MAB poised to remain as national carrier

Restructuring talks have progressed positively that consultants are now optimistic about the airline’s continuing prospects


MALAYSIA Aviation Group (MAG) may not have to proceed with its Plan B to make FlyFirefly Sdn Bhd the flag carrier, as prospects to revive Malaysia Airlines Bhd (MAB) improve considerably.

MAB’s restructuring talks have progressed positively to the point that consultants are now optimistic about the airline’s continuing prospects.

Sobie Aviation Pte Ltd analyst and consultant Brendan Sobie said Firefly will expand following the point-to-point jet strategy which involves opening new routes bypassing Kuala Lumpur (KL).

He said the strategy supplements MAB which will remain as the national flag carrier following a network model and hubbing at the KL International Airport.

“The Plan B alternative is not necessary as negotiations with creditors have been successful or successful enough, with over 75% agreeing, which means the new terms can be applied to any remaining holdouts using the UK scheme,” Sobie told The Malaysian Reserve (TMR).

MAB recently said its parent company, MAG, is currently at the tail end of its restructuring exercise as a large majority of its creditors have given full support towards a consensual agreement.

The airline said, however, pending confirmation from the remaining small minority creditors, MAG is exploring the use of a UK Scheme of Arrangement to complete the restructuring exercise by the first quarter of 2021 (1Q21).

“MAG is confident that it will achieve a win-win situation with all creditors involved and looks forward to executing its revised long-term business plan alongside its partners,” a representative at MAB told TMR recently.

Given the progress of the negotiation talks, an analyst, who preferred anonymity, expressed a similar opinion with Sobie, saying it seemed that it is not likely for Firefly to be made the national carrier.

Sobie said the restructuring at MAB has progressed well, particularly relative to some other ongoing airline restructuring in South-East Asia.

Sobie said the restructuring at MAB has progressed well, particularly relative to some other ongoing airline restructuring in South-East Asia.

He said a successful outcome is close to being achieved despite initial challenges and difficult market conditions.

Sobie also said MAB is expected to have a lower fleet cost once its leases and debt renegotiations conclude successfully, which have now received approvals from the majority of the creditors.

The analyst said the fleet cost would come down significantly, giving the national flag carrier a competitive fleet of Boeing 737s, Airbus A330s and A350s.

He added that MAB is also expected to end the Airbus A380 services, the world’s largest passenger airliner which has been highly unprofitable over the years, but was not part of earlier restructuring.

Moving forward, Sobie said MAB still has challenges as market conditions will remain difficult for some time.

He added that overcapacity is a concern, given the Firefly expansion and the fact that MAB’s fleet other than the A380s is being maintained.

“But the new lower cost structure is a major improvement, and depending on what happens with AirAsia Group Bhd, AirAsia X Bhd and Malindo Airways Sdn Bhd, the capacity at MAG post-restructuring may end up being manageable,” he added.

MAG previously said Firefly will start jet operations in 1Q21, with an addition of 10 narrow-body jets to its fleet in phases.

Firefly is also expected to serve the domestic, Asean and AsiaPacific markets out of Penang International Airport.

With the commencement of jet operations, MAG said Firefly will be complementing MAB in serving the leisure market while diversifying its base, connecting secondary cities in Malaysia to East Malaysia, Thailand, Indonesia and Singapore.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in a recent Dewan Rakyat sitting that as at Aug 31, MAG’s liquidity stood at RM366 million.

Read our earlier report

MAB’s negotiation with lessors suspended in a stalemate