By MARK RAO & NG MIN SHEN

Malaysia will stand to lose ancillary economic benefits if Malaysia Airlines Bhd (MAB) is closed down, said sole shareholder Khazanah Nasional Bhd.

MD Datuk Shahril Ridza Ridzuan (picture) said Khazanah has to weigh the cost of maintaining the loss-making flag carrier versus the bigger loss to the domestic economy, if the airline ceased operation.

“You have to recognise the fact that essentially (MAB) is one of those assets that has a much bigger impact on the Malaysian economy than its own profit or loss,” he said in a panel session during Invest Malaysia 2019 yesterday.

“The question is how much support is required to get those other spin-off benefits.” He said the aviation industry — when looked across the entire value chain — generates a lot of economic benefits for other sectors such as tourism, business and employment.

It is the airlines which are struggling to be profitable due to overcapacity resulting from demand not growing as fast as capacity, he said.

However, Shahril Ridza said there is a huge cost associated with closing down any business, and such factors must be considered before taking such a decision.

“Under the strategic review that we are doing with MAB, it’s quite important for the government to have all the facts in hand and really understand what is the cost of keeping the airline,” he said.

That cost analysis should be weighed against the substantial loss to the economy, if the airline were to be shut down.

MAB has been dogged by years of mismanagement and plain bad luck, struggling with losses since 1998 which resulted in government bailouts amounting to billions of ringgit.

Khazanah took MAB private in 2014 and carried out a RM6 billion restructuring plan to turn the company profitable by 2017. The airline reported a RM812.11 million loss after tax that year and remained in the red in 2018.

It further contributed to approximately half of Khazanah’s RM7.3 billion impairments in 2018, up from the RM5 billion incurred in 2017, and resulted in the sovereign state fund posting a RM6.27 billion loss before tax that year.

Shahril Ridza said Khazanah’s new strategy needs a “reset” for its asset allocations and investments which required provisions for assets trading below book value.

“That should clean up the books of Khazanah going forward, allowing us to focus on generating the right returns both from yield and dividend assets, as well as pruning activities in the market.

“This should translate to a much cleaner profit and loss for 2019 and that is why we are fairly confident that, with the new strategies in place and ongoing restructuring, we should return to the black this year,” said Shahril Ridza.