KUALA LUMPUR – Khazanah Nasional Bhd will stop funding Malaysia Aviation Group Bhd (MAGB) should talks with lessors on restructuring break down, the airline company has warned leasing firms.
This ups the stakes in discussions for a shake-up outlined in “Plan A”, with an alternative plan to divert funds into Firefly, reported Reuters, citing a letter whose content has been confirmed by six people familiar with the matter.
“In the event Plan A fails, shareholder (Khazanah) will cease funding for MAGB and will trigger a winding down/liquidation process for MAGB,” said the document.
Sources said this comes after the Malaysia Airlines Bhd (MAB) holding company sought discounts on plane rentals under a major restructuring plan.
Under “Plan B”, low-cost carrier Firefly will receive narrow-body aircraft, and eventually, wide-body ones from the market.
Also, Khazanah will “inject funds into Firefly directly to start new jet operations in Kuala Lumpur on a much smaller scale, focusing first on domestic services”.
The sovereign wealth fund declined to comment on the matter, while MAGB said it will only reveal “its final position upon achieving resolution with the parties” it is negotiating with.
Defending its restructuring plan as essential, the group said it aims to become a “sustainable and profitable organisation in the future”.
MAB has yet to recover from the twin tragedies of MH370 and MH17, and is struggling – along with airlines worldwide – to cope with the impact of the Covid-19 pandemic.
The national carrier, weighed down by overstaffing and high expenditure, has been looking for a strategic partner since last year.
It is negotiating price cuts with lessors through a restructuring it hopes to carry out via the UK courts, with sources saying Freshfields Bruckhaus Deringer and Clifford Chance are among the law firms tapped.
An October 7 deadline was set for lessors to respond to MAGB.
Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz has reiterated that the government will not inject more money into MAB, and it is Khazanah’s responsibility to sort out the matter.
“We have consistently said this is a matter that Khazanah has to resolve.
“The Finance Ministry will not be injecting any (more) cash or capital into the airline through Khazanah... so Khazanah, as the sole owner, will have to undertake their own exercise to ensure the survival of MAB,” he told BFM Radio’s Breakfast Grille programme today. – The Vibes, October 8, 2020
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