KUALA LUMPUR, Malaysia – Malaysia Airlines will cut 6,000 workers as part of a $1.9 billion overhaul announced Friday to revive its damaged brand after being hit by double passenger jet disasters.
The staff reduction represents about 30 percent of its current workforce of 20,000. A search for a new CEO is underway, but there is no move to change the airline’s name, which some branding experts said was necessary for a successful makeover.
Khazanah Nasional, the state investment company that owns 69 percent of the airline, said the overhaul includes the establishment of a new company that will take over the existing Malaysia Airlines business and its reduced staff.
The revamp and new investment in the carrier will cost about 6 billion Malaysian ringgit ($1.9 billion). Analysts say the substantial staff cuts suggest the airline will reduce flights to Europe and China.
The twin disasters and ongoing financial woes created a perfect storm for the restructuring to take place, Khazanah managing director Azman Mokhtar said. We need to have a fresh start.
The plan seeks a balance between Malaysia’s desire to revive a national carrier against the prudent use of public funds, he said.
The airline will be removed from the Malaysian stock exchange and taken fully under the wing of the government. Khazanah, which previously announced that it plans to take full ownership, aims to restore Malaysia Airlines to profitability by the end of 2017, then relist it on the stock exchange by the end of 2019.
A substantial revamp has long been on the cards for Malaysia Airlines, which was struggling with chronic financial problems even before it was hit by the double disasters this year.
Investigators continue to scour the southern Indian Ocean for Malaysia Airlines Flight 370, which veered far off course while en route from Kuala Lumpur to Beijing on March 8 with 239 people on board.
Then in July, 298 people were killed when Flight 17 was blasted out of the sky as it flew over an area of eastern Ukraine controlled by pro-Russian separatists.
The tragedies have scarred the airline’s brand, once associated with high-quality service. Travelers on recent long-haul flights have posted photos on social media of nearly empty cabins and departure lounges. The airline says passenger counts fell 11 percent in July from the year before.
Azman said Khazanah’s 6 billion ringgit investment will not be a bailout and that the investment company will get its money back if the airline follows strict conditions laid out under the 12-point restructuring plan.