Malaysia Airlines on the brink of closure

Airline bosses need creditors to agree on new deal.
Airline bosses need creditors to agree on new deal. Photo credit: Getty.

Malaysia Airlines will have to shut down if its lessors decide not to back its latest restructuring plan, the chief executive of the airline’s parent group was quoted as saying at the weekend.

A group of leasing companies had rejected the restructuring plan, bringing the state carrier closer to a showdown over its future, Reuters reported on Friday. 

Malaysia Aviation Group (MAG) chief executive officer Izham Ismail said the group would have "no choice but to shut it down" if lessors decide against backing the restructuring plan.

"There are creditors who have agreed already. There are others still resisting, and another group still 50:50," Izham said in an interview with a local magazine.

"I need to get the 50:50 ones on board with those who have agreed. I understand quite a sizable amount of creditors have agreed."

Izham said the plan was to restructure the airline’s balance sheet over five years, achieving break-even in 2023 on the assumption that demand in the domestic and Southeast Asian markets returns to 2019 levels by the second and third quarters of 2022.

The plan will also require a fresh cash injection from the airline’s shareholder, state fund Khazanah Nasional, to help the company over the next 18 months.

MAG declined to comment.

Lessors claiming to represent 70 percent of the airplanes and engines leased to the airline group have called the plan "inappropriate and fatally flawed" and pledged to challenge it, according to people familiar with the matter spoken to by Reuters.

MAG had earlier warned lessors that Khazanah would stop funding the group and force it into a winding down process if the restructuring plans fail.

Izham said the lessors would need to make a decision soon, so the airline can decide whether to proceed with its restructuring plan or "execute Plan B".

Izham said Plan B could involve shifting Malaysia Airlines’ air operator’s certificate (AOC) to a new airline under a different name, or leveraging on the AOCs of sister airlines Firefly and MASwings.

"If you ask me, is Plan B credible? Of course, it is. We have all the skills sets in place."