Malaysian Aviation Group (MAG) gets much needed funds
Malaysia Airlines Bhd.’s parent company Malaysian Aviation Group (MAG), has been given the nod to implement a wide-ranging restructuring by most of its lessors and a U.K. court on Monday. This move has provided a lifeline to the national flag carrier. MAG has floundered amid a plunge in air traffic during the coronavirus pandemic.
MAG can now proceed with its plan to reduce its liabilities of over 15 billion ringgit ($3.7 billion). The company announced this in a statement. Malaysia’s sovereign wealth fund Khazanah Nasional Berhad (Khazanah) wholly owns MAG.
Restructuring since 2020 October
In October, MAG began an urgent restructuring exercise. The exercise involved renegotiations with leasing companies and creditors, as airlines globally contend with lockdowns and travel restrictions to combat a resurgence of Covid-19 in many countries. The airline has firstly cut salaries for management and pilots. Secondly, it has offered unpaid leave to employees. Finally, it had sought payment deferrals since March last year.
MAG expects to complete the financial restructuring exercise in early March this year. It will see the airline “successfully achieve” agreements with a range of its engine, financial and maintenance leasing companies and lenders, as well as Malaysian state entities. The airline has also embarked on green initiatives.
Khazanah will commit new capital of 3.6 billion ringgit to MAG to fund the airline’s business throughout the restructuring period until 2025.
This restructuring will not be the first time that Khazanah has committed capital to the airline.
A decade of struggle for MAG
The airline has struggled for a good part of the last decade. It first began with the disappearance of MH370 and the loss of MH17 in 2014. These incidents led Khazanah to take MAG private that year in a bid to save the airline.
There was some success from 2015 till 2017 when the airline changed CEOs.
Unfortunately, this success was shortlived. The change in government following the 2018 general elections changed in the MAG board, leading to more losses.
