KUALA LUMPUR: Malaysia’s cash-strapped airlines could get up to RM10 billion financial assistance from Khazanah Nasional Bhd.
Sources said the potential RM10 billion would specifically be in the form of loans guaranteed by Khazanah to help the local carriers cope with the Covid-19 pandemic.
This was meant as a short-term relief for them to cover operating cost and improve liquidity, a source told the New Straits Times.
The pandemic has exacerbated the local carriers’ yields and profitability, which had already been compressed by overcapacity and irrational levels of competition particularly in Asia Pacific.
“The assistance depends on how long the Covid-19 crisis will last. Most airlines have cash reserves less than a month to keep their operations, except AirAsia Group,” the source said.
He said the government’s intervention via the sovereign wealth fund would be critical at this juncture to assist local airlines such as Malaysia Airlines Bhd, AirAsia, Firefly and Malindo Air as the air transport industry supported about 450,000 jobs in Malaysia in 2018.
“The short-term relief is important for local airlines to continue operations and keep their staff employed amid capacity reduction in certain affected routes, aircraft grounding and travel restrictions enacted to curb the spread of the virus,” the source added.
Khazanah managing director Datuk Shahril Ridza Ridzuan said he could not comment on the possible financial aid.
“Apologies but things are too fluid right now,” he said when contacted.
Malaysian carriers recently initiated a voluntary unpaid leave scheme and at least 10 per cent reduction of its senior management salary including their allowances following their reduced operations due to the pandemic.
Malaysia Airlines group chief executive officer Captain Izham Ismail confirmed that the national carrier had been in discussions with the government on emergency measures to help it sustain operation.
He said the discussions did not involve on mergers between Malaysia Airlines and AirAsia Group.
“Solutions to address the industry oversupply situation and long-term sustainability need to be addressed holistically.
“While mergers between airlines is one option, addressing the issues via regulations and policies should also not be ignored as it could just be as effective,” he said.
Izham added that any merger proposal would need to take into account anti-competition regulations, and address the numerous implementation or integration challenges including the people aspects, and respective commitments/liabilities of both airline groups.
Sobie Aviation consultant and Singapore-based independent analyst Brendan Sobie said the Covid-19 crisis presented a rare opportunity for the Malaysian airlines industry to benefit from a reset.
“However, securing government support is a critical first step if the industry is to weather this crisis and transform,” he told the NST recently.
Sobie pointed out that government support was needed globally and not just in Malaysia, adding that some countries had committed to supportint their aviation sector.
“This is not about the survival of the fittest airlines but about which governments will follow the likes of the US and Singapore in supporting their airlines,” he added.
Sobie said there were lots of potential components in a government support package including job support schemes, loans or loan guarantees, and reduced or waived taxes, charges and fees.
“Ideally a package in Malaysia would include all these components, resulting in a lower cost base, ensuring sufficient liquidity and avoiding layoffs.
“By maintaining jobs at pre-crisis levels, airlines will be able to restore capacity as soon as the crisis is over and resume growth,” he said adding that this would drive an overall economic recovery and ensuring Kuala Lumpur’s role as an air hub is not diminished,” he added.