Malaysia Airlines has been struggling financially for many years, but things got significantly worse when the airline lost two 777s just weeks apart about five years ago.
The airline has restructured… sort of, but not really. The problem is that the airline can’t seem to decide on a strategy and actually execute it. Malaysia Airlines decided they’d bring a 747 back into their fleet. They spent the money to reactivate it, only to never fly it.
Then the airline decided they’d retire the A380… then they decided they wouldn’t.
The list of things they’ve changed their mind on goes on and on. On top of that, the airline has seen significant management changes:
- The airline hired Christoph Mueller as the turnaround CEO, and he quit after just over a year to go work for Emirates
- The airline then hired Peter Bellew as the next CEO, and he quit after just over a year to go work for Ryanair
- The airline then hired Izham Ismail as the next CEO, and he’s still the current CEO
I have a lot of respect for the current CEO. He’s a local, and he has been at the airline his entire career. At the same time, I also think that’s a liability, because I imagine he has a harder time making tough decisions, given that he views the entire airline as being his “family.”
Anyway, the airline has been aiming to return to profitability, but that hasn’t happened. Bloomberg reports that Malaysia’s prime minister has now said that he’s studying options for Malaysia Airlines, including investing more funds, selling it off, or even shutting down the airline. Mahathir Mohamad has said:
“It is a very serious matter to shut down the national airline. We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or whether we should refinance it. All these things are open for the government to decide. We have to decide soon.”
The airline has been taken private after Khazanah Nasional Bhd poured 1.5 billion USD into the airline in 2014 in hopes of turning the airline around and making it profitable (and I should say “sort of private,” since this is the sovereign wealth fund of the government of Malaysia) . They’re now demanding the airline come up with a strategic plan for profitability, which is easier said than done.
The added challenge at the moment is that the wealth fund that owns Malaysia Airlines reported a loss of over 1.5 billion USD last year, and Malaysia Airlines accounted for about half of those losses.
Bottom line
With Malaysia Airlines continuing to lose money with no end in sight, it sure seems like their current plan isn’t sustainable. So while some drastic measures need to be taken, my guess is that the government will just pour more money into the airline and maintain the status quo.
I just don’t see Malaysia letting their national airline go out of business. At the same time, I also don’t see the airline undertaking a real turnaround plan. Goodness knows that if they haven’t been able to do so in the past five years, the next five years are unlikely to be any different.
What do you think will happen to Malaysia Airlines?
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