Canadian Manufacturing

Embattled Malaysia Airlines cuts 6,000 workers

The employee reduction represents 30 per cent of its workforce and is part of a US$1.9 billion government plan to revive the national carrier

KUALA LUMPUR, Malaysia—Malaysia Airlines will cut 6,000 workers as part of a US$1.9 billion overhaul to revive its damaged brand after being hit by double passenger jet disasters.

The staff reduction represents about 30 per cent of its current workforce of 20,000. A search for a new CEO is underway but there is no move to change the airline’s name, which some branding experts had said was necessary for a successful makeover.

Khazanah Nasional, the state investment company that owns 69 per cent of the airline, said the overhaul includes the establishment of a new company that will take over the existing Malaysia Airlines business and its reduced staff.

Analysts say the substantial staff cuts suggest the airline will reduce flights to Europe and China.

Twin disasters and ongoing financial woes “created a perfect storm for the restructuring to take place,” said Khazanah managing director Azman Mokhtar. “We need to have a fresh start.”

The plan aims to “strike a balance between Malaysia’s desire to revive a national carrier against the prudent use of public funds,” he said.

The airline will be removed from the Malaysian stock exchange and taken completely under the wing of the government. Khazanah, which previously announced that it plans to take 100 per cent ownership, aims to restore Malaysia Airlines to profitability by the end of 2017 and then relist its shares on the stock exchange by the end of 2019.

A substantial revamp has long been on the cards for Malaysia Airlines, which was struggling with chronic financial problems even before it was hit by the double disasters this year.

The tragedies have scarred the airline’s brand, once associated with high-quality service. Travelers on recent long-haul flights have posted photos on social media of nearly empty cabins and departure lounges. The airline says passengers fell 11 per cent in July from the year before.

Azman said Khazanah’s investment “will not be a bailout” and that the investment company will get its money back if the airline follows strict conditions laid out under the 12-point plan restructuring plan.

Khazanah said it would consider selling all or some of its stake to “strategic buyers from the private sector” once the carrier returns to the stock market.

But after four previous restructuring efforts in a dozen years, the latest plan was met with some skepticism by analysts.

Analysts have been predicting the airline will cut unprofitable routes to China and Western Europe, where many of the passengers in the two disasters were from.

Azman said Khazanah has recommended to the government that the Malaysia Airlines name remain unchanged. He also said there are no plans to sell its profitable maintenance arm.

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