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Resurfing from the Crisis: Malaysian Airlines Case Study

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Summary

The Malaysia Airline System (MAS) reported a loss of over RM1.3 billion for the Financial Year 2005. It was unacceptable to many parties such as the stakeholders and the government especially the announcement was made at the same time as some of MAS regional competitors reported strong profits in the same year. The airlines was expected to cut up to 5,000 jobs and spend a maximum of 850 million ringgit (US$236 million; euro198 million) in compensation packages as part its plan to return to profitability, making it one of the country's biggest corporate retrenchment exercise. The retrenchement was a measure to reduce cost due to crippling fuel prices and lower load factors. The carrier was also battling a cash …show more content…

In 2000, six years after the Government had privatised its controlling stake in MAS to tycoon Tan Sri Tajudin Ramli, MAS had ended up saddled with RM9.5bil in debt after a fourth straight year of losses. Clearly drastic action was required. First off, the Government renationalised MAS in 2000 by buying back Tajudin’s shares at RM8 each, although the prevailing market price was RM3.62. Then in 2002, came the WAU. This financial “restructuring” (which coincidentally sounds like the Kelantanese kite logo of MAS) was designed to help the airline fly high again. What happened was that 73 aircraft of MAS (which were tagged with a value of RM5.1bil ) as well as an associated RM7bil in debt were shifted to a government holding company called Penerbangan Malaysia Berhad (PMB). The shortfall of RM1.9bil was made up by issuing additional (MAS) shares to PMB at the then price of RM3.85 each. In this way, the Government stood to gain from any potential appreciation in Malaysia Airlines’ share price going forward according to MAS Chief Financial Officer, Tengku Azmil Zahruddin, in a corporate press release. There was also the issue of domestic flight services, which MAS announced were mostly making losses. To give

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