Ever since last month’s crash in Ukraine, its second disaster this year, Malaysia Airlines (MAS:MK) has been struggling to survive. The airline had been losing money before the March disappearance of MH370 and the July crash of MH17. Malaysian Prime Minister Najib Razak was just one of the critics calling for major changes.
This week, the airline’s owners may finally decide what those changes will be. The sovereign wealth fund that controls MAS is considering a series of steps to stem record losses, including layoffs of up to 20 percent of its workforce. Among those likely to lose their jobs, Bloomberg News reported on Monday, is Chief Executive Officer Ahmad Jauhari Yahya, whose term ends next month.
When searching for a new boss, the Malaysian government and its sovereign wealth fund, Khazanah Nasional, should consider a new strategy: Find an executive who has a lot of experience in the business of flying planes from one airport to another. That’s something the current boss didn’t have when he joined Malaysia Airlines in 2011: Ahmad Jauhari had worked in the power, oil, and media industries. Before taking over the country’s leading airline, he was CEO of a renewable energy company.
While entrepreneur Tony Fernandes was building local rival AirAsia (AIRA:MK) into the region’s premier low-cost carrier, Malaysia Airlines under Ahmad Jauhari couldn’t keep up. Even before the twin disasters this year, the airline was in trouble, losing 4.13 billion ringgit ($1.31 billion) from 2011 to 2013. Malaysia Airlines, which has endured four consecutive quarters of losses, is on track to make that five in a row when it announces it latest results on Thursday, Mohshin Aziz, an analyst at Maybank Investment Bank, told Bloomberg Television on Tuesday. “It’s going to be a very, very nasty quarter,” said Aziz, who put MAS’s latest quarterly loss as high as 600 million ringgit. That “is basically the highest loss ever in Malaysia Airlines history.”
Investors won’t have to put up with the losses much longer. Khazanah plans to delist the company. Then comes the pain for MAS employees. Among the first routes to go will be long-haul flights to Europe such as the one from Amsterdam that went down in Ukraine. Those “have been losing money for decades, and there’s no hope” for a turnaround, said Aziz. Flights to northeast Asia and Australia are likely to be on the chopping block, too. After restructuring, Malaysia Airlines might end up a lot like AirAsia, with a focus on domestic and regional routes.