Malaysian Airline System Bhd. is considering job cuts, a review of aircraft orders and replacing its chief executive officer after the national carrier suffered two disasters this year, people familiar with the plan said.
The airline’s parent, sovereign wealth fund Khazanah Nasional Bhd., will discuss the proposals tomorrow, which also include cutting some routes, one person said, asking not to be identified as the discussions are private. The carrier may need to lay off between 3,000 to 4,000 people, a second person said. The carrier had 19,577 employees at the end of last year, according to data compiled by Bloomberg.
Khazanah is also talking to as many as three people as possible candidates to replace Malaysia Airlines Chief Executive Officer Ahmad Jauhari Yahya, whose term is due to expire in mid-September, one of the persons said.
The restructuring measures and Khazanah’s offer earlier this month to buy out minority shareholders are part of the plan to revive the Subang, Malaysia-based airline. The carrier, which will report earnings Aug. 28, is struggling to stem losses and repair its image after the downing of Flight 17 in Ukraine last month compounded woes from the disappearance of a jet in March.
“The airline needs fleet rationalization,” said K. Ajith, an analyst at UOB Kay Hian Pte in Singapore. “The question is where, how and what type of aircraft. The long-haul European routes might be cut. The European routes have been money-losing for Malaysia Airlines.”
A call to the office phone of Khairunnisak Dzun Nurin, a spokeswoman for the airline, wasn’t answered. Khazanah doesn’t comment on speculation, Raslan Sharif, a spokesman for the sovereign wealth fund said. The carrier’s shares were unchanged at 25.5 sen in Kuala Lumpur trading today. The stock has declined 18 percent this year.
The airline needs to take tough measures in a thorough overhaul and the government and Khazanah are in the final stages of working out the restructuring plan, Prime Minister Najib Razak said Aug. 8.
Khazanah said it would buy the 30.6 percent stake it didn’t already own in the company at 27 sen per share for a total of 1.38 billion ringgit ($436 million). It plans to delist the company after the two disasters.
Even before that, Malaysia Airlines had accumulated losses as more low-fare carriers started in Southeast Asia and lured customers by driving down fares. The airline missed its target to be profitable last year on higher fuel, maintenance and financing costs.
Flight 17, 370
Flight 17 was shot down in Ukraine in July, four months after a jet en route to Beijing from Kuala Lumpur vanished. The earlier incident put the carrier under global scrutiny, jeopardizing its reputation and prompting boycotts in China, whose nationals accounted for most of the passengers. No trace of the plane has been found in the world’s longest search for a missing plane in modern aviation history.
Even before that disappearance, Malaysia Airlines had racked up 4.13 billion ringgit in losses over the previous three years. The carrier will probably lose more than 1 billion ringgit in 2014, according to average analyst estimates compiled by Bloomberg.
Ahmad Jauhari, a 60-year-old power industry veteran, joined the airline in September 2011, and struggled to turn the carrier profitable as it was battered by unviable routes and competition from low-cost carriers including AirAsia Bhd.
He spent about 16 years in the power-generation industry, where he rose to the rank of managing director at Kuala Lumpur-based Malakoff Bhd., the nation’s largest private-sector power generation group before it was delisted. He was the CEO of privately-held Premium Renewable Energy Sdn for about six months before joining Malaysian Air.
His career also included stints at Esso Malaysia Bhd., the then petroleum-retailing unit of Exxon Mobil Corp., and newspaper-publishing group New Straits Times Press Bhd.
Options for a revival plan for the airline had ranged from Khazanah taking it private to bankruptcy, with both routes involving a delisting, a person familiar with the matter said last month, asking not to be identified because the talks were private. Malaysia Airlines director of commercial operations Hugh Dunleavy had in May ruled out a bankruptcy.