Malaysia Airlines on the brink, but not out yet

Malaysia Airlines has been struggling and it is no news. The airline has been facing adverse headwinds since flight MH370 disappeared and flight MH17 was shot down in 2014.

The airline has missed its target of turning profitable in 2018, aided in no small part by rising fuel costs.

Now the wounds are getting reflected on its sole shareholder Khazanah, the sovereign wealth fund of Malaysia. Khazanah had to make a massive impairment to its books that eventually caused it to post an annual pre-tax loss for 2018, its first since 2005.

Everyone is talking

Reportedly, the Malaysian government is considering all possible options regarding the fate of its national carrier. According to Prime Minister Tun Dr Mahathir Mohamad. “It is a very serious matter to shut down the national airline. We have to decide soon. We will nevertheless study the situation whether we should shut it down or we should sell it off, or whether we could refinance it. All these [options] are open.”

Economic Affairs Minister Datuk Seri Azmin Ali said “The prime minister has given his view on how to manage the situation now. They (Malaysia Airlines and Khazanah) are taking the matter seriously, and hopefully, they will find the solution to it. Hopefully we can also explore new markets from Indonesia and Thailand:

Stronger words came from Mohd Sheriff Mohd Kassim, who was Khazanah managing director from 1994 to 2003. He said “There are a lot of people saying that we may have to re-examine whether we still need a national airline, and I think we should really look into it, if we really need a national airline”

My view

I closely track the Air India developments and the issues with Malaysia Airlines are very similar.

However, it is hard to privatize or discontinue a national airline. It is even harder in a democratic setup. There is a potential loss of face and there are certain loss of jobs. Both issues can and will be raised by the opposing parties to corner the government.

The scenario is no better if the airline manages to turn around its fortunes in a private setup. The government will be accused of favoritism or selling the national jewel at cheap.

I will wait before writing the obituary. It is probably going to be a long wait.