Assignment Question:

Khazanah to liquidate Malaysia Airlines as last resort, turn Firefly into new national carrier

ByAyisy Yusof-October 15, 2020 @ 11:18am

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Khazanah Nasional Bhd may opt to ground Malaysia Airlines Bhd permanently and instead turn turboprop operator Firefly into the new national carrier, sources said.NSTP/Danial Saad

KUALA LUMPUR: Khazanah Nasional Bhd may opt to ground Malaysia Airlines Bhd permanently and instead turn turboprop operator Firefly into the new national carrier, sources said.

Khazanah, however, would prefer Malaysia Airlines' creditors to share the burden of the carrier's restructuring, rather than going down the liquidating path, they added.

Closing Malaysia Airlines would be the last resort if creditors failed to agree on its restructuring, they said.

Meanwhile, Khazanah managing director Datuk Shahril Ridza Ridzuan told Berita Harian (BH) that Firefly could be the new national carrier.

"If implemented successfully, Firefly has the potential to become the national airline," said Shahril when responding to BH's query on whether closing Malaysia Airline was the best option under Khazanah's consideration.

The sister daily of the New Straits Times (NST) said Khazanah was willing to end financing for Malaysia Airlines and continue funding Firefly.

This would help the short-haul airline to expand its operations, thus continuing air connectivity for Malaysia.

A source directly involved in the negotiations with the creditors said Khazanah might opt to reboot Malaysia Airlines' air operator licence by transferring it to other company belonging to the fund.

"We can't justify using national resources to rescue foreign creditors excessively," the source told the NST.

Meanwhile, Malaysia Airlines said it could not disclose information and update the outcome of the discussions with its lessors and creditors due to the confidentiality of the negotiation.

"Our focus now is to get our lessors, creditors and key suppliers to help us achieve mutual agreement to make the restructuring work. We are prepared to reset the company and start afresh if the plan fails," a Malaysia Airlines spokesperson said when contacted.

He said Khazanah was supportive of the restructuring efforts, currently undertaken by Malaysia Aviation Group (MAG), pathway to a financially self-sustainable aviation company post-Covid-19.

"If this effort proves unsuccessful, they will need to evaluate options as we advance on how to maintain connectivity for Malaysia. Additional support beyond November 2020 is conditional upon successful restructuring terms with all stakeholders."

(Adapted form New Straits Times)

The script above explains the extent of problem faced by Malaysian Airlines. The corona virus (covid-19) pandemic ruined all hopes of reviving the national carrier. Furthermore, Malaysian economy heading towards recession and tourism industry already hit the rock bottom. It could be hard for the Airline industry to survive in this predicament. However, not all firms are doomed, some have fared well during this trial times.

Question1The above script indicate the serious problems faced by Malaysian Airlines due to the covid-19 pandemic. Nevertheless, not all companies are doomed in Malaysia. There are some firms made profit during the covid-19 era. List out the industries that made profit and losses during the covid-19 pandemic. Using the knowledge of 'demand and supply' explain why some industries able to make profit and successful while some failed in Malaysia.

Question2: Assume that you are chosen as the CEO of the Malaysian Airline, explain how would you turn around the Malaysian Airline into profit again in post covid-19 era. Using the knowledge of elasticity, explain how would you make the demand of the Malaysia Airlines 'inelastic', so that you can earn more revenue even when the price is increased.