A merger between Malaysia Airlines Bhd (MAB) and low-cost airline AirAsia would be difficult to carry out due to the different business model and work culture of the two entities, according to Malaysia’s sovereign wealth fund Khazanah Nasional Bhd managing director Shahril Ridza Ridzuan.
Khazanah fully owns Malaysia Airlines.
“Malaysia requires both low-cost operators as well as a higher-value operator like Malaysia Airlines to co-exist because you need to address multiple segments of the market,” Shahril said in a report by national news agency Bernama.
Earlier this month, Shahril said that the sovereign wealth fund was waiting for Malaysia Airlines to come up with a recovery plan.
“So I think for the long-term strategy of Malaysia, (it is) important to provide enough choice, not only for Malaysians to fly but for international travellers to come to the country (as well),” he said on TV3’s Money Matters programme on Saturday.
In an interview with Bloomberg TV, when asked if the proposal on merging Malaysia Airlines and AirAsia was off the table, he replied “in life, never say never to anything.”
The aviation industry is one of the worst-affected sectors as countries imposed travel bans and stay-home orders to contain the highly-infectious COVID-19 pandemic. The pandemic has also forced airlines to slash costs, laying off staff and raise capital to keep themselves afloat.
Elsewhere, Hong Kong’s Cathay Pacific Airways announced a recapitalisation plan worth HK$39 billion ($5.03 billion) led by the Hong Kong government last month. The plan includes the issuance of preference shares, warrants, bridging loans and rights issues, to help it weather the coronavirus pandemic, according to Reuters.
Nearer to home, Temasek-backed Singapore Airlines reportedly said that it had secured about $1 billion in credit facilities, in addition to the S$8.8 billion ($6.32 billion) it recently raised from a rights issue, to help it weather the COVID-19 pandemic.
Singapore Airlines reportedly said it had raised S$900 million through loans on some of its aircraft. It had also arranged new lines of credit and a short-term loan with several banks for further liquidity of more than S$500 million.
Meanwhile, AirAsia has announced plans to raise capital of up to RM1.4 billion to strengthen its equity base and liquidity. It also said it is in talks to raise more than RM1 billion funds from certain financial institutions, following a statement from the company’s auditors, Ernst & Young, which expressed doubts on the airline’s ability to continue as a going concern. AirAsia reported a net loss of RM803.85 million in the quarter ended March.
In an interview with Nikkei Asian Review, AirAsia Group CEO Tony Fernandes the low-cost carrier can bounce back to profitability next year, but that it will look to raise RM2 billion ringgit in the next six months to be in a “very comfortable” position.