Malaysia Airlines «technically bankrupt,» new CEO unveils revival plan

"We are technically bankrupt and the decline of performance started long before the tragic events of 2014," Christoph Mueller, a German citizen with a track record of corporate turnarounds, said in his first press conference since taking over on May 1. He was referring to the twin tragedies of flights MH370, which mysteriously disappeared over the South China Sea on March 8 with 239 people on board and has yet to be found, and MH17, which was shot down over Ukraine on July 17, killing all 298 people on board. The tragedies forced shareholder, Khazanah Nasional, a sovereign investment fund, to come up with a 6-billion ringgit ($1.62 billion) rescue plan last August. This latest restructuring plan follows a series of turnaround plans that Khazanah had come up for the airline in the past 13 years, none of which succeeded in boosting its bottom line. Years of mismanagement coupled with stiff competition have seen the airline company bleeding heavily. Malaysia Airlines was eventually delisted on Dec. 31 last year to become wholly-owned by Khazanah. Part of Khazanah's plan was chopping the headcount by 30 percent, from 20,000 to 14,000. The first round of termination letters were sent out Monday together with offer letters for the 14,000 to join a new company under new terms. A new company called "Malaysia Airlines Berhad" will begin operation come Sept. 1, replacing the outgoing "Malaysia Airlines System Berhad." Mueller who has a reputation as "The Terminator" for the job cuts he executed as the former chief executive of Aer Lingus of Ireland, did not discount that more heads will roll. "We have not issued all permanent contracts because we have to play it safe this time. We have a lot of temporary contracts," he said when asked about recent media reports that the number of jobs cut could reach 8,000. Mueller said the airline needs a "hard reset" to cut costs by 20 percent in order for it to be sustainable, with the aim to "break even" by 2018. He also confirmed news reports that the carrier will dispose of two of the six A380 superjumbos it bought in 2003. "We have problems filling them," he said. He was also looking at cutting some long-haul routes but maintained that Malaysia Airlines "will remain a full-service, international carrier", dismissing earlier talks that it will be turned into a "regional airline" focusing only on Asia. Some of the measures include "reducing aircraft size on certain routes, reducing frequency on certain routes and in certain cases, abandoning the routes altogether," he said. Mueller said part of the funds from Khazanah will be used to invest in refurbishing the cabins of its international flights and in improving the information technology system. It will also embark on rebranding the airline. "We have to achieve a perception of a completely new start-up in certain markets where our brand is particularly tarnished," he said. Mueller said he cannot disclose at present whether the rebranding entails new name or logo or new colors. The problem, he admitted, is that so long as MH370 is not found, the public will continue to be reminded of the tragedy and link it to Malaysia Airlines. Source: Kyodo