Malaysia Airlines May Need To Shut Down Without Restructuring
Financial situation comes to a head
Malaysia Airlines is making plans to shut down if lessors do not accept its restructuring bid. The deadline for accepting the restructuring plan is Sunday, which means we could know the fate of the airline soon.
Malaysia Airline’s financial woes date far back from the current crisis. The airline had been operating at a loss for a while and expected to need nearly $5bn to continue operations until 2025. However, the pandemic has decimated business for the ailing flag carrier, with reserves quickly falling and airline burning through a staggering $84mn every month.
Last week, the airline’s owner, Khazanah, said that it intends to stop funding the carrier and plan an alternate airline if Malaysia cannot restructure. This has sent the airline scrambling to pass its restructuring plans by creditors, which would also see it renegotiate contracts with aircraft lessors.
Malaysia CEO Izham Ismail is quoted in The Edge Malaysia as saying this week that the carrier will have no choice but to shut down unless the plan passes, according to Bloomberg. He also added that the airline does have sizeable support but needs to flip a few more undecided creditors to pass the restructuring plans.
According to Reuters, however, a leading group of creditors has rejected Malaysia’s plans, calling it “fatally flawed.” This group claims comprise nearly 70% of the airline’s lessors, which could spell trouble for Malaysia Airlines. Khazanah does have a plan if the airline shuts down, known as “Plan B.”
Malaysia Airlines’ parent, Khazanah, has a plan to ensure continued air operations. If the airline fails, Khazanah will place Malaysia into liquidation and transfer its Air Operator’s Certificate (AOC) to another carrier. This airline would then fly the essential air routes as needed.