Malaysia Airlines embarks on restructuring exercise
KLIA, 2 October 2020: Malaysia Airlines Berhad (MAB) confirms that it has reached out to its lessors, creditors, and key suppliers recently as the Company embarks on an urgent restructuring exercise.
When MAB and all its sister companies under the Malaysia Aviation Group (MAG/the Group) launched its Long-Term Business Plan (LTBP) in early 2019, the Group achieved better overall net income after tax (NIAT) compared to 2018, which is 18% ahead of target whilst the Group revenue grew by 7% year on year. The improved NIAT performance is despite higher fuel prices, increase in forex and impact of MFRS16. MAB passenger revenue per available seat-kilometer (RASK) meanwhile, increased by 3%, and yield increased by 5% on the back of a 5% increase in available seat kilometer (ASK) year on year. The airline achieved a record-breaking RASK results in second half of 2019, with the highest RASK ever recorded in 3 years.
MAB also made significant improvements operationally, exceeding its on-time performance target of 80% to achieve 83%, the best ever since 2015. Mishandled baggage has steadily improved to 5.6 bags per 1000 passengers, the best ever in the last five years. Furthermore, MAB’s customer service index improved to 78%, the best in the last four years, and net promoter score climbed to +14 compared to -22 in the last three years.
MAB/MAG was set to continue the good momentum in 2020; but the COVID-19 pandemic caused an unprecedented lockdown across the globe, forcing all airlines to halt operations and ground almost all their fleet for most of March to June this year. At the height of the COVID-19 crisis, MAG continued to serve the nation and our customers by maintaining some domestic and minimal international connectivity, mostly to facilitate essential movements, mounting of rescue and repatriation flights, and ensuring global supply chains were maintained via our cargo operations.
The negative financial impact from the COVID-19 crisis has been unprecedented, and MAG has wasted no time in taking hard measures since March 2020 to cut costs and conserve cash, including introducing extensive salary cuts for the entire management team and pilots, introducing no-pay leave, seeking payment deferrals, renegotiating contracts, etc. in order to survive and protect as many jobs as possible.
With the pandemic still showing little sign of improvement with a resurgence in some markets; without visibility of a vaccine that needs to be widely distributed; and tight border restrictions remaining in place for our key markets; these will hamper the return of international leisure and business travel demand for MAG in the next couple of years. The deep impact of the prolonged COVID19 crisis has necessitated MAG to take drastic steps in revising its LTBP further to ensure the Group’s relevance and survival. This includes reworking its network and fleet plans, to be able to cope with not only the uncertain and volatile aviation landscape, but also likely softer traffic demand for the foreseeable future.
This plan, which requires a comprehensive restructuring of the MAG business and capital structure, is highly dependent on the individual contributions of all relevant stakeholders in supporting the Group to emerge out of this crisis as a well-capitalised and financially healthy airline group. It is intended that this restructuring exercise be completed over the next few months. However, if such an outcome is not possible, the Group will have no choice but to take more drastic measures.
As a national carrier, it is MAG’s intention to ensure some level of continuous connectivity for its passengers; and to minimise impact on the livelihood of direct and indirect workforce and industries dependent on its operations. Being an economic enabler to the country, MAG is cognisant that any action taken by the Group will have a greater impact to the broader aviation industry and to the nation. Hence it is committed to ensure that its restructuring exercise is duly implemented in a fair manner through any form of mechanism that is appropriate.