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Malaysia Airlines to be delisted

Yahoo Finance AU

SNAPSHOT:

  • Malaysia Airlines to be de-listed and privatised ahead of major restructure

  • Airline shares put in trading halt

  • Malaysia's state fund Khazanah Nasional to buy all minority shares

  • Khazanah to offer offer 27 sen for each share it does not own

  • Restructure to be finalised by the end of the month

  • Airline lost 4.1 billion ringgit (A$1.37 billion) from 2011-13, and a 443 million ringgit ($A148.8 million) in Q1 2014

Malaysia Airlines will be delisted from the stock exchange, making it fully state-owned, the Associated Press reports.

The announcement comes hours after the deeply troubled airline suspended trading in its shares amid expectations of a corporate restructuring following the twin disasters of MH370 and MH17.

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The struggling company announced that Khazanah Nasional Berhad, the Malaysian Government's   investment fund, would undertake a review with plans to restructure.

Twin tragedies push Malaysia Airlines to the brink

Khazanah Nasional's proposal to delist Malaysia Airlines is what it calls 'the first stage of restructuring'.

The investment fund, which owns a majority stake in the airline, says it plans to buy out minority investors at MYR0.27 per share.

According to the statement, private ownership will allow room for Khazanah to introduce an appropriate capital structure for Malaysia Airlines.

This would allow the airline to meet 'substantial funding requirements' in the next few years, and would help to sustain operations amid a high level of debt.

Stronger rules needed on flight paths: Malaysia Airlines official

A notice posted on the Kuala Lumpur stock exchange said the airline, Malaysia's flag carrier, had requested the suspension as of 9 a.m. Friday "pending a material announcement."

Trading has now been suspended until 5pm today.

The airline, which was already in serious financial trouble, has been hit by two major tragedies this year.

In March, Flight 370 disappeared with 239 people on board after flying far of course during a flight from Kuala Lumpur to Beijing. The plane has still not been found, with a search in the southern Indian Ocean underway.

While the airline was dealing with that, in July 298 people were killed when Flight 17 was shot down over Ukraine. It was heading to Kuala Lumpur from Amsterdam and was shot out of the sky over an area of eastern Ukraine controlled by pro-Russian separatist rebels.

Is this the end for Malaysia Airlines?

 

Plunging into the red

The loss of two Boeing 777 jets added to the troubles to Malaysia's flagship carrier that has been in the red for the last three years.

In 2013 alone, its losses ballooned to 1.17 billion ringgit ($363 million), nearly three times larger than its 433 million ringgit loss in 2012.

As a flag carrier, it is required to fly unprofitable domestic routes, and its strong union has resisted operational changes. Nimbler discount rivals such as Air Asia have expanded rapidly, while Malaysia Airlines has been like a supertanker, slow to change direction.

The disappearance of Flight 370 further compounded the airline's woes by affecting public confidence and damaging its business with China.

It put the carrier under global scrutiny, jeopardising its reputation and prompting boycotts in China. It has also hurt the country as a travel destination, with Chinese tourists canceling their visits to the Southeast Asian nation, according to Malaysia’s tourism promotion agency.

In an interview last month, Malaysia Airlines Chief Executive Ahmad Jauhari Yahya said the airline, which kept a low profile after Flight 370 disappeared on March 8, began to boost its marketing again this month.

"We need to operate far more efficiently. We cannot simply go on with incremental improvements. Our only option at this point is radical or sweeping change," Jauhari said. "We have had a lot of financial reset but we have never had an operational reset."

FULL ANNOUNCEMENT: Read Khazanah's statement

Inputs from AP and Reuters.