MAB mulls ‘all options’ to fund order of Boeing jets

The national carrier is reportedly tapping several banks to fund at least 9 of its Boeing 737 MAX planes


MALAYSIA Airlines Bhd (MAB) is vetting all options to fund its order of 25 new 737 MAX jets from US-based commercial aircraft manufacturer, Boeing Co.

MAB group CEO Captain Izham Ismail has neither denied, nor confirmed that the airline had approached lenders to fund its plane orders. However, he said MAB is considering its options.

“It is a normal course of business. We go out and evaluate our options, whether we want to fund it ourselves or opt for financing. At this stage, this is what is floating around, that Malaysia Airlines is evaluating its options,” Izham told reporters after a signing ceremony in Petaling Jaya yesterday.

The national carrier is reportedly tapping several banks to fund at least nine of its Boeing 737 MAX planes, which is valued at about US$1 billion (RM4.06 billion) each, minus hefty discounts.

Reuters reported that banks in Malaysia, Europe and China are likely to compete for financing of the planes after MAB sent out a request for proposal several weeks ago.

However, it also noted that lenders will be cautious in dealing with the loss-making airline, given its poor operating performance for nearly two decades now.

Since state investment fund Khazanah Nasional Bhd took over the airline in 2014, the company witnessed several changes, including its delisting from the local stock exchange, the retrenchment of some 6,000 employees and multiple departures at the top executive level. Izham is the airline’s fourth CEO in less than three years.

Sources quoted by the newswire said there have been no concrete signs of recovery from the airline company after three years into its five-year turnaround programme.

This has forced even traditional backers of MAB, in the form of Japanese banks, to refrain from participating in the financing plan.

“Things are clearly not working out the way they should. There’s a lack of continuity at senior management positions, they have formidable low-cost competitors on short- and medium-haul routes, and the long-haul market has still not recovered,” one source said.

MAB’s order of Boeing 737 MAX planes was agreed exactly two years ago tomorrow, involving 25 firm orders and another 25 purchase rights valued at US$5.5 billion.

The purchase is said to be a mix of 737 MAX 9 and 737 MAX 8 aircraft. Deliveries are expected to commence in 2019.

It is said that the Boeing 737 MAX jets contain features that will significantly reduce the air carrier’s operating costs, including greater seat capacity and lower fuel consumption.