Malaysian Airlines set for shakeup after disasters

HONG KONG-

Malaysia is preparing to unveil the latest overhaul of its beleaguered state-owned airline, which is reeling from twin disasters months apart that killed hundreds of passengers.

Khazanah Nasional, the state investment company that owns 69 percent of Malaysia Airlines, said in early August it will announce details of the overhaul by the end of this month. Malaysian news reports said the announcement will come Friday.

Analysts expect Khazanah to slash jobs, drop money losing routes to Europe and China, and replace top management.

A substantial revamp has long been on the cards for Malaysia Airlines, which was struggling with chronic financial problems even before it was hit by the double disasters this year.

Investigators continue to scour the southern Indian Ocean for Flight 370 which severed contact with air traffic controllers and apparently veered far of course while en route from Kuala Lumpur to Beijing on March 8 with 239 people on board. In July, 298 people were killed when Flight 17 was blasted out of the sky as it flew over an area of eastern Ukraine controlled by pro-Russian separatists.

The tragedies have scarred its brand, once associated with high-quality service. Travelers on recent long-haul flights have posted photos on social media of nearly empty cabins and departure lounges. The airline says passengers fell 11 percent in July from the year before.

Khazanah has promised a complete overhaul of Malaysian Airlines, which has lost 5.5 billion ringgit ($1.7 billion) since the beginning of 2011 and has undergone at least four previous restructurings in the past dozen years. To carry out its revamp, the fund said earlier this month it would take full ownership of the airline by buying out minority shareholders.

“This is the last chance,” said Mohshin Aziz, an aviation analyst at Maybank.

Malaysia Airlines “would be dead already” were it not for its high level of state support, he said.

CEO Ahmad Jauhari, who had little airline experience before joining the company and whose contract is up in September, is likely to be shown the door.

Another prime target of the overhaul is likely to be the carrier’s 20,000-strong workforce, which is bloated compared with regional rivals such as Hong Kong’s Cathay Pacific Airways and Singapore Airlines. Those and other established Asian carriers have also been facing rising competition from upstart budget carriers such as Malaysia’s AirAsia.

The airline may cut up to 5,500 staff, or a quarter of its workforce, according to a report in Malaysia’s Star newspaper, which cited unnamed sources.

Staff cuts have always been a difficult sell because the jobs provided by the state-owned carrier are a form of economic patronage. Mohshin said they would be logical if routes to China and to Amsterdam and other Western European cities are cut.

“If you’re going to cancel routes, those planes are useless and when you don’t use aircraft you don’t need a lot of employees,” he said.