Malaysia Airlines to shed third of workforce

Malaysia Airlines is to shed a third of its workforce and trim its fleet as part of restructuring efforts after being taken back into government ownership following two disasters last year.

Over the past week, the entire 20,000-strong workforce received letters of termination at the “old” Malaysia Airlines. However, an email presentation by the company said that it will offer “at least” 14,000 members of staff their jobs back at the newly-minted Malaysia Airlines Berhad.

The announcement adds details to the three-year turnaround plan which has been in circulation for months. Summed up as: “Stop the bleeding ; Fit for the future ; Grow again”, the scheme is light on specifics, but will involve cutting costs this year, launching programmes to become more efficient next year and regaining market share to become a regional leader by 2017/18.

The Malaysian state is seeking to rescue the national carrier after it suffered two calamities last year – MH370 vanished without a trace in March and MH17 was shot down over Ukraine in July, killing 298.

Last August, Khazanah, the country’s sovereign wealth fund that is now the airline’s sole shareholder, agreed a rescue plan to privatise and restructure the airline. Khazanah previously held a 69 per cent stake and paid 1.4 billion Malaysian Ringgit (€348 million) to buy out the carrier’s minority shareholders.

On the agenda for this year are the elimination of loss-making operations and renegotiating key contracts, such as those with lessors and airports.

While revenues at the airline were scythed following the two disasters the company has long struggled to turn a profit: the last time it was in the black was in 2010.

As a result the group had already been lurching from one restructuring plan to another. The carrier has been hit by the twin challenges of fierce competition from budget regional carriers such as AirAsia, founded by Malaysian entrepreneur Tony Fernandes, and the cost of maintaining unprofitable long-haul routes.

The airline has a dual significance for the country not only as one of the oldest in Asia, but also as an emblem of the southeast Asian country’s rapid industrialisation during the 1980s.

Chief executive Christoph Mueller - who is one month into the job after serving five years reviving Aer Lingus - last week assured customers that the airline's operations would continue as usual amid the restructuring.

“You can continue to make reservations in full confidence that our flights and schedules are operating as normal, that tickets sold will be honoured, and that our Enrich frequent flyer programme continues with Miles and status preserved”, Mr Mueller said.

Mohshin Aziz, an analyst for Maybank, was critical of the timing of the announcement. A delay of a week meant that the announcement of job cuts and the blow to employees has coincided with school holidays and a peak in pressure on the group.

He also suggested the company needed to shake up the management structure under Mr Mueller. He said: “The minions have made their sacrifice, the masters have to make their fair share too.”

– (Copyright The Financial Times Limited 2015)