Capital requirement needed is difficult to be determined due to the fluidity of the Covid-19 pandemic, says Khazanah
by RAHIMI YUNUS/ pic by RAZAK GHAZALI
KHAZANAH Nasional Bhd will continue to assist Malaysia Aviation Group (MAG) and Malaysia Airlines Bhd (MAB) as the coronavirus pandemic plunges the sector to the worst crisis in aviation history.
Tens of thousands of planes have been grounded and millions of travellers cancelled their bookings across the globe as the sector confronts passenger revenue losses of US$250 billion (RM1.09 trillion) due to the deadly pathogen, which has infected more than one million people, with the death toll breaching 50,000 people.
MAB has also cancelled thousands of flights as Malaysia shuts its borders to foreigners and most countries are on lockdown.
Khazanah said the capital requirement needed by MAG, the parent company of MAB, is difficult to be determined due to the fluidity of the Covid-19 pandemic.
“The immediate priority is to tackle the impact of the Covid-19 pandemic. We are currently supporting MAG’s efforts in responding to the disruptions as best as we can.
“With the Covid-19 situation still unpredictable, it is difficult to have certainty on MAG’s capital requirements,” Khazanah told The Malaysian Reserve in an email reply.
MAG group CFO Boo Hui Yee warned last month that the company was no different than other airlines which are at risk of going bankrupt.
MAG has offered its 13,000-strong staff two voluntary options, either five days of unpaid leave per month for at least three months or unpaid leave of between one and three months beginning April. The company’s top management also took a pay cut to manage its cashflow.
The group comprises MAB, rural service provider MASwings Sdn Bhd, FlyFirefly Sdn Bhd, MAB Kargo Sdn Bhd, ground handler AeroDarat Services Sdn Bhd, pilgrimage arm Amal, MAB Academy Sdn Bhd and MAB Engineering Services Sdn Bhd.
The national carrier is currently operating at a minimal capacity, mostly to facilitate essential travels and cargo movement. It reinstated flights to Australia, New Zealand and London to bring largely Malaysians back to Malaysia.
AirAsia Group Bhd had temporarily grounded its fleet, including its subsidiaries in the Philippines, Thailand, Indonesia and India. Malindo Airways Sdn Bhd has also suspended its international operations.
The coronavirus pandemic literally buries Khazanah’s plan to sell stakes in MAB as losses at the carrier mounts and capital injection widens, putting off any suitors for the airline.
It was reported as many as six parties had shown interest to acquire a stake in MAB, but the previous Pakatan Harapan government viewed the offers as being too low.
Khazanah had injected RM6 billion in a botched bailout of the airline in a massive restructuring exercise which started in 2014. It is estimated that MAB, prior to the coronavirus pandemic, is bleeding between RM1 billion and RM1.2 billion in annual losses.
Khazanah wants to remove the airline expenses from its books as it dilutes the sovereign wealth fund’s profit.
As of now, many airlines may not survive the pandemic without financial assistance from the respective governments.