Malaysia Airlines is ‘technically bankrupt’ - Mueller

The newly appointed chief executive of loss-making Malaysia Airlines said on Monday that the carrier is "technically bankrupt", as he announced plans for a restructuring that will cut the company's workforce by a third.

"We are technically bankrupt...the decline of performance started long before the tragic events of 2014," Christoph Mueller said, speaking at a news conference. Already squeezed into years of losses by stiff regional competition, the carrier was seriously affected last year by the loss of two jets in separate disasters.

Mueller was making his first public appearance as CEO since being hired last month by the carrier’s owner, Malaysian state fund Khazanah, to lead the restructuring. The airline on Monday confirmed previously disclosed plans to cut 6,000 jobs, shrinking its workforce to 14,000.

Many analysts worry that the state-owned carrier’s long history of mismanagement and government interference, and its severely damaged brand after last year’s two plane disasters will be too much to overcome.

“You can’t parachute in someone irrespective of how sterling his previous record shows and expect him to do a job with an airline that’s been abused for two decades,” said Shukor Yusof, an analyst at Malaysian aviation consultancy Endau Analytics.

In addition to an unprecedented need to build a completely new brand after the disappearance of flight MH370 and the shooting down of MH17, Mr Mueller must slash costs at a time when the airline faces intense competition from other full-service carriers and budget airlines.

Forced to fly to unprofitable destinations to promote Malaysia’s foreign policy agenda, keep on more staff than needed due to powerful unions and to hand out contracts to politically connected firms, the airline has been saddled with a cost base 20 percent bigger than its peers, analysts say.