The new management team at Malaysia Airlines (MAS) has set a 2004 target for a financial turnaround as the airline finally opts for KLM, rather than oneworld, as its international partner.

Sweeping changes are planned for the recently re-nationalised airline over the next two years. At the end of May, MAS reported its financial year-end results, showing a fourth consecutive set of heavy losses (see page 83), but managing director Mohamad Nor Mohamad Yusof forecasts a return to the black in 2004.

MAS has been working on a recovery plan with the Boston Consulting Group. It says its restructuring will encompass a reorganisation of its domestic and international operations, a reduction of its sizeable debt and the expansion of airline partnerships. The carrier had considered hiving off loss-making domestic operations, either by handing over routes to other airlines or creating a new carrier, but Mohamad Nor says these will not now be separated from the mainline.

MAS will "reorganise domestic services", however, to improve feeder operations which Mohamad Nor says are run in a "messy" manner. The carrier is also hoping to increase domestic fares, which have not risen since 1992. A key part of the plan will be to reduce the airline's debt, which stands at around 10 billion ringgit ($2.6 billion).

MAS is expected to carry out a wider management restructuring as part of its turnaround plan. This is likely to include the creation of new high-level posts and the appointment of an in-house foreign technical adviser.

On the international side, MAS will focus more on services within the Asia-Pacific region. In mid-June the carrier put an end to long-standing questions about its alliance plans by expanding its established ties with KLM based on "exclusivity". The two carriers will boost marketing and sales activities on current codeshare flights, add more codeshare services and fully share revenues and costs on some flights. MAS and KLM also say that "partner airlines-will be involved in the intensified co-operation".

The announcement effectively puts an end to speculation over MAS joining the oneworld alliance. It already has a tie-up with KLM-partner Northwest Airlines and aims to start codesharing with the US carrier later this year. Last year, oneworld founding member Qantas Airways held talks on a possible equity partnership with MAS but no deal was done.

Source: Airline Business