Malaysia Airlines posts quarterly loss amid delisting
Kuala Lumpur, Malaysia • Malaysian Airline System, which lost a plane to a missile in Ukraine while another remains missing for months, reported a sixth quarter of losses as its majority owner considers a restructuring plan.
Net loss widened to $97 million in the three months ended June, the carrier controlled by sovereign wealth fund Khazanah Nasional Bhd. said in a statement Thursday. Revenue fell to $1.1 billion. The company said the full financial impact from the two air disasters will be felt in the second half.
Khazanah made a $442 million buyout offer this month to take Malaysia Airlines private in the first step of a revamp. The carrier has lost 19 percent of its market value this year, after enduring two disasters and having racked up $1.3 billion in losses in the three years through 2013. Malaysian Prime Minister Najib Razak has said "painful steps" need to be taken to overhaul the airline.
"The fact that both incidents have occurred within such a short span of time had exacerbated the situation and severely damaged the airline's brand and business reputation accelerating the need to restructure the company," it said. Average weekly bookings fell 33 percent immediately after Flight 17 was downed over Ukraine with "numerous flights" canceled, it said.
The airline is struggling to repair its image after MH370 vanished on March 8 en route to Beijing from Kuala Lumpur with 239 people on board. The incident sparked street protests in Beijing and prompted boycotts by Chinese travelers. Families of the victims criticized both the carrier and the Malaysian government for how the crisis was handled.
An initial report showed confusion reigned as MH370 went missing, and the longest search for a plane in modern aviation history remains unresolved.
Four months later, Flight 17 was shot down in Ukraine on a flight path that Malaysia Airlines said was declared safe by the International Civil Aviation Organization, a similar route used by other carriers including Singapore Airlines Ltd. The Ukrainian government blamed the downing on pro-Russian rebels in the country's eastern part.
The carrier will probably lose more than $320 million in 2014 and continue to report losses through 2016, according to analyst estimates compiled by Bloomberg.
Khazanah is talking to as many as three people as possible candidates to replace Malaysia Airlines Chief Executive Officer Ahmad Jauhari Yahya, whose term is due to expire in mid- September, a person familiar with the restructuring plan said this month. The carrier may need to lay off between 3,000 to 4,000 people, a second person said. The carrier had 19,577 employees at the end of last year, according to data compiled by Bloomberg.
Malaysia Airlines, hurt by competition from budget carriers, missed its target to be profitable last year as rising prices for items including fuel, maintenance and financing wiped out revenue gains. In May, it pointed to an unfavorable foreign exchange rate environment as an additional challenge this year.