Malaysia Airlines has been haemorrhaging cash since even before the Flight MH370 crisis from which it is only beginning to recover, prompting speculation that it might need another financial infusion from Khazanah Nasional Bhd, its majority stakeholder.
At the end of last December, MAS’s cash and short-term investments stood at close to RM4 billion – less than its average operating costs of the two previous quarters, signalling that it might need fresh funding or new bank loans.
MAS is Southeast Asia’s fourth-largest airline by market value, and has had negative operating cash flow for the past three years. This means the airline is not making enough money to cover its operating costs. It has had negative free cash flow, or operating cash flow minus capital expenditure, for the past six years.
MAS shares have slumped and have lost three-quarters of their value over the past five years.
The total cost of the loss of Flight MH370 has yet to be calculated. While the plane itself was insured, the relatives of those who perished in the crash will likely be paid compensation for their loss as well.
Bertrand Grabowski of German bank DVB said, “What this accident is going to create is an acceleration of the downward trend that we’ve seen at MAS for years, and the need to restructure. The only way out is shrinking, in terms of capacity and route network.”
Of the effects of the Flight MH370 tragedy, Anna Tipping, partner at the Norton Rose Fulbright law firm in Singapore, said, “Primarily, it’s Malaysia Airlines’s reputation and, to a lesser extent, that of the aircraft hull and engine manufacturers on the line until the cause is identified to be something outside their control.
“MAS will take the initial brunt of the loss, being the carrier, but once the cause of loss is identified the blame and consequences will shift.
“For PR reasons, particularly if there are going to be payouts to the families of the victims, then that will probably be paid sooner rather than later and by Malaysian Airlines because of the reputational aspect.”
See Also: Malaysia Airlines suffered its 4th straight quarterly loss; MH370: Insurance companies prepare to pay MAS RM365 million; Insurers to split the bill for Flight MH370
Story: The Malaysian Insider
