was interested in offering help to the government to give another lifeline to the struggling national carrier.

The former non-executive chairman of AirAsia, who retired from his position in 2008, has already been considered as a contender for the chairmanship of Malaysia Airlines and its parent company Malaysia Aviation Group, following the resignation of Tan Sri Mohammed Nor Md Yusof in March 2019, the paper says.

Last month, during the Bloomberg Asean Business Summit in Bangkok, Thailand, the Prime Minister stated that Malaysia is willing to consider selling its national carrier on the condition that the company receives a good offer. Mahathir stressed, however, that before considering sale offers, the government must first ensure the potential buyer would be capable of managing the airline well, in view of past failings.

“We have changed their [Malaysian Airlines] leadership many times, each time we were hoping they would do something to turn around the company but they failed… We [the government] need to be very careful about choosing the buyer,” the Prime Minister was quoted as saying by the national news agency Bernama during a session entitled “The Future of Malaysia and ASEAN’”on the sidelines of the Summit on June 21, 2019.

Among the various options that could be considered for the revival of Malaysia Airlines, Mahathir said, would be another restructuring plan, changes in the executive leadership, or a cash injection by the government. Nevertheless, the best option for now, according to the Premier, would be selling the airline if “there is a good offer”.

On the other side of the debate is the former Prime Minister Najib Razak, who insists that the government should not sell the carrier, but boost it with a cash injection instead, as in his view, the existing turnaround plan by the airline’s major shareholder Khazanah Nasional (a sovereign wealth fund of the Malaysian government) “is working”, The Independent writes.

According to recent claims by the current Prime Minister’s media advisor and veteran journalist Datuk A. Kadir Jasin, Khazanah’s board has already rejected a bid to shut down Malaysia Airlines. However, in a Facebook post, he highlighted that Khazanah has previously attempted four unsuccessful turnaround initiatives, which cost the government around $6 billion (RM25 billion), the malaymail cites him as saying.

Opposing proposed plans for yet another cash injection, in a separate report by Bernama, Kadir also argued against alleged recommendations to close down Malaysia Airlines, pointing out that such move would lead to a duopoly of two Malaysian low-cost carriers – AirAsia and Malindo Airways. Instead, according to him, it would be better for the carrier to either be sold or “married” to AirAsia.

Kadir referred to the short-lived share swap agreement between the two airlines in 2011. Although the deal fell through only eight months later, the veteran journalist said AirAsia is still interested in the national carrier.

Kadir also stressed the significance of the Malaysia Airlines’ brand – one that, according to him, is globally recognized and has “considerable monetary value”. The Prime Minister seems to share this view, having stated a few days earlier that although the government would like to sell Malaysia Airlines, it should retain its identity as the national carrier. 

In the case of a sale, Kadir reminded that: “Switzerland and Holland sold their national carriers to foreign airlines - Lufthansa (LHAB) (LHA) and Air France respectively. Malaysia Airlines is already in partnership with many foreign airlines either through joint ventures or code-sharing, the latest being with Japan Airlines and Singapore Airlines (SIA1) (SINGY) ,” he was quoted as saying by the national news agency.

Although Malaysia Airlines is the country’s flag carrier, it is by far not the leading airline neither in its home market nor the region. AirAsia (together with its affiliates in Thailand, Indonesia, the Philippines, Japan, and India), on the other hand, is the largest low-cost carrier in Asia by passenger numbers. The two airlines also differ in their business models, which would be a major question point, if AirAsia were indeed to take over the national carrier.

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