Air Transport World

Juggling act: despite a return to government control, Malaysia Airlines aims to bring a commercial focus to its operation.(Profile)

In the late 1990s, Malaysia Airlines was ravaged by a conflict between privatization and satisfying its government's social and political agendas. Today, after a return to government control, it represents a unique response to the complex issues of nationalism and tourism. These show no signs of abating as government and airline seek solutions to the country's reliance on access to inexpensive air travel to link communities divided by sea, mountains and jungle.

Although MAS was privatized in 1994, the government retained a "golden share" and veto power over strategic decisions, It insisted that the airline maintain unprofitable domestic services in order to support social goals as well as promote tourism. The government's imposing shadow also resulted in MAS's retaining first-class cabins on regional routes for traveling bureaucrats long after better-heeled competitors had abandoned them. Nor was it permitted a free hand to address overstaffing, a legacy of a quarter-century of state control.

The currency crisis of 1997, which sent the airline into a dizzying financial spiral, exposed the folly of the conflicting agendas. Three years of red ink and a 10 billion ringgit debt burden pushed MAS to the breaking point and forced the government to step back in. In December 2000 it acquired the 29.09% owned by former Chairman Tajudin Ramli for 1.79 billion ringgit ($470 million), or twice the market value of the bottling. Deputy Finance Minister Datuk Chan Kong Choy justified the bailout as necessary to support plans to develop the new Kuala Lumpur International Airport into a regional hub.

Coincident with the return to government control, Mohamed Nor Yusof was named chief executive. A former banker and adviser to the Finance Ministry, Nor evolved a restructuring plan dubbed Widespread Asset Unbundling. This involved the formation of a new Finance Ministry company, Penerbangan Malaysia Berhad, to rake over the carrier's debt and assets, raise private capital and sell airline property.

In effect, the slate was wiped clean and MAS was given a fresh start. It transferred ownership of 73 aircraft, leases on another 17 and liabilities of 6.97 billion ringgit to PMB. The latter received 482.5 million new shares (a 69.4% interest) at 3.85 ringgit to offset the assumption of the carrier's liabilities and the difference between the value of the fleet and the liabilities. …

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