Najib must explain the real reasons behind the decision of spending RM1.4 billion of tax payers’ money to take MAS private

Khazanah Nasional’s decision to take Malaysia Airlines(MAS) private is questionable given the current dire financial state MAS is in. MAS has lost a total of RM 4.3 Billion over the the last three financial period. There is no indication that a turnaround would happen in the near future based on the current cost structure MAS is operating in. Khazanah Nasional’s move to buyout MAS is akin to throwing good money over bad.

Instead, a better option is to let MAS emulate the footsteps of Japan Airlines(JAL) in 2010 by filing for bankruptcy. Filing for bankruptcy under Section 176 of the Companies Act 1965 would allow MAS come under creditors protection and restructure its operation in a shorter timeline.

If JAL as the biggest airline in Asia could file for bankruptcy and pull off a corporate turnaround, there is absolutely no shame for MAS to file for bankruptcy. I agree with Najib’s statement that MAS is part of the country history as it is a symbol of national pride. However national pride should neither be an excuse to take MAS private nor come at the expense of taxpayers’ interest.

JAL managed to turnaround its fortune in a short period of 6 months time after filing for creditors protection. Khazanah Nasional said in a statement yesterday that its proposed “complete overhaul” of MAS would take 6 to 12 months after approval from shareholders. Based on this estimated timeline, it would be 1 to 2 years time before MAS could return to profitability.

MAS lost an average of RM 1.5 Billion annually for the past 3 years. Under the most optimistic prediction, the government would need to inject an additional RM 2-3 Billion if MAS needs 1 to 2 years time to return to profitability and self sustain financially. This means that the total cost to the tax payers would be a whopping RM 3.4 – 4.4 Billion to rescue the airline.

By choosing not to let MAS file for creditors protection, Khazanah Nasional is putting MAS creditors interest above tax payers’ interest. According to MAS latest annual report, its main bankers are CIMB, RHB, Maybank and Citibank. It is obvious that Khazanah Nasional’s move to take MAS private is a political decision rather than a sound financial decision to bring the airline back to profitability.

By taking MAS private, the amount of financial information made available would be very limited. Hence any further amount of money injected by the government to rescue MAS would no longer be under public scrutiny. This will lead to a scenario where tax payers’ money being thrown in a black box without accountability.

Najib must come clean and explain the real reasons behind the decision of spending RM1.4 billion of tax payers’ money to take MAS private

Media Statement by Chong Zhemin, DAP Perak Economic Development Bureau Chief and Political Secretary to the Taiping MP on 9 Aug 2014

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