Aircraft operated by Malaysian Airline taxi on the tarmac at the Kuala Lumpur International Airport. The airline and its key stakeholders are in talks with banks for a strategic overhaul.
Malaysian Airline System Bhd and its key stakeholders are in talks with banks for a strategic overhaul that could include the partial sale of its engineering unit and an upgrade of its ageing fleet, sources involved in the discussions said.
Even before the loss of its flight MH370 from Kuala Lumpur to Beijing on March 8 there was talk that loss-making MAS might need a financial rescue from state investor Khazanah Nasional Bhd, which owns 69% of the company.
“They are sending all these feelers to banks to try and test the waters,” said a banking source familiar with the situation.
“The most imminent move looks to be on the engineering business, an IPO or trade sale,” said the source, who declined to be identified as the talks are private.
MAS aimed to break even this year after three years of red ink, but analysts expect losses to widen as the airline cuts fares to spur demand shaken by the disappearance of its MH370 flight over the Indian Ocean. It was already facing stiff competition from AirAsia Bhd on local and short-haul routes and from AirAsia X and Gulf carriers in the medium and long-haul market.
“The next step will be to kick off a formal auction process for the engineering unit. They wanted to cut down the stake for many years, but from all the other options now, this might be one of the easier things to do,” the banking source said.
In a research report in April, MayBank Investment Bank Bhd highlighted MAS Engineering as the biggest profitable business unit in MAS, valuing it at 2bn Malaysian ringgit ($619mn). Officials from MAS, Malaysia’s Ministry of Transport and Khazanah are involved in the informal talks with a handful of banks including CIMB Group Holdings Bhd, sources said. A spokesman from Khazanah declined comment while CIMB was not immediately available to comment. Officials from MAS and the Ministry of Transport did not offer any immediate comment when contacted by Reuters for the story.