Rebooting Malaysia's national carrier

The winds of change for Malaysia Airlines (MAS) have begun to blow. Minority shareholders of the troubled carrier agreed this month to its privatisation by selling their shares to majority owner Khazanah Nasional, Malaysia's sovereign wealth fund, by the end of the year. It is the first step towards starting on a clean slate after a "perfect storm" of two air tragedies in the space of four months this year.

Critics are right to ask how different this reform will be from the five that have taken place since 2001. Those attempts did little to staunch the pervasive red ink. In the 13 years up to last year, the airline racked up cumulative losses of RM8.4 billion (S$3.3 billion) despite the government pumping in a total of RM17.4 billion over the same period.

It would undermine confidence if the authorities are seen to be doing little more than dusting off an old playbook - leaning on creditors to swop debt for equity, staff cuts, route cuts and building partnerships with other airlines. All these have been tried but the results have been depressingly similar, no thanks to the overweening influence of vested interests. A partnership plan with AirAsia in 2011, for example, was scuttled by the airline's powerful unions. Lopsided contracts with well-connected suppliers added to its costs.

Crippled as the carrier is by bloated staff numbers, overcapacity and skewed contracts, industry professionals know only too well how uncompetitive MAS has become in a cut-throat industry. Its revenue per employee is half Cathay Pacific's and 63 per cent below that of Singapore Airlines. Yet, change has been slow in coming.

This time round, there is cause for hope that things will be different because of the direness of the situation. The staff cuts proposed are deep - 6,000, or 30 per cent of the 19,500 workforce - to bring its staff strength nearer that of comparable airlines. It also plans to renegotiate lopsided deals.

None of these, however, will come easy. Already, the unions are proposing alternative plans requiring smaller staff cuts. And behind-the-scenes lobbying is expected to be intense. However, legislation is being planned to head off such resistance and facilitate the restructuring. As AirAsia chief Tony Fernandes observed, the political will to effect change is now clearer than before. That will make the crucial difference.

Essentially, MAS must be allowed to operate as a business with minimal political interference after the painful restructuring. Hard-nosed business decisions must prevail in an industry with razor-thin margins. When regional and European flag carriers, too, are being buffeted by turbulent market conditions, MAS will have to be doubly shrewd to overcome setbacks and fly high again.