NICHOLAS IONIDES / SINGAPORE
Airline reveals wide-ranging scheme to raise cash and claims that traffic is picking up
One year after taking back control of Malaysia Airlines (MAS) through a controversial renationalisation, the Malaysian government is pumping more than 6 billion ringgit ($1.1 billion) into the troubled airline in an attempt to reduce its massive debts.
MAS, which is on course to report its fifth consecutive year of losses to 31 March, unveiled the sweeping cash-raising plan on 7 January. It was immediately described by analysts as another "bail-out" by the government, but one that was generally welcomed.
Under the plan, a company set up by the ministry of finance will buy eight aircraft and property assets from MAS. The airline will then lease them back.
MAS is also negotiating to sell a majority stake in its catering unit to a consortium led by LSG Sky Chefs. It says it received an offer from the consortium for 70% of MAS Catering on 7 December, although it wants to dispose of all its shares in the loss-making subsidiary.
The asset sales to the government include three Boeing 747-400s, as well as three new 747-400s and two Boeing 777-200ERs, to a special-purpose company named Aircraft Business Malaysia.
The aircraft will be leased back for 12 years and the sales, to be completed in the first half of this year, will raise 3.9 billion ringgit. Funds will be used to repay yen-denominated loans and for working capital purposes, including part-financing the purchases of the new aircraft.
Another special-purpose vehicle set up by the finance ministry will at the same time buy and lease back to MAS its headquarters in Kuala Lumpur, as well as airport offices and other properties estimated at 2.2 billion ringgit.
MAS has struggled for years under a debt of around 10 billion ringgit. It says the disposals "would enable MAS to address its cash-flow position and subsequently improve its net current asset position". It expects to return to profitability by 2004.
The airline claims, meanwhile, that there are signs that traffic is recovering and as a result it will reinstate suspended services to six international destinations and continue operating to two others that it had previously planned to drop.
The carrier says it will gradually reinstate services over the next two months to Beirut, Cairo, Istanbul, Karachi, Manchester and Rome. It will also continue to serve Auckland and Zurich - two of 12 destinations it announced late last year that it would drop.
Source: Flight International
