Malaysia’s new government is talking about shutting down Malaysia Airlines. Is this a realistic threat?
In a word, no. At least not likely. But let’s work our way there.
Prime Minister Mahathir Mohamad is in a bind. As the deficit in Malaysia continues to grow, the newly-elected Prime Minister is looking for ways to stop the bleeding.
Khazanah Nasional, the Malaysian sovereign wealth fund, took Malaysia Airlines (MAS) private in 2014. Since then, it has sought to build a lean and profitable carrier.
Five years later, the prognosis is clear: total failure.
Yes, loss-leading longhaul routes, including service to Los Angeles via Tokyo have been cut. Yes, two tragic crashes scared away many prospective and long-term customers.
But $1.5BN has been poured into making Malaysia Airlines profitable and the carrier just lost about $750MN last year. Such losses cannot possibly be sustained, even with a viewpoint (not widely shared) that the airline is a public necessity, whose ripple effects across the wider economy undermine any calls for shut down.
Prime Minister Mohamad told reporters this week:
It is a very serious matter to shut down the national airline. We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or whether we should refinance it. All these things are open for the government to decide. We have to decide soon.
“Round And Round There She Goes, Where She Stops, Nobody Knows!”
Now that’s a sound strategy, isn’t it? We’ll either sell it, close it, or throw in another billion dollars into it…
And that lack of strategy is exactly why Malaysia Airlines will continue to groan on. And on…and on.
After the Prime Minister’s dire warning, Minister of Economic Affairs Azmin Ali talked about new routes to Indonesia and Thailand as part of the turn-around strategy.
It is certainly a logical fallacy, but my hunch is there will be no buyers for MAS, prompting the government to invest more money on the basis that they’ve already invested so much into it. There’s also national pride reasons.
Thus, this whole discussion warrants addressing, but cannot be taken seriously.
Even with the rise of Air Asia and other budget carriers, MAS is not redundant. Offering short-, mid-, and long-haul service and offering a full-service model works well for other airlines in the region.
But MAS must pick a strategy and stick to it. It has invested much in its lounge in Kuala Lumpur and in a refreshed business class product. My opinion, for what it is worth, is to cut all service to Europe and focus on a network spanning Japan to Australia that offers customers a reliable, full-service model.
Go ahead. Be an armchair CEO. What is your turnaround plan for MAS? Or do you deem it a lost cause?