Nicholas Ionides/SINGAPORE

Recently re-nationalised Malaysia Airlines (MAS) is working to finalise a sweeping restructuring plan aimed at returning the troubled carrier to profitability. Meanwhile, the carrier is seeking to raise badly needed cash through a government-guaranteed special share issue.

New chairman Azizan Zainul Abidin says the restructuring, aimed at finding ways to reduce MAS' debt of around 10 billion ringgit ($2.6 billion), should be unveiled early in June. He says the new management has "identified the problems as well as our options and solutions".

Observers say the proposed fixes could cover international route cuts and should cover job reductions, although the government has said it will not lay off employees.

One option under consideration is to separate loss-making domestic operations from international operations, either by handing over domestic flights to other carriers or by establishing a new domestic entity. MAS meanwhile has been considering joining a multilateral alliance and has said it is open to partial ownership by a foreign carrier.

The carrier has operated in the red for the past four years and, until February, was 29%-owned and managed by aviation holding company Naluri. The government bought back the stake in a controversial deal widely seen as a bail-out of main Naluri shareholder Tajudin Ramli, a friend of prime minister Mahathir Mohamad.

The 1.79 billion ringgit buy-back lifted the government's stake to well over 50% as it already controlled MAS through various investment arms.

Soon after the deal was finalised, Azizan, the chairman of state oil company Petronas, was appointed chairman of MAS to replace Tajudin. Former senior banker and finance ministry adviser Mohamad Nor Mohamad Yusof was named managing director, filling a post vacant since February 1999.

The new management has already moved to raise cash and is seeking 800 million ringgit through the issue of redeemable convertible preference shares. It says the capital injection will result in savings on annual interest payments of around 64 million ringgit.

Source: Flight International