Malaysian Airlines delisted; restructuring ahead

The future for Malaysian Airlines remains unclear as the company works to recover from two major disasters in a very short timeframe. What is clear, however, is that the State-backed carrier will be able to make the necessary changes without interference from outside investors. Khazanah Nasional, the Malaysian national investment arm and 70% stakeholder of the airline, announced today that the company would be delisted from trading on the open market. Trading of shares is suspended and the minority shareholders will be bought out on the private market at a cost of USD ~$325mm.

The bigger question now is what the airline should actually do as part of this restructuring. Some have suggested that spinning off their low cost arm Firefly would be a quick way to raise capital, for example. The privatization would also allow the carrier to restructure and address labor issues with minimal interference. This latter part appears to be the more significant factor in the move. Efforts to restructure and partner with AirAsia in 2012 were derailed by MAS’s main employee union, a move which has not helped the company’s financial performance. And, while airlines typically enjoy a boost in revenues as they join a global alliance it is not clear that oneworld membership has had that effect for MAS.

And the recent incidents certainly haven’t helped the image problem.

Kazhanah has invested a lot of money in the past decade in efforts to right the ship. Success has been somewhere between fleeting and non-existent. The cash costs to take the company private are likely less than another public infusion would cost and it helps address the union, political and management issues without nearly as much interference. They were going to have to spend the money anyways; this seems like a reasonable way to make it happen.