Malaysia Airlines is reportedly running out of cash and has told aircraft lessors it is unlikely to be able to make payments unless it receives more funding from Malaysian sovereign wealth fund and owner Khazanah.
A letter sent to lessors by Malaysian Aviation Group and seen by news agency Reuters said the Malaysia Aviation group had an average monthly operating cash burn of $US84 million but only had $US88 million in liquidity as of August 31 plus $US139 million available from Khazanah.
“Based on the current run-rate, absent further funding from shareholders, the group will likely be unable to meet its obligations, including payments to lessors, post-November 2020,” The letter said.
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The letter also warned that unless the airline was restructured by the end of the year, Khazanah intended to divert all “efforts and funds” to an alternative company with an existing air operator’s certificate “to ensure connectivity for Malaysia”.
The news agency said the alternative company was not named but noted Malaysia’s other major airline operator was AirAsia Group.
Khazanah confirmed the thrust of the letter in an emailed response to Reuters but said it was supportive or restructuring efforts by Malaysia Airlines.
The airline told The Star newspaper it was taking drastic steps to revise its long-term business plan to ensure the group’s “relevance and survival”.
“This includes reworking its network and fleet plans, to be able to cope with not only the uncertain and volatile aviation landscape but also likely softer traffic demand for the foreseeable future,” it said.
The Malaysian airline group was privatized in 2014 after two fatal crashes: the still-unsolved loss of MH370 and the downing of MH17 by a missile attack.
The tragedies came after a string of losses by the then Malaysia Air System Bhd and the company was de-listed after Khazanah Nasional paid 1.4 billion ringgit to take over the shares it did not own.
A recovery plan included cutting about 6000 jobs and the transfer of the airline in 2015 to a new company, Malaysia Airlines Berhad.
It was supposed to be profitable by 2019 but this failed to eventuate, prompting a warning by then Malaysian Prime Minister Mahathir Mohamad that the government needed to move urgently to decide the company’s future of Malaysia Airlines and that it could even be closed down.
The government was still considering investment proposals for the financially-embattled airline as COVID-19 hit almost a year later.
