Malaysia Airlines (Kuala Lumpur) is “technically bankrupt” according to its new CEO Christoph Mueller, formerly of Aer Lingus. Mueller announced today at a press conference the company will cut around 6,000 jobs in order to reduce costs. The airline continues to operate normally.
The airline will also rebrand on September 1. Mueller did not want to offer any details on the rebranding.
Mueller also stated the new airline could break even by 2018.
A full review is underway on all routes and some routes will be dropped.
As previously reported, a new legal entity, Malaysia Airlines Bhd (MAB), will replace the technically bankrupt Malaysian Airline System Bhd (MAS).
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An analyst comment from Ken Odeluga, a senior market analyst at www.cityindex.co.uk
Christopher Mueller’s strategic comment very much suggests the recently appointed CEO is trying to afford himself maximum flexibility in the difficult months ahead.
There’s a moderate possibility the airline will in practice not be formally declared bankrupt.
We note Malaysian bankruptcy law provides a much lower threshold to judge going concerns than would apply to Malaysian Airlines.
Its balance sheet is remarkably clean under the circumstances with about $810m of accumulated losses including $75m of hedge accounting.
Aside from that, there is no other red ink at all—no significant impairments or other risky effects and its most recent pre-tax margin at 17% is well above MA’s internal run-rate.
The burdens that exist are of course not inconsiderable, but the point is, the airline has been carrying them for longer than its crisis has been going on.
Its bigger problems involve the significant depreciation in the ringgit against the dollar that continues to shave off its room to manoeuvre, not to mention political interference, powerful unions, and more than a whiff of alleged corruption.
MA’s cost base could be about 20% higher than those of its rivals.
Mueller will need in the near-to-immediate term, all his negotiating, persuasive and coercive skills in dealing with all sorts of stakeholders—those which are legitimate and those for whom that term is more arguable.
At least there does now appear to be a will in the State apparatus that wasn’t there a year ago.
Mueller will have the ear of those strong enough to bulldozer parties which might attempt block the root-and-branch reform of the airline that will be necessary to make it what it may never really have been—competitive.
Copyright Photo above: SPA/AirlinersGallery.com. Malaysia Airlines is reviewing its fleet of 13 Boeing 777-200 ERs and will also attempt to find buyers for two of its six Airbus A380s. Airbus A380-841 9M-MNB (msn 081) approaches the runway at London’s Heathrow Airport.
Malaysia Airlines aircraft slide show: