Aug 082014
 

1458363 - Malaysia Airlines Goes Private to Restructure Brand

After the MH370 and MH17 crisis, Malaysian Airline System BHD. will be restructured and privatized to ensure the air carrier remains afloat this year. Share trading in Malaysia Airlines was suspended on Friday just prior to this announcement by the Malaysian air carrier. An alert posted on the Kuala Lumpur stock exchange said the air carrier had requested a suspension as of 9 am Friday Malaysian local time, “pending a material announcement.”

Moments later, the Malaysian air carrier announced its majority investor, state-run Khazanah Nasional plans to buy 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 to The Sydney Morning Herald and USA Today moments ago.

This represents 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, says 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.”

Malaysia’s state-run investment company, Khazanah Nasional says it wants to remove the fatigue and financially-hinged Malaysia Airlines from the stock exchange, making it fully state-owned, as Khazanah Nasional embarks upon a long-range restructuring of its 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 the airline, Malaysia Airlines said in a statement after announcing the suspension of its shares, upon the air carrier’s poor financial condition, recent persistently poor stock performance, and 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.

Malaysia Airlines has lost $1.3 billion dollars in the last three years. The air carrier lost $360 million last year in 2013, amounting to three times its losses in 2011.

Malaysia Airlines has been losing nearly one million dollars a day, well before the MH370 and MH17 aviation crises hit the ailing firm. The Malaysian government has been significantly subsidizing the air carrier to keep it afloat.

What I know about the airline business – it’s a five days of working cash business.

Bottom-Line:Cash is King” to stay afloat in the international commercial passenger airline business. The key to playing in the tall grass with the big dogs is your capital reserves.

3bfaa19 - Malaysia Airlines Goes Private to Restructure Brand

A name change could allegedly be coming soon for the Malaysian flagship-carrier after the loss of 537 lives in five months. Majority owned by the Malaysian state-run investor, Khazanah Nasional, officials must seek private restructuring to rebuild the suffering southeast Asia air carrier.

Khazanah confirmed it wanted to buy the shares it does not already own in Malaysia Airlines, delist the carrier, and carry out a comprehensive rebranding, Breaking Travel News reported recently.

Discussed in my recent articles are three strategic questions now confronting the executive leadership and board governance of the ailing Malaysian air carrier under crisis: (1) What are the ‘Potential Opportunities’ for a Re-Branded Malaysia Airlines? (2) What are the ‘Potential Threats’ to a Renamed Malaysia Airlines? and (3) What is the ‘Possible Future’ of a Rebuilt Malaysia Airlines?

Key Takeaways:

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 redesign and re-branded as a new and valuable organizational substitute in the southeast Asia market, tied to an integrative and interdependent infrastructural system of more private-based, entrepreneurial organizational activities.

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.

In other words, the Malaysian government has now let loose its stronghold onto the reins of the ailing air carrier, now bleeding $1.3 billion in cash these past three years, aside from the recent MH370 and MH17 extreme events, bombarding the firm during these past five months.

Continued bureaucracy has not and will not work going forward, as the air carrier attempts to regroup inside a highly-competitive international commercial passenger airline industry. The crisis has crushed the Malaysia Airlines brand name and the dual air disasters have caused its cash cow passenger loads to and from China to plummet recently, leaving largely empty planes flying. Stock price shares have fallen 23 percent this year, because of the mass exodus of passengers, market analysts have said.

“It is a tragedy with no comparison. In the history of aviation, no airline has gone through two tragedies of this magnitude in a span of four months,” said Mohsin Aziz, an aviation analyst at Maybank in Kuala Lumpur on August 7. “I can’t comprehend of anything they can do to save themselves.”

“Even before the second incident, I have been very skeptical over the company’s ability to survive beyond the second half of 2015. They are making huge losses … This is probably going to hasten that.

“It doesn’t matter who is at fault. The perception to the customer is ‘I don’t want to fly Malaysia Airlines any more’, and to battle that is not easy.”

Trends in the Last Five Months of Malaysia Airlines Securities.

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, presently. Below are the six-month trend of the Malaysian Airline System BHD securities, via Yahoo! Finance. Shown in Appendix A are 1-year, 2-year, and 5-year trends in the firm’s securities, as of August 12, 2014.

2d80d13 - Malaysia Airlines Goes Private to Restructure Brand

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 [see APPENDIX B Malaysian Airlines System, BHD. Closing Stock Prices and Critical Volume Trading (that is, above Average Volume: 92,202,300 ($6,899,683 USDollars) shown in bold between February 20 – March 21, 2014, reflecting asymmetric Kuala Lumpur securities market information), surrounding the MH370 aviation tragedy shock event on March 8, 2014]. 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 [see APPENDIX C: Malaysian Airlines System, BHD. Closing Stock Prices and Critical Volume Trading (that is, above Average Volume: 92,202,300 ($6,899,683 USDollars) shown in bold between June 23 – August 1, 2014, reflecting asymmetric Kuala Lumpur securities market information), surrounding the MH17 aviation disaster shock event on July 17, 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.”

2cf664a - Malaysia Airlines Goes Private to Restructure Brand

What Private Ownership May Bring to the Malaysian Air Carrier?

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.”

Aviation consultant Michael Boyd said the company must have a reputation overhaul after one plane vanishes and another is shot down, together claiming 537 lives.

Boyd said, according to the Mirror (U.K.), the sooner Malaysia Airlines has a brand overhaul, the better.

He told CNN: “They need to do it and they need to do it very quickly.

“The color scheme must be different, the name must be different, everything has to be different.

“They need a program that they can put into place within, probably, 90 days.”

Upon today’s sudden market announcement by the Malaysian air carrier, it appears that this privatization and restructuring has begun right now.

Prior to the downing of MH17 on July 17, Malaysian officials were already considering the future of its air carrier. Malaysia Airlines flights to China were already 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 restructuring options for the future of the air carrier. These included an unlikely government-subsidized re-capitalization, infusion of private investments, a sell-off of the air carrier’s assets to a low-cost air carrier in the region that continues services to its major southeast Asia cities, a re-branding to start over and regroup the Malaysian air carrier on a few select routes that have entrepreneurial potential of profitability, and a “let’s make a deal” to merge with an existing air carrier.

Malaysia Airlines commercial director, Hugh Dunleavy, remains optimistic the air carrier can in the future “emerge stronger,” even after the loss of two of its original fleet of 15 Boeing 777-200ER airliners, and the loss of 537 of the air carrier’s passengers and crews in five months.

Writing in The Sunday Telegraph (U.K.), Dunleavy insists that despite the “tragic loss” of both aircraft, the airline would eventually “emerge stronger.”

He says the Malaysian government was already under crisis management, considering the future strategy of the firm, following the unexplained disappearance of flight MH370 on March 8, 2014.

That crisis management process has now been accelerated by the hyper-escalated extreme event of a missile attack on flight MH17 over Ukraine.

“Our majority shareholder, the Malaysian government, has already started a process of assessing the future shape of our business and that process will now be [ramped] up as a result of MH17,” Dunleavy adds.

“There are several options on the table but all involve creating an airline fit for purpose in what is a new era for us, and other airlines,” says Dunleavy.

“This tragedy has taught us that despite following the guidelines and advice set out by the governing bodies, the skies above certain territories are simply not safe,” he writes. “MH17 has shown us that airlines can no longer rely on existing industry bodies for this information.”

“Airlines such as ours should be left to focus on the quality of our product in the air, not on the air corridor we fly in, which should be guaranteed as safe passage,” concludes Dunleavy in The Sunday Telegraph (U.K.).

What do you think?

Let’s for now, generally leave it up to you to draw your own thoughtful conclusions in the comment section that allegedly may have been or may not have been precursors to today’s announcement of privatization and future restructuring of the southeast Asia air carriers’ brand and securities, based on these widely observable Kuala Lumpur market news and information (via. Yahoo Finance in Appendices A and B) on Malaysia Airlines System, Bhd. securities, surrounding these extreme MH370 and MH17 aviation shock events.

1394751 - Malaysia Airlines Goes Private to Restructure Brand

APPENDIX A

1-Year Malaysian Airlines System, BHD Securities

189efbe - Malaysia Airlines Goes Private to Restructure Brand

2-Year Malaysian Airlines System, BHD Securities

2d5c443 - Malaysia Airlines Goes Private to Restructure Brand

5-Year Malaysian Airlines System, BHD Securities

31f42e6 - Malaysia Airlines Goes Private to Restructure Brand

APPENDIX B

Malaysian Airlines System, BHD. Closing Stock Prices and Critical Volume Trading (shown in bold between February 20 – March 21, 2014, reflecting asymmetric Kuala Lumpur securities market information), surrounding the MH370 aviation tragedy shock event on March 8, 2014.

Source: Yahoo! Finance. Quotes on August 7, 2014 delayed, except where indicated otherwise. Currency in MYR = 0.24 (24 sen) on August 7, 2014. Volume: 81,643,600 ($6,109,554); Average Volume: 92,202,300 ($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).

Date Close Price* Volume ($Dollars)

3/21 0.24 ($0.075) 30,682,200 ($2,296,010)

3/20 0.24 ($0.075) 18,108,100 ($1,355,065)

3/19 0.24 ($0.075) 12,360,700 ($924,976)

3/18 0.23 ($0.072) 24,067,100 ($1,725,948)

3/17 0.23 ($0.071) 102,432,800 ($1,672,728)

3/14 0.24 ($0.075) 46,601,500 ($3,487,284)

3/13 0.23 ($0.071) 62,347,100 ($4,471,160)

3/12 0.24 ($0.075) 53,743,800 ($4,021,756)

3/11 0.24 ($0.075) 70,937,400 ($5,308,388)

3/10 0.24 ($0.075) 385,161,600 ($28,822,413)

3/8 (MH370) —

3/7 0.25 ($0.078) 18,254,600 ($1,422,946)

3/6 0.25 ($0.078) 65,030,000 ($5,069,089)

3/5 0.25 ($0.078) 20,789,200 ($1,620,518)

3/4 0.25 ($0.078) 30,871,300 ($2,406,418)

3/3 0.25 ($0.078) 27,173,400 ($2,118,167)

3/28 0.25 ($0.078) 65,691,900 ($5,120,684)

2/27 0.25 ($0.078) 65,610,100 ($5,114,307)

2/26 0.25 ($0.078) 246,707,300 ($19,230,834)

2/25 0.26 ($0.081) 111,056,500 ($9,003,128)

2/24 0.28 ($0.087) 72,057,500 ($6,290,908)

2/21 0.28 ($0.087) 26,862,900 ($2,345,239)

2/20 0.28 ($0.087) 93,237,400 ($8,139,998)

* Close price adjusted for dividends and splits

APPENDIX C

Malaysian Airlines System, BHD. Closing Stock Prices and Critical Volume Trading (shown in bold between June 23 – August 1, 2014, reflecting asymmetric Kuala Lumpur securities market information), surrounding the MH17 aviation disaster shock event on July 17, 2014.

Source: Yahoo! Finance. Quotes on August 7, 2014 delayed, except where indicated otherwise. Currency in MYR = 0.24 (24 sen) on August 7, 2014. Volume: 81,643,600 ($6,109,554); Average Volume: 92,202,300 ($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).

Date Close Price* Volume ($Dollars)

8/1 0.22 ($0.068) 39,980,800 ($2,742,523)

7/31 0.22 ($0.068) 40,113,500 ($2,751,626)

7/30 0.22 ($0.068) 64,603,900 ($4,431,569)

7/29 0.22 ($0.068) 0

7/28 0.22 ($0.068) 0

7/25 0.22 ($0.068) 32,486,800 ($2,228,465)

7/24 0.22 ($0.068) 96,844,400 ($6,643,139)

7/23 0.22 ($0.068) 180,158,300 ($12,358,139)

7/22 0.23 ($0.071) 291,668,800 ($20,916,736)

7/21 0.20 ($0.062) 180,437,600 ($11,252,089)

7/18 0.20 ($0.062) 471,104,200 ($29,378,058)

7/17 0.22 ($0.068) 19,538,800 ($1,340,284) (MH17)

7/16 0.23 ($0.071) 93,211,500 ($6,684,570)

7/15 0.22 ($0.068) 0

7/14 0.22 ($0.068) 10,061,000 ($690,144)

7/11 0.22 ($0.068) 11,546,400 ($792,037)

7/10 0.22 ($0.068) 26,314,900 ($1,805,097)

7/9 0.22 ($0.068) 59,393,100 ($4,074,129)

7/8 0.23 ($0.071) 34,638,900 ($2,484,094)

7/7 0.22 ($0.068) 19,540,700 ($1,340,414)

7/4 0.22 ($0.068) 58,384,300 ($4,004,929)

7/3 0.23 ($0.071) 194,194,100 ($13,926,436)

7/2 0.21 ($0.068) 42,495,000 ($2,782,488)

7/1 0.20 ($0.062) 33,458,600 ($2,086,478)

6/30 0.20 ($0.062) 55,301,800 ($3,448,620)

6/27 0.21 ($0.068) 73,481,000 ($4,811,389)

6/26 0.20 ($0.062) 52,243,800 ($3,257,923)

6/25 0.19 ($0.059) 93,104,700 ($5,515,709)

6/24 0.20 ($0.062) 148,325,000 ($9,249,547)

6/23 0.22 ($0.068) 45,374,200 ($3,112,489)

* Close price adjusted for dividends and splits

(Visited 13,678 times, 1 visits today, 141,186,631 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

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)

This site uses Akismet to reduce spam. Learn how your comment data is processed.