Malaysia Airlines will have to shut down if its lessors decide not to back its latest restructuring plan, the airline’s group chief executive, Izham Ismail was quoted as saying in early October, 2021. A group of leasing companies has rejected the airline’s restructuring plan, bringing the state carrier closer to a showdown over its future, Reuters reported recently.
Izham said the plan was to restructure the airline’s balance sheet over five years, achieving break-even in 2023 on the assumption that demand in the domestic and Southeast Asian markets returns to 2019 levels by the second and third quarters of 2022. The plan will also require a fresh cash injection from its major shareholder, the state fund Khazanah Nasional, to help the airline over the next 18 months. So far RM28 billion has been pumped in! Lessors claiming to represent 70% of the airplanes and engines leased to the group have called the plan “inappropriate and fatally flawed”. They have pledged to challenge it, according to people familiar with the matter.
Malaysia Aviation Group (MAG), the airline’s parent company, said recently it was “pleased” with the level of support it had received from its lessors and was continuing discussions with them. The airline group is seeking to implement the restructuring plan through a UK court process, according to sources.
In mid-October, the legal firm Freshfields helped state-owned Malaysia Airlines to reduce its obligations on leases for aircraft as part of its restructuring. Freshfields turned to the English courts and a scheme of arrangement — a tool that is often used in financial restructuring but never before with aircraft leases. The leaseholders agreed to a class arrangement as a replacement for the previous ad hoc leases, which made the settlement for Malaysia Airlines more efficient.
Izham had earlier said the lessors will need to make a decision soon, so that the airline can decide whether to proceed with its restructuring plan or “execute Plan B”. He said Plan B could involve shifting Malaysia Airlines’ air operator’s certificate (AOC) to a new airline under a different name, or using the certificates of sister airlines Firefly and MASwings.
Why is Plan B workable? It could easily end up in the same mess. The skill sets of the airline is depleted. It needs new people, new thinking, new policies and no politics! Unless the political leadership has courage, this Plan A or B will falter and more good money will be thrown at recovery. Can’t we do this with the best people for the job?
References:
Malaysia Airlines’ survival in doubt, say CEO, Reuters, 10 Oct 2020 (https://www.bangkokpost.com)
How airlines survived to fly another day, Philip Georgiadis, Financial Times, 15 October 2021(https://www.ft.com)
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