Khazanah still mulling MAS business plans

PETALING JAYA: Khazanah Nasional Bhd, which yesterday announced plans to cut Malaysian Airlines System Bhd's (MAS) aggregate capacity by 10% to focus on domestic and regional routes, have met and will continue to meet relevant parties to discuss various business proposals which have been submitted to them in detail.
To-date the sovereign wealth fund in charge of turning around MAS for the umpteen time, has received 36 proposals.
Without giving details, Khazanah said it conducts a rigorous evaluation process and will only evaluate and assess credible proposals with proven capability and resources, adding that all proposals should not involve any break up of MAS assets "integral to its function as the national carrier."
Within the next three months, Khazanah is scheduled to disburse up to RM1.6 billion, as part of the second phase of conditional investment funding, depending on the delivery of a newco business plan approved by Khazanah and the MAS board, a corporate governance review, implementation of a talent selection process as well as talent management and development programmes, and financial and operational targets to be agreed upon.
It said more than 4,000 contracts have been identified under a comprehensive review of MAS' contracts and that the process to replace contracts that meet the market-based requirements of newco began end-February 2015, days after the MAS Act came into effect, while discussions are underway on selected contracts that have been identified for renegotiation.
Khazanah in its second quarterly report update on the MAS recovery plan said, the short term network consolidation is to strengthen the airline's financial position to subsequently grow its capacity by a compounded annual growth rate (CAGR) of more than 5% per annum over the 2015-2020 period.
Newco, Malaysia Airlines Bhd, plans to grow its domestic and Asean route capacity by 6-8% per annum and Asia-Pacific by 5% to build its Kuala Lumpur hub connectivity, while reviewing its European and Middle Eastern routes to focus on network contribution and profitability.
"Existing routes are therefore being carefully evaluated and where routes are not in line with these objective, cancellations shall be considered," Khazanah said.
It also added that further refinement of the newco business plan continue to generate operational transformation opportunities in many areas of the business including sales and marketing, products, aircraft ownership and ground operations, which will result in material improvements in the operational performance of the group.
It also hinted at having contingency plans, as part of the business continuity plan, ready to be activated if the need arises in the transition from MAS to newco.