By Sharen Kaur
Published in NST on August 14, 2014
Published in NST on August 14, 2014
KHAZANAH Nasional Bhd should be given the benefit of engineering the rescue of Malaysia Airlines (MAS), says MIDF Research head Zulkifli Hamzah.
He said the delisting of MAS will accord Khazanah greater manoeuvrability to restructure the company and ensure its long-term viability.
Zulkifli also does not expect MAS to be declared bankrupt because of Khazanah’s strong backing.
“This has not been attempted before. Thus, the government should be given the benefit of engineering the rescue of MAS, away from the prying eyes of the public, which can be distracting at times.
“MAS has enough cash to last it well into 2015. Therefore, ceasing its operations with a view of starting afresh is not exactly a pressing option,” he told Business Times via email.
MAS started a massive restructuring plan at the end of 2011 to reduce cost and return to profit.
However, despite several “rescue plans”, “restructuring plans”, and “new business plan”, MAS lost RM4 billion in three years.
Khazanah, which owns 69.37 per cent of MAS, has proposed to take the Main Market-listed national carrier private with an offer of 27 sen per share to minority shareholders.
Upon completion of the RM1.4 billion exercise, Khazanah will become MAS’ sole shareholder, which would lead to a delisting by the end of this year.
Some analysts opined that the Khazanah announcement is a pre-emptive move to contain negative sentiment on MAS’ stock ahead of its second-quarter results to be released on August 22.
MAS is expected to report heavier losses for the quarter ending June 30, due to knee-jerk reactions on its bookings after Flight MH370 disappeared on March 8.
The results will not include the impact of Flight MH17, which was shot down in Ukraine on July 17.
MAS, however, may give an indication of how the second tragedy will impact its earnings during the announcement of the results.
On Brahim’s Holdings Bhd, Zulkifli said the company still maintains a 25-year concession agreement with MAS to supply the latter’s inflight meals.
He sees two possible scenarios subsequent to the delisting exercise. These include MAS cutting down its capacity by 10 to 15 per cent, which will reduce the demand for Brahim’s inflight meals, or the national carrier re-negotiating the terms of the concession agreement with the company.
“If MAS was to cease operation, the government will have to compensate Brahim’s at a fair value plus 20 per cent premium based on the concession agreement,” Zulkifli added.
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