Malaysia Airlines has unveiled a major restructuration plan that includes 6,000 job cuts in a bid to stay in business after suffering several years of losses.
The plan, released today (June 1st), states that the airline will start operating under a new brand from September 1st, whose name has not yet been revealed.
Focus on regional routes
The move was masterminded by newly-appointed CEO Christoph Mueller: “We are technically bankrupt … the decline of performance started long before the tragic events of 2014,” he said at a news conference.
Some 20,000 existing employees received letters of redundancy over the week-end, but 14,000 of them are anticipated to remain with the restructured airline.
Malaysia’s national carrier is also expected to drop unprofitable long-haul routes such as to Europe, and focus instead on regional routes. The shake-up means it is looking to sell two of its six Airbus A380 superjumbos.
Measures include “reducing aircraft size on certain routes, reducing frequency on certain routes, and certain cases abandoning the route altogether,” Mr Mueller said.
However, he added: “We will remain a full service international carrier connecting continents.”
Strong regional competition
The airline’s failure is widely blamed on poor management, government meddling, and strong regional competition.
Two recent disasters were the final straw, with Malaysia Airlines flight MH370 disappearing with 239 passengers and crew aboard in March 2014. Four months later, flight MH17 was shot down by a suspected ground-to-air missile while in Ukrainian airspace, with the loss of 298 passengers and crew.
In its last earnings report, the airline recorded its worst quarterly loss since late 2011 as passenger numbers and yields dropped following the two tragedies. According to the Financial Times, Mr Mueller did not define his break-even target, but one person close to the company said the aim was to potentially generate an operating profit by 2018.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.