MAG has offered staff 2 voluntary options, either 5 days of unpaid leave per month or unpaid leave between 1 and 3 months
by RAHIMI YUNUS/ pic by TMR FILE
MALAYSIA Airlines Bhd (MAB) would need more capital injection from Khazanah Nasional Bhd to keep the company afloat amid the Covid-19 pandemic which has sent few airlines towards bankruptcy.
MAB confirmed with The Malaysian Reserve (TMR) that its parent company Malaysia Aviation Group (MAG) has offered staff two voluntary options, either five days of unpaid leave per month for at least three months or unpaid leave between one and three months beginning April following capacity cuts.
To date, the national flag carrier said more than 2,000 flights have been cancelled up to April due to travel restrictions imposed by countries within the company’s network.
Earlier, the company has slashed the salary of the senior management staff by 10% and removed all allowances effective this month as it battles the financial fallout from the virus outbreak.
Sobie Aviation analyst and consultant Brendan Sobie said a voluntary leave programme and management salary cut are typical responses for an airline needing to reduce capacity in the short term.
“MAB is rather late in implementing such a voluntary leave programme as several other Asian airlines have already applied it,” Sobie told TMR yesterday.
Generally, he said several government-owned airlines will be requiring cash injections to survive the crisis.
Another analyst said MAB would need more capital to keep the business running in the next few months before it reaches a failure point in facing the pandemic.
“MAB’s loss in 2018 was already over RM791 million. 2019 (results) is not out yet, but it is expected to be around that. What about 2020? They could go bust if (there is) no injection from Khazanah in a few months,” the analyst who requested anonymity told TMR.
Last October, Khazanah MD Datuk Shahril Ridza Ridzuan said in a report to the Public Accounts Committee that the government needs to pump about RM1 billion per year to MAB to sustain the entity amid overcrowded market.
The sovereign strategic fund has allocated RM6 billion for its wholly owned MAB since 2014 to turn around the flagging airline, but the five-year programme met with failure on deadline.
MAG CEO Captain Izham Ismail said in a recent video message to employees, seen by TMR, that the company did “very well” in 2019 with group revenue growing 7% year-on-year.
Izham said MAB’s revenue per available seat-kilometre (RASK) rose 3%, with a record-breaking RASK in the second quarter (2Q) and 4Q of 2019 since the last three years.
Overall, he said the group was just behind 3% of targeted passenger revenue in 2019.
The MAG comprises MAB, rural service provider MASwings Sdn Bhd, FlyFirefly Sdn Bhd, MAB Kargo Sdn Bhd, ground handlers AeroDarat Services Sdn Bhd, pilgrimage arm Amal, and MAB Academy Sdn Bhd and MAB Engineering Services Sdn Bhd with about 13,000 employees.
The analyst, who declined to be named, said AirAsia Group Bhd can weather the crisis better than MAB with some RM3 billion cash in the balance, with not much borrowing, according to last quarterly results.
But the analyst said AirAsia’s long-haul sister company AirAsia X Bhd is expected to be in a much difficult situation similar to MAB.
“AirAsia is a net cash company, if stripping out lease liabilities on the leased aircraft. However, AAX is in a different situation. That one is also another ‘gone case’ but not as bad as MAB,” the analyst added.
AirAsia’s share price dropped to the lowest level in 48 months below RM1 a unit as the low-cost carrier reduced the pay of the company’s highest earners and cut many other non-essential expenses to shield the company from being battered by the virus pandemic.
The International Air Transport Association has projected a total global lost revenue of between US$63 billion (RM265.6 billion) and US$113 billion in the passenger business, more than double its previous assessment of US$29.3 billion in revenue loss.
Markets in Australia, China, Japan, Malaysia, Singapore, South Korea, Thailand and Vietnam are estimated to see a 23% reduction in passenger numbers that translates into a loss of US$49.7 billion in revenue. A 40-year-old British discount airline Flybe has succumbed to the virus crisis and entered bankruptcy after months of bailout talks.