Aug 222014
 

burns_00_crop

The southeast Asia air carrier burns its cash reserves at nearly $2.16 million each day. Operations are losing about $1.6 million a day. Malaysia Airlines stock prices reveal a business deeply in the red for the past several years.

International airlines operate viably in the industry, as a five days of available working cash business. With this enormous cash burn rate, the Malaysian air carrier struggles to survive, as bookings continuing to slide.

One thing is now clear for the southeast Asia air carrier: When a firm is burning cash, it’s time to do something fast!

Read also my companion breaking news story to this one on LinkedIn: Is Malaysia Airlines’ New Name Coming This Week? Facebook is not permitting this companion article released Monday to be shared at this time, nonetheless, due to an unknown and unexplained technical glitch, nobody seems to know why at this point. However, this article released Friday is now shared globally across Facebook more than 190,000 times at Partnership Possibilities for America! Confirms The Financial Times, on August 25, and Wall Street Journal, The World Post/Huffington Post, Daily Caller, New York Post, New York Daily News, The Independent (U.K.), Business Insider, and Mashable today on August 26-27. Malaysia Airlines is now poised to be immediately re-nationalized and completely overhauled.

Passengers are Stunned by the Large Empty Planes Upon Boarding.

The title photo above posted on Twitter claiming to show a Malaysia Airlines flight from Australia last Friday paints a poignant picture of the business reality the southeast Asian air carrier is undergoing. Rows and rows of empty seats are seen, and only three passengers are on board. Just last week on August 15, 2014, Ricardo Goncalves exclaims, “Picture sent to me of a Malaysia Airlines flight out of Australia today to Asia!Photo Credit: news.com.au

Australian News Service (news.com.au) reports today: Customer have been running away from the southeast air carrier’s brand for months now, as represented by these consumer sentiments on Twitter:

Can confirm my mother arrived in KL [Kuala Lumpur] in one piece after flying Malaysia Airlines. But plane so empty she had three seats to herself in A380,” says Julie MacFarlane on April 25, 2014, over a month after the disappearance of flight MH370 on March 8, 2014.

At Penang Airport, flying to Kuala Lumpur. The Malaysia Airlines check-in line is empty as a Richard Marx concert,” says another more recent consumer on July 24, 2014 in the aftermath of the downing of flight MH17 on July 17, 2014.

Additionally, a family is thrilled to be flying on their own private jet airliner, upon arrival to their seats, tweeting last week on August 17, 2014, “Thank you @MAS it is an amazing surprise!

“In a bid to lure passengers back on board, the airline has boosted the commission it’s offering travel agents in Australia. The commission rate nearly doubled, rising from 6 percent to 11 percent for flights leaving the nation,” reports the Australian News Service (news.com.au). Correction (according to Mashable): An Instagram photo taken by Ping Coombes was previously included in this article. Coombes later posted that the flight she was on was full. See follow-on article in Malaymail Online on August 27.

Trends of Malaysia Airlines Stock Securities on the Market are Bleak.

Shares in the carrier fell sharply right after the first moments of the MH17 aviation disaster, down 11% on July 17 by the mid-day break in volume trading in Kuala Lumpur, as already negative investor sentiment deepened, acknowledged CBCNews.

In all, unadjusted stock price has dropped by 35 percent during this year. In fact, Malaysia Airline’s unadjusted stock price has fallen more than 36 percent, since this time last year.

Stock prices of firm securities always speak to where the firm is going, and not where the firm is at, currently right now. So, buyers beware. Or maybe not, depending on how much news and information international stock marketers have about the Malaysian air carrier’s restructuring and rebranding coming soon.

Below are the six-month projected trend of the Malaysian Airline System BHD securities.

Source: Yahoo! Finance. Quotes on August 12, 2014 delayed, except where indicated otherwise. Currency in MYR = 0.24 (24 sen) on August 12, 2014.

(1 Malaysian Ringgit (MYR) = $0.3118 US Dollar; (24 sen) 0.24 Malaysian Ringgit (MYR) = $0.074825 US Dollar; As of Saturday, August 9, 2014, 12:09 PM GMT).

A particularly sudden escalated drop in Malaysia Airlines share price persisted, as observed by close market watchers, just three weeks prior to the MH370 aviation tragedy on March 8.

Since the disappearance of MH370, the stock price has continued to slide sharply.

Moments after the MH17 aviation disaster occur on July 17, Malaysia Airlines stock fell a dramatic 13 percent in just moments of trading on the Malaysian stock market.

Shown below in the Appendix are 1-year, 2-year, and 5-year trends in the firm’s securities, taken as of August 12, 2014.

Nonetheless,

Malaysia Airlines is now in the fog of the greatest dual-crisis in international aviation safety and security history,” I said recently on Reuters.

As I added further on July 18 to Reuters, it was unprecedented for a commercial airline to suffer two tragedies in such rapid succession with 537 people dead. “I don’t see how Malaysia Airlines is going to recover from this as a firm.”

There’s no historical precedent,” said Mohshin Aziz, aviation analyst at Malaysian financial company Maybank. On the contrary, there is similar precedent of airline restructuring after airliner crisis in aviation history.

Malaysia Airlines is not the only airline to collapse in the aftermath of an extreme aviation safety mishap or disaster event. Back in 1988, the iconic US airline Pan Am dissolved in three years, while it was attempting to recover in the aftermath of the bombing of flight 103 from London to New York.

A similar restructuring approach in the commercial passenger airline business was taken years ago by former American low-cost air carrier, ValuJet, upon the loss of one of its DC-9 airliners, operating as flight 592 on May 11, 1996 from Atlanta to Miami, in a crash inside a Florida Everglades swamp. After a series of safety problems and the fatal crash of Flight 592, the company merged with the much smaller regional airline AirWays Corporation, as the holding company for AirTran Airways. The former ValuJet air carrier was rename as AirTran, which has now been acquired in 2011 by highly profitable Southwest Airlines.

“It’s completely not their fault, but right now if you ask any customers would they fly with Malaysia Airlines, they’d just have that negative sentiment of ‘I’d rather choose something else’,” Maybank aviation analyst, Aziz adds.

“It cannot be a quick fix. So the second question is do they have the financial resources to survive a year, two years? And the answer is, unfortunately, no.”

Malaysia Airlines Restructuring is Accelerating at a Quicker Pace Now.

On August 8, as its share price continued to slide, Malaysia’s state-run investment company, Khazanah Nasional, announced that it would remove the struggling airline from the stock exchange, making it fully state-owned.

The Malaysian air carrier announced its majority investor, state-run Khazanah Nasional bought out the minority shareholders at a premium of Malaysia Airlines’ most recent share price at 27 sen (0.27 MYR = $0.084186) for each share, amounting to nearly 1.4 billion ringgit (US$470 million) to take the struggling southeast air carrier private, according toThe Sydney Morning Herald and USA Today.

That represented a 12.5 percent premium to the closing price on Thursday, August 7 at 24 sen (0.24 MYR = $0.074825) for each share, with shares now suspended, said Breaking Travel News.

A statement from Malaysian Prime Minister Najib Razak said: “This is the first step needed to return our national carrier to profitability.

“It is a step I wholeheartedly support.”

Khazanah Nasional removed the fatigue and financially-hinged Malaysia Airlines from the stock exchange, making it fully state-owned, as the state investment fund embarks upon a long-range restructuring of the southeast Asia air carrier’s business this year, reports USA Today.

Khazanah says a “complete overhaul” of the airline would be carried out.

Khazanah, which owns 69.37 percent of the carrier, plan to conduct a comprehensive review and restructuring of its business, Malaysia Airlines said in a statement after announcing the suspension of its shares, upon the air carrier’s poor financial condition, upon recent persistently poor stock performance, and upon net losses over the past three years prior to the bombardment of the dual crisis of the MH370 aviation tragedy and the MH17 aviation disaster.

Private ownership will give its parent company room to introduce an appropriate capital structure to meet the airline’s “substantial funding requirements” in the next few years, and to sustain operations amid a high level of debt, the Malaysia Airlines statement said.

“It is easier to restructure, if it’s a private company,” Ang Kok Heng, the Kuala Lumpur-based chief investment officer of Phillip Capital Management, said before the announcement. “They don’t need to worry about making announcements and the timing of it.”

Industry analysts believe the air carrier’s days are numbered with such an enormous daily cash burn rate in the multi-millions. It is now widely believed the state-owned Malaysia Airlines is unlikely to survive a year without a substantial cash injection from the Malaysian government.

“Malaysia Airlines has experienced more tragedy in a few months than most other airlines see in their entire lifetime of operations, and Malaysia Airlines is struggling to deal with the aftermath,” says the Australian News Service (news.com.au) today.

Prior to the downing of MH17 on July 17, 2014, Malaysian officials were already considering the future of its air carrier. Malaysia Airlines flights to China were largely empty as a result of the MH370 aviation tragedy. The air carrier’s hub position in Kuala Lumpur was also an extremely important competitive advantage in southeast Asia for flights to Sydney, Australia. In the aftermath of MH370, many of Malaysia Airlines’ Kuala Lumpur to Sydney flights were largely empty.

As the MH17 aviation disaster bombarded Malaysia Airlines on July 17, the air carrier was already considering a number of options for the future of the air carrier. These included an unlikely government re-capitalization, infusion of private investments, a sell-off of the air carrier’s assets to a low-cost air carrier in the region, and a rebranding to start over and regroup the Malaysian air carrier.

Plans are in the works to solicit a former chief of the Malaysia Airlines and Malaysia’s top economic policymaker to overhaul the southeast Asia air carrier. Former Malaysia Airlines chief, Idris Jala, led the air carrier from 2005 to 2009. During this time, Jala is widely known to have transformed the air carrier’s heavy losses at that time to record-breaking profits.

Airline industry analysts quietly believe Jala would likely shift the air carrier into a “premium airline” instead of a full-service carrier, dismantling the heavy cash burn inside the air carrier’s domestic and international routes. Jala is now Malaysia’s Economic Transformation Program Chief, local news site FreeMalaysiaToday has reported.

As I have recently addressed in this broader question, “Can Malaysia Airlines Save Its Brand?” on LinkedIn Pulse Airlines and Aviation Channel,

The Bottom-Line Takeaway is:

Malaysia Airlines has no choice but to become the international air carrier entrepreneur in the southeast Asia region.”

This could be achieve through better pricing and cost mechanisms in the international discount airline industry.

The air carrier also must be redesigned and re-branded, as a new and valuable organizational substitute in the southeast Asia market, tied to an integrative and interdependent, more synergistic risk governance of more private-based, entrepreneurial organizational activities.

APPENDIX

Source: Yahoo! Finance. Quotes on August 12, 2014 delayed, except where indicated otherwise. Currency in MYR = 0.24 (24 sen) on August 12, 2014. Volume: 81,643,600 shares ($6,109,554); Average Volume: 92,202,300 shares ($6,899,683); Market Capitalization: 918.21 billion MYR ($284.65 billion).

(1 Malaysian Ringgit (MYR) = $0.3118 US Dollar; (24 sen) 0.24 Malaysian Ringgit (MYR) = $0.074825 US Dollar; As of Saturday, August 9, 2014, 12:09 PM GMT).

1-Year Malaysian Airlines System, BHD Securities

2-Year Malaysian Airlines System, BHD Securities

5-Year Malaysian Airlines System, BHD Securities


This article has been referenced inside these international mainstream news media outlets:

(Visited 74,312 times, 1 visits today, 67,587,820 overall visits across all posts)

Thank you so much for your time in reading this article. Will you please share it across your Facebook, Twitter, Google and LinkedIn social media? I do await your comments on this article.

Leave a Reply