Just sell-off or merge Malaysia Airlines

KHAZANAH Nasional should consider selling off or merge Malaysia Airlines Bhd (MAB) with another player to stay afloat in the current economic climate.

“Given the current volatile market due to the COVID-19 pandemic, it remains uncertain whether the national carrier can still survive in the industry despite a capital injection.

Prof Yeah Kim Leng

“Besides, MAB has been struggling even before the economic downturn,” Sunway University economist Prof Yeah Kim Leng told FocusM.

Two days ago, business portal The Edge Weekly reported that MAB was seeking RM2.1 bil as financial aid from its parent company Khazanah.

Reuters reported last month that Khazanah had warned leasing companies that it would stop funding the group and force it to wind down if restructuring talks with the lessors failed.

Khazanah had pumped in billions numerous times for MAB to stay afloat. Former prime minister Tun Dr Mahathir Mohamad even contemplated selling off the ailing national carrier before the pandemic ravaged the globe.

Yeah said that even if Khazanah does approve the financial aid, it remains uncertain whether MAB can still pull through as experts have predicted that the airline industry may take up to seven years to experience a full recovery.

“So, I think it is prudent for the Government to explore other market options. Consolidation may be an option as many other airliners have opted for it.

“Merging with another airline may provide it with better facility to survive the ordeal,” he said.

National sentiment vs market reality

On MAB being a national sentiment, Yeah said that it was best of everyone to look into market realities when making tough business choices.

“We need to shed sentiments when facing market uncertainties. It is because it will become a huge burden on us, on top of affecting market efficiency,” he said.

He also highlighted the fact that many European automakers had to consolidate or sell-off their businesses during tough times despite holding sentimental values over them.

“Volvo is now owned by a Chinese company and Jaguar was taken over by Tata Motors, an Indian company.

“So we need to allow market forces to drive the economy in order to make us more competitive, viable and sustainable,” said Yeah.

Crewstone International chairperson Datuk Jalilah Baba said the Government needs to study MAB’s request thoroughly before making any decision.

“If a capital injection is allowed, MAB must come up with plans on how it will be generating revenue and pay its due to Khazanah.

“And we have to be honest in our deliberation. It doesn’t look like COVID-19 is going away anytime soon.

“Even if the vaccine is found, it’s not like people are going start travelling immediately. All this must be taken into consideration,” she said.

Whether a bailout for MAB would trigger other local airliners to seek aid as well, Jalilah said that even if the Government decides to help them, it should be on a loan basis instead of a grant.

“Whatever decision the Government or Khazanah is planning to make, they must ensure a proper cost and benefit study is made,” she said. – Nov 23, 2020.

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