Malaysian Airlines (MAS) has withdrawn legal proceedings against the now-defunct Air Maldives after signing a settlement with the Maldives government, resolving a three-year legal battle.

When Air Maldives collapsed in 2000, it was 51%-owned by the Maldives government and 49%-owned by Naluri, MAS' former parent company which had negotiated a management contract for the Malaysian carrier.

In 2007, Air Maldives' remaining shell company initiated legal action against MAS in the International Court of Arbitration at the International Chamber of Commerce. It alleged that MAS failed to perform its duties under a management agreement it signed with Air Maldives in 1996.

MAS challenged the claim in 2007, and filed a civil suit against Air Maldives in the Kuala Lumpur High Court. Air Maldives then filed a counterclaim in 2008.

MAS says it has entered into a settlement agreement dated 14 February with the Maldives government, which acted on its own behalf and that of Air Maldives, to "discontinue and terminate all legal proceedings" in both suits.

The two parties have also agreed to release each other from all claims, adds MAS.

"This settlement will enable MAS and the Government of the Republic of Maldives to develop new business opportunities for the Kuala Lumpur-Male sector and other destinations in India," says MAS.

Source: Air Transport Intelligence news