PUTRAJAYA: Khazanah Nasional Bhd expects air travel recovery will be "hard-pressed" and unlikely to happen earlier than 2024.
It would be dependent on the reopening of the international borders to facilitate global aviation growth, according to the sole shareholder of Malaysia Airlines Bhd (MAB).
Khazanah believes the global aviation sector would still navigate a "tough" recovery period going forward.
Managing director Datuk Shahril Ridza Ridzuan said Khazanah's RM3.5 billion capital injection into Malaysia Airlines would at least help the national airline going through the period with the right cost structure and balance sheet to steer out in much better prospect in 2023 and 2024.
Khazanah saw its profits from operations in 2020 plunged 60.8 per cent to RM2.9 billion from RM7.4 billion, dragged by higher impairments of RM6.0 billion, particularly in aviation and hospitality assets, compared to RM4.9 billion in the previous year.
"The bulk of the impairments with over RM3 billion was a direct financial support for Malaysia Airlines as we helped them (the airline) for their cashflow requirement throughout 2020," he said at a virtual conference after announcing Khazanah's 2020 financial performance today.
Shahril Ridza said Malaysia Airlines had also experienced a write-down in the value of assets, which declined tremendously resulting from plunging air passenger.
Khazanah said it would continue to provide full support and close cooperation in the comprehensive efforts to ensure the airline sustainability post-pandemic.
Under the restructuring plan, Khazanah was committed to putting in up to RM3.5 billion over the course of the next five years.
This was to "give certainty" to the restructuring plan so that the creditors, in turn, could provide the kind of "discount haircut" and debt-to-equity convergence.
"It is basically, all parties - restructuring of the balance sheet of the airline, allowing the best possible financial outcome from the restructuring.
"But the revenue outcome will be dependent on essentially of what happens with the opening of the aviation and borders in the future," said Shahril.
On February 22, the High Court of Justice of England and Wales (UK Court) sanctioned a scheme of arrangement between Malaysia Aviation Group's (MAG) leasing entity, MAB Leasing Ltd (MABL), and the majority of its aircraft operating lessors.
This represented an important component of the groups' wider restructuring exercise to achieve a reduction in liabilities of over RM15 billion.
MAG said it would focus on working closely with the government and stakeholders on restarting air travel and promoting industry recovery, as well as continuing cash conservation while capturing demand recovery as part of its internal restructuring.
"About RM15 billion of our liabilities in the whole capital structure were taken out either through debt forgiveness or through the convergence of debt to equity, allowing the balance sheet to reset at a more sustainable level.
"We receive significant support from creditors in terms of liquidity management to create more available cost structure in the immediate future
"We also defer delivery of new aircraft to a time where hopefully the market will recover, which is essentially taking out a substantial amount of ongoing cost structure of MAB," said Shahril Ridza.
He reckoned that consolidation in the local aviation industry would be inevitable if the sector continued to face "oversupply" issue in the post-Covid-19-pandemic.
Shahril said having the national carrier was the right approach for Malaysia connecting to the world, bringing value in terms of cargo and vaccines supplies.
"MAB Kargo Sdn Bhd has been the forefront of bringing the vaccines for Malaysians. The investment that we (Khazanah) are doing over the next few years will keep the airline afloat until they can get to the turnaround, which is part of the necessary support for our economy and infrastructure," he said.
Khazanah will likely consider to give up a certain stake in Malaysia Airlines to add more value to existing equity holders, resulting from its debt to equity convergence that some of the creditors to cut.
"However, we remain the largest shareholder of MAB going forward. Any discussion for new investors will likely occur after the recovery in aviation as we expect until 2023," he said.