Suitors no longer interested in Malaysia Airlines

A merger or rescue of the carrier is no longer possible as airlines are prioritising their own survival

by AZREEN HANI & RAHIMI YUNUS / pic by TMR FILE

INVESTOR interest in national carrier Malaysia Airlines Bhd (MAB) has dried up as potential rescuers grapple with their own survival due to a global decline in air travel because of the coronavirus pandemic.

At the beginning of the year, there were nine suitors to take over the troubled MAB, but today these offers are “no longer viable”, according to a source with knowledge of the matter.

“A merger or rescue of the airline is no longer possible as airlines are prioritising their own survival,” the source told The Malaysian Reserve (TMR).

“There is no new interest from others too. Everything is about own’s survival now. As for now, no (bid). Who in their right mind would?”

The Air Transport Action Group estimated that 46 million jobs are at risk because of the loss of connectivity caused by the Covid-19 crisis. The vast majority of these (41.2 million jobs) are in the travel and tourism sector, which relies on aviation. The remainder (4.8 million jobs) are spread across direct employment in aviation, including airports and airlines.

Earlier this year, Khazanah Nasional Bhd — the sole owner of MAB — said it received nine proposals and had shortlisted four carriers bidding to take over the flag carrier.

Among the firms said to be in the running were Air France-KLM SA, Japan Airlines Co Ltd and domestic carriers AirAsia Group Bhd and Malindo Airways Sdn Bhd.

There have been no updates by Khazanah since April, when it was reported to have rejected a US$2.5 billion (RM10.38 billion) offer by Golden Skies Ventures Sdn Bhd.

A spokesperson at MAB declined to comment when contacted, but said the matter was at the shareholder level.

The lack of suitors has put the survival of MAB back in government hands, analysts said.

Sobie Aviation Pte Ltd analyst and consultant Brendan Sobie said virtually every airline that was looking at potentially acquiring any other airline prior to the Covid-19 pandemic has put all considerations on hold.

“The focus now is on restructuring MAB as it should be. If the restructuring at MAB is successful, avoiding MAB from having to shut down and the airline restarting under Firefly (FlyFirefly Sdn Bhd), Khazanah can then consider what is next in terms of capital infusions and eventually also relook at a sale,” Sobie told TMR.

Another analyst said potential suitors would naturally be better off not buying MAB because there is no visibility of government aid to save the airline.

“Why would they take that risk? There are so many uncertainties. The bigger question mark is will the government save MAB or not?,” the analyst who requested for anonymity told TMR.

If anything, the analyst said, potential buyers would want to acquire MAB at bankrupt value, or else the creditors would go after them as a new owner.

“Technically, a new owner would need to sort the mess at MAB. Why would anyone want to be in such a predicament? Might as well buy another airline that is probably in better value in terms of government support and recovery,” the analyst added.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz recently reiterated that the government would not provide any more cash to MAB and that it was up to the airline’s sole shareholder Khazanah to make decisions.

The Malaysia Aviation Group (MAG), the holding company of MAB, had warned leasing companies that Khazanah would stop funding the group, forcing it into a winding-down process if restructuring talks with lessors failed, Reuters had reported.

MAG has raised the stakes in negotiations for a financial shake-up known as “Plan A” and set out an alternative plan to divert funds to a sister airline, Firefly, according to a document sighted by Reuters.

Under a “Plan B” scenario, Khazanah was said to “inject funds into Firefly directly to start new jet operations at KL on a much smaller scale, focusing first on domestic services”.

MAB said in a statement previously that it had reached out to its lessors, creditors and key suppliers recently as the company embarked on an urgent restructuring exercise that included network reworking and fleet plans; and a comprehensive restructuring of the MAG business and capital structure.