Malaysia Airlines (MAB) confirmed that it has reached out to its lessors, creditors and key suppliers recently as it embarks on "an urgent restructuring exercise". In a statement to A+M, the airline said the plan, which requires a comprehensive restructuring of all the Malaysia Aviation Group (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. MAB did not comment on whether the restructuring will impact its marketing team.
The statement explained that when MAB and all its sister companies under MAG launched its long-term business plan in early 2019, the Group achieved better overall net income after tax compared to 2018, which is 18% ahead of target whilst the Group revenue grew by 7% year on year. MAB and MAG were set to continue the good momentum this year but the pandemic is showing little sign of improvement with a resurgence in some markets and there is a lack of visibility of a vaccine, as well as tight border restrictions.
Since March this year, it has undertaken cost cutting measures and conserved cash through measures such as extensive salary cuts for the entire management team and pilots, introducing no-pay leave, seeking payment deferrals, and renegotiating contracts, among others in order to survive and protect as many jobs as possible.
"The deep impact of the prolonged COVID-19 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," the airline said in the statement.
It intends to complete the restructuring exercise 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, it said in the statement. It added that as a national carrier, it is its 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," the statement read.
Meanwhile, MAG said in a letter to lessors that it is unlikely to be able to make payments owned after November unless it obtains more funding from Khazanah Nasional. Reuters reported today that MAG was witnessing "an average monthly operating cash burn of US$84 million" but as of 31 August, only had US$88 million in liquidity, as well as an additional US$139 million from Khazanah. The Group added in the letter that based on this, it is unlikely to be able to meet its obligations, including payments to lessors, after November this year.
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