Khazanah says Malaysia Airlines’s strategic review ongoing

A member of the ground staff walks near a Malaysian Airlines Bhd. aircraft at Kuala Lumpur International Airport (KLIA) in Sepang, Selangor, Malaysia, on Tuesday, Jan. 17, 2017. Photographer: Sanjit Das/Bloomberg

Malaysia’s sovereign wealth fund Khazanah Nasional Bhd said its strategic review of Malaysia Airlines Bhd is still ongoing and involves multiple parties that have expressed interest in the ailing national carrier, according to a report by The Edge Financial Daily.

However, Khazanah declined to name the interested parties. Ultimately, the airline’s future is a policy decision that impacts various stakeholders including Malaysia Airlines, its staff, and customers, it added.

The $33-billion sovereign wealth fund was responding to a recent report by The Malaysian Reserve which said Khazanah was pushing for a merger between Malaysia Airlines and long-haul budget carrier AirAsia X Bhd.

AirAsia co-founder and group CEO Tony Fernandes had previously dismissed talks of a possible merger with Malaysia Airlines as the regional budget carrier intends to focus on its digital transformation. In a recent interview with The Edge Malaysia, Fernandes reiterated AirAsia is not interested in the national carrier.

The report also claimed that the negotiations between Khazanah and AirAsia X, which Fernandes is a major shareholder, are already at an advanced stage. The proposed merger is said to be facing strong resistance from the sovereign wealth fund’s stakeholders due to the lopsidedness of the deal, considering AirAsia X is still loss-making.

Eight years ago, both AirAsia and Malaysia Airlines had agreed to a share swap deal that would have seen Tune Air Sdn Bhd, the parent company of AirAsia, exchanging 10 per cent of AirAsia shares for 20.5 per cent of the now-defunct Malaysia Airline System Bhd stocks with Khazanah. However, the deal was scrapped amid pressure from the workers’ union at MAS.

In July, Khazanah had hired Morgan Stanley to explore strategic options for Malaysia Airlines which included a potential stake sale. The fund is the national carrier’s sole shareholder and invested 6 billion ringgit in the business in a bid for it to return to profit after it was privatised in 2014.

Najah Air, led by AirAsia Group co-founder and former chairman Pahamin Ab Rajab, is among the forerunners that are vying to take over Malaysia Airlines. However, it is said that Najah Air had pulled out from the race as it is not confident about striking a deal. Another contender was The Westerstar Group, although it is also said that the conglomerate did not submit its bid to Morgan Stanley.

A few weeks ago, The Edge Malaysia reported Japan Airlines Co. could be a contender to pick a stake in Malaysia Airlines, as there have been high-level talks for Japan Airlines to pursue an interest in the national carrier amid close ties between the two governments.