Unable to Recover From Tragedies, Malaysia Airlines to Be Dissolved, Recreated

May 25, 2015 Updated: May 26, 2015

After two fatal tragedies delivered a tough year to Malaysia Airlines, the company was placed in the hands of an appointed administrator on Monday, who will oversee the dissolution of the flag carrier and the creation of a new entity.

Any good assets from the existing company, Malaysian Airline System Berhad (MAS), will be transferred to the new company, Malaysia Airlines Berhad (MAB), on Sept. 1.

For the consumer, little is expected to change in the short run. CEO Christoph Mueller, who was only appointed on May 1, reassured passengers of continued service in a statement:

“I assure you our operations are very much business as usual.”

“This appointment does not affect our daily operations or existing reservations. You can continue to make reservations in full confidence that our flights and schedules are operating as normal, that tickets sold will be honoured,” he stated.

Recovery Plan

The transition follows an extensive 12-point recovery plan.

Of the airline’s 20,000 employees, 6,000 will lose their jobs. Another 2,000 will be offered new jobs after a reskilling training program. The new airline will also cut less profitable routes.

Airline industry website, Boarding Area, reports that Korean and Qatar Airlines are already recruiting Malaysia pilots and flight attendants. 

The recovery plan gives the new company a period of three years to become profitable from the moment of delisting from Malaysia’s stock exchange. 

The airline has a history of financial ups, downs, and turnarounds, starting with the Asian financial crisis in 1997. But the last year, during which the airline suffered two catastrophic loses, was particularly devastating in terms of bad publicity.

On March 8, 2014, Flight MH370 disappeared from radar with 239 people on board, and hasn’t been found. All passengers and crew are presumed dead, but there’s been no resolution to the mystery of the flight’s disappearance and search efforts are still ongoing. 

A few months later, on July 17, Flight MH17 with 298 people on board was shot down over eastern Ukraine with no survivors. 

But even before the second tragedy, the airline was already in trouble. On Aug. 28, 2014, the airline announced a net loss of almost $85 million for the quarter ending on June 30. 

“We expected the impact of MH370 on the performance in Quarter 2. Given that our team put in much hard work and effort to regain market confidence and rebuild sales. Tragically, just as we were beginning to see signs of recovery in all regions, we were dealt the blow of MH17,” said then CEO, Ahmad Jauhari Yahya.

In August 2014, majority shareholder (69.37 percent) Khazanah Nasional Berhad, a Malaysian sovereign wealth fund, bought out minority shareholders and took over full ownership of the airline with the intention to delist and restructure.