Malaysia Airlines in position for recovery post-pandemic - Khazanah

 

Khazanah Nasional Bhd expects the global aviation industry to recover, at the earliest, by 2023, but believes Malaysia Airlines Bhd (MAB) has the right cost structure and balance sheet to tough it out.

Khazanah Managing Director Shahril Ridza Ridzuan said the industry’s recovery, especially in terms of revenue, would take years to be at par with pre-pandemic levels.

He said MAB’s wide-ranging restructuring plan, for which the United Kingdom Court on Feb 22 had given its approval, provided the airline with much better prospects despite being seen by many that consolidation in the industry is inevitable.

"About RM15 billion of outstanding liabilities in this whole debt structure were taken out, either through debt forgiveness or through the convergence of debt to equity, allowing the balance sheet to reset at a much more sustainable level.

"We (also) received significant support from creditors in terms of liquidity management, for instance, to create a more viable cost structure in the immediate future,” he told a virtual conference after presenting Khazanah's 2020 financial performance report today.

Shahril said Khazanah also deferred delivery of new aircraft to a time, where hopefully the market will recover, as it was essentially taking out a substantial amount off its ongoing cost structure.

Under the restructuring plan, Khazanah was committed to inject up to RM3.5 billion over the course of the next five years, an essential move to give certainty to creditors so that in turn, they could provide the kind of discounts, haircuts and debt-to-equity convergence that are required to fix the airline's balance sheet.

According to Shahril, the sovereign wealth fund is committed to supporting the Malaysia Aviation Group Bhd (MAG) in implementing internal restructuring.

He said MAG would focus on working closely with the government and stakeholders on restarting air travel and promoting industry recovery, as well as continuing its cash conservation initiatives for the airline.

Khazanah is the sole shareholder of MAB, through its subsidiary MAG.

Asked about any guarantee that MAB would be able to turn around post-restructuring, Shahril replied, “no guarantee but what we have done with MAB’s restructuring plan is to negotiate will all stakeholders to put the airline in a good position”.

He said the aviation industry in Malaysia has had an oversupply situation for a very long time, which renders consolidation inevitable.

However, he said having the national carrier was the right approach to connect Malaysia with the world, as well as bring in valuable cargo such as the Covid-19 vaccines.

"The investment that we 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 added.

In 2020, Khazanah’s profit from operations fell to RM2.9 billion as compared to RM7.4 billion in 2019.

Dividend income from investee companies rose to RM5.2 billion from RM3.8 billion but was offset by lower divestment gains of RM2.7 billion against RM9.9 billion in 2019.

The impact of the pandemic led to higher impairments of RM6.0 billion, particularly in aviation and hospitality assets, compared with RM4.9 billion the previous year.

- Bernama