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Struggling Malaysia Airlines looking at long-term makeover

Aug. 11, 2014, Hong Kong - Hemorrhaging cash after almost unfathomable double disasters that killed 537 people, Malaysia Airlines will be brought back under the wing of the Malaysian government as a prelude to a comprehensive overhaul of the airline. It will be the latest in a string of restructurings of the carrier over the past decade, all of which failed to put it on a steadier flight path.


August 11, 2014
By The Associated Press

Some analysts doubt the airline will be in a much improved position
in another five years. Here are some questions and answers on what lies
ahead:

 

— WHY DOES THE AIRLINE NEED AN OVERHAUL?

 

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Malaysia's struggling
national airline continues to lose money in spite of four major
restructurings in 12 years. Two disasters within months of each other—
the disappearance of flight MH370 and the downing of MH17 over Ukraine —
may have dealt a fatal blow to the airline's finances.

 

— WHAT IS THE PLAN?

 

Few details have been
released by Khazanah Nasional, the Malaysian sovereign wealth fund that
has a controlling stake in the airline and wants to mop up the minority
of shares it doesn't own. The fund said that after it owns all the
shares it will carry out a "complete overhaul" including operations,
business model, finances, staff and regulations. "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," it said.

 

— WHAT NEEDS TO BE DONE?

 

Malaysian Airlines needs
to cut costs to stem the red ink that amounted to 1.3 billion ringgit
($405 million) in losses last year alone. Top of the list is trimming
staff, which at nearly 20,000 is "relatively sizeable" compared with
other full service carriers such as Singapore Airlines and Cathay
Pacific Airways, analyst Jerry Lee of RHB Bank wrote in June. But staff
cuts have always been a politically sensitive issue because the airline
is state-owned. Experts say the airline could also reduce its fleet.
Passenger capacity has risen in recent years as the airline brought in
new planes, forcing it to discount airfares aggressively to fill enough
seats. There's also talk the carrier could sell its profitable
maintenance division.

 

— WHAT COULD THE AIRLINE LOOK LIKE IN 5 YEARS?

 

Malaysian Airlines could be
slimmer, have new executives, and fly less often to some destinations.
Some have suggested a new name is needed but don't expect radical
changes. It's unlikely to expand heavily into the discount market to
compete with AirAsia, the country's highly successful low-cost carrier,
said Brendan Sobie, analyst at CAPA The Centre For Aviation. Other
analysts are doubtful that its fifth restructuring will do the trick.
"I'm skeptical of the success of this new measure," said Shukor Yusof,
founder of aviation research firm Endau Analytics. "The root problems
are not being looked into seriously, things like the strategy, the
business model and what they want the company to be in the long term."

 

— HOW HAVE OTHER NATIONAL AIRLINES FARED AFTER RESTRUCTURINGS?

 

Following bankruptcy in 2010,
Japan Airlines Co. returned to solid profitability. The airline, once a
Japanese icon, was saddled with a bloated workforce, unpopular routes,
safety lapses and mountains of debt. New management trimmed a third of
the payroll, invested in budget carriers, retired big jets in favour of
smaller ones and focused on international routes instead of less
profitable domestic ones. The company returned to the stock market with
an $8.5 billion IPO in 2012. Swissair International Air Lines was
created out of the ashes of Swissair, which went out of business in
2002, becoming the first airline to collapse after the Sept. 11 attacks.
The new airline suffered financial problems for several years but
subsequently returned to profit. It's now owned by Lufthansa.