Malaysia Airlines Can Be Saved, But Only By A Federal Overhaul & Complete Restructuring

After the disappearance of flight MH370 in March and the crashing of flight MH17 last month, Malaysia Airlines has reached a desperate, pivotal point. Shares have fallen and quarterly earnings plummeted, as did passenger flight reservations. As the airline's stocks dropped to its lowest since 1998, the company has been headed toward bankruptcy. Now Malaysia's state investment company Khazanah Nasional plans to make Malaysia Airlines state-owned, proposing a comprehensive plan to restructure the flailing airline.

Khazanah, which owns 69 percent of Malaysia Airlines, has proposed to buy out minority shareholders at 27 sen (8 cents) a share. In recent months, shares in the airline had fallen to 15.5 sen (5 cents), Khazanah is offering to pay a significantly higher amount. The overall buyout would cost 1.38 billion ringgit ($429 million) — to put that in perspective, U.S. Airways proposed a $11 billion deal to acquire American Airlines last year.

In a statement, Khazanah said:

The proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul. Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity.

Even before the disasters, Malaysia Airlines was among the worst-performing carriers in the industry. But the impact of MH370 and MH17 has plunged the airline into an unprecedented position, and the only answer now seems to be a complete overhaul.

After the Disappearance of MH370

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In March, flight MH370, carrying 227 passengers, lost contact with air traffic control less than an hour after takeoff and mysteriously vanished without a trace — a lengthy and comprehensive search involved multiple countries, but has turned up nothing to date.

Mere days later, shares in the airline fell 20 percent, and by May, the airline had experienced the lowest quarterly earnings in more than two years. On top of that, flight bookings from China fell 50 to 60 percent (the majority of the victims of MH370 were Chinese).

After the Crash of MH17

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In July, flight MH17 was shot out of the sky, killing all 283 passengers, several of whom were renowned AIDS researchers. After its second major tragedy in just four months, far more is on the line now for the airline than just earnings. Malaysia Airlines, which was once a symbol of national pride, will have to overhaul its image as well, which may be harder to restructure.

According to the Guardian, Malaysia Airlines had been considering rebranding the company, including changing its name. For now, Khazanah's proposal will focus on more financial matters, and they're hoping to announce detailed plans by the end of the month.

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