May 22 (Bloomberg) -- Malaysian Airline System Bhd., the nation's largest carrier, said it expects to eliminate as many as 22 percent of its workforce in the biggest round of job cuts in Malaysia, as part of plans to turn around the company.

The airline, based in the state of Selangor, will trim between 3,000 and 5,000 jobs, it said in a statement today. The cuts will cost the carrier up to 850 million ringgit ($234 million) and won't hurt its earnings targets, Managing Director Idris Jala said in a briefing today.

``It's a generous offer,'' Gan Kim Khoon, head of research at AmSecurities Sdn., which has a ``hold'' recommendation on Malaysian Airline shares. The airline's statement that the plan won't hurt its earnings target is ``implying it's making some operating profit already,'' Gan said.

Malaysian Airline, which has posted losses for the last three quarters, is trimming jobs for the first time and planning to sell assets and cut costs to return to profit by 2007 as part of a three-year business plan. The job cuts follow the take over by AirAsia Bhd., Southeast Asia's biggest low-fare airline, of 96 of Malaysian Air's domestic routes, most of them unprofitable, including services to small towns and rural areas.

Malaysian Airline is in talks with Qatar Airways for the state-owned airline of the Persian Gulf country to absorb 1,000 of its workers, Jala said. Malaysian Airline, which expects to complete the job cuts by July 31, has 22,835 workers on its payroll, according to its 2005 annual report.

Workers' Package

Workers, who have until June 7 to decide, were offered one to three months salary for every year of service, with no limit on the years served, the airline said. They were also each offered a one-off payment of 2,000 ringgit in medical benefits, it said.

That's better than banks in Malaysia which typically offer 1.75 months salary for every year of service and limit the number of years covered, Gan said.

The plan to cut jobs ``fast-tracks the organization's intention to right-size its workforce a year ahead of schedule,'' Jala told reporters.

About 70 staff out of the 1,700 working overseas will also be reduced, he said.

Under the turnaround plan unveiled in February, Malaysian Airline aims to narrow its losses to 620 million ringgit this year, post a net income of 50 million ringgit by 2007 and a record 500 million ringgit profit in 2008. The carrier reported a loss of 616.4 million ringgit in the quarter ended Dec. 31.

Earnings Target

``We will strive to meet the target,'' Jala said. ``It means we have to push for more sales and rejig stations,'' he said. The carrier seeks to halve its 32 stations, or key branches, after reducing its routes, he said.

Asia's airlines are seeking to cut costs on rising prices of jet fuel, their single-biggest expense. Malaysian Airline's announcement comes a week after Qantas Airways Ltd., Australia's biggest carrier, said it will eliminate 1,000 management and administration jobs by the end of the year.

Malaysian Airline, which will cut domestic flight frequencies by 58 percent and seats by 28 percent, will fund the job cuts partly with government compensation from giving up domestic routes to AirAsia, Jala said, without disclosing how much it will get from the state, which controls the airline.

Malyasian Airline is also seeking government loans of 4 billion ringgit to fund operations. The airline will reduce its fleet for domestic routes to 21 aircraft from 40, the government said in March.

AirAsia and Malaysian Airline will still compete on 19 main domestic trunk routes, or primary routes, the companies said on March 28.

Shares of Malaysian Airline fell 0.34 percent to close at 2.90 ringgit in Kuala Lumpur today. The stock has risen 2 percent this year. AirAsia shares, which have gained 3.1 percent this year, rose 0.6 percent to 1.64 ringgit.

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

Last Updated: May 22, 2006 07:37 EDT