Najah Air still in the race to take over Malaysia Airlines

The local firm’s proposal includes the involvement of multiple corporations from China, e-commerce player

by AFIQ AZIZ/ pic by TMR

NAJAH Air Sdn Bhd, one of the companies that were named as possible candidates to take over Malaysia Airlines Bhd (MAB), is still very much in the game despite reports of its withdrawal from the deal.

Sources close to the matter said Najah Air — a special-purpose vehicle company formed by a group of businessmen led by Datuk Pahamin Ab Rajab — had already submitted its proposal to Khazanah Nasional Bhd recently.

Pahamin was AirAsia Group Bhd’s co-founder and former chairman. He also served as secretary general of the Domestic Trade and Consumer Affairs Ministry from 1998 to 2002 during Tun Dr Mahathir Mohamad’s earlier tenure as the prime minister.

A source said Najah Air’s proposal included the involvement of multiple corporations from China, including an established airline, and a well-known e-commerce player that is largely dominating the retail, Internet and technology marketplace.

However, the takeover proposal excluded the undertaking of MAB’s debts, believed to have mounted up billions of ringgit.

“Najah Air’s proposal, however, does not include MAB’s debts, which have been rising due to issues faced by the previous management.

“The new company (NewCo) will be a joint venture (JV) of Najah Air and the Chinese firms, and it will only be focusing on turning around MAB’s current business model and operations,” the source said.

It was reported that Khazanah, the country’s sovereign wealth fund, aimed to complete the MAB deal by the end of this year, as a result of the government’s overall financial burden that is eating into the national reserves.

In July, Khazanah hired Morgan Stanley as an independent advisor to look at strategic options that could save the loss-making MAB.

The source said Najah Air’s takeover proposal would also allocate Khazanah with a stake in the NewCo.

A RM1 billion fund is expected to be raised by Najah Air for the initial setup. “Najah Air would hold the majority share, while Khazanah was offered some equity to recover their losses after the NewCo starts making money and become profitable.

“Should Khazanah choose not to participate in the NewCo’s equity, Najah Air and the Chinese airline will end up owning a 100% stake in the new company.

“The NewCo will in turn own all of Malaysia Aviation Group ecosystem,” the source said, adding that the interested carrier from China is currently making a handsome profit in homeland.

Based on Centre for Asia Pacific Aviation Pty Ltd’s (CAPA) data, the Chinese international market is experiencing rapid growth, driven by aggressive expansion from Chinese airlines.

“Chinese airlines grew international passenger traffic by 14% in 2018 and have more than doubled international passenger traffic over the past five years.

There are now 29 Chinese airlines competing in the international market, compared to 12 airlines five years ago,” CAPA said.

The source said Najah Air’s collaboration would also result in MAB establishing an aviation hub within the lucrative Chinese market.

“The route and passenger load of MAB will also be increased as a result of this arrangement. So, neither the government nor Khazanah would have to bail out any ailing firm and risk public money in the future,” the source added.

He also said Khazanah has not set any specific asking price from the bidder.

The source added that Najah Air had also recruited strong team players who are capable in addressing issues pertaining to high fuel cost and exorbitant maintenance, repair and overhaul expenses.

“There will be no job cut to MAB’s 14,000 employees. It was proposed that the popular e-commerce player in the NewCo will leverage big data technology via a new loyalty platform.

“The idea is to combine these data with MAB’s travellers on a platform that will give a new flying experience to the travellers.

“It would also engage the traveller’s daily life through digital connectivity and becoming a substantial source of revenue for MAB,” the source said.

MAB now carries 40,000 guests daily, according to its official website.

A Khazanah spokesman who was contacted by The Malaysian Reserve said the fund did receive “several proposals” but declined to confirm if Najah Air was one of them.

Earlier news reports suggested that four proposals from various parties had been submitted to take over MAB, which had already consumed government’s fund of over RM24 billion.