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Friday 19 September 2014

Malaysia Airlines shares suspended as airline to return to private ownership

Published 08/08/2014 | 07:17

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A Malaysia Airlines Boeing 737-800 plane sits on tarmac at Kuala Lumpur International Airport in Sepang, Malaysia, Friday, Aug. 8, 2014. Malaysia's state investment company said Friday it plans to make Malaysia Airlines fully government owned, removing it from the country's stock exchange before carrying out a far-reaching overhaul of the carrier that is reeling from double disasters. (AP Photo/Vincent Thian)
A Malaysia Airlines Boeing 737-800 plane sits on tarmac at Kuala Lumpur International Airport in Sepang, Malaysia, Friday, Aug. 8, 2014. Malaysia's state investment company said Friday it plans to make Malaysia Airlines fully government owned, removing it from the country's stock exchange before carrying out a far-reaching overhaul of the carrier that is reeling from double disasters

Malaysia Airlines (MAS) plans to suspend its shares from trading on Friday, likely paving the way for state investor Khazanah Nasional to take the airline private as a first step in a major restructuring.

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Trading in the company, whose official name is Malaysian Airline System, will be halted due to "a pending corporate announcement," according to the sources, who declined to elaborate. The sources declined to be identified as the matter was private.

The same sources said in early July that Khazanah, which owns 69 percent of MAS, plans to take the airline private as a slump in business since the disappearance of Flight MH370 on March 8.

Loss-making Malaysia Airlines' problems deepened on July 17 when its Flight MH17 was shot down over Ukraine, killing all 298 people on board. That incident accelerated the government's plans to restructure the airline, the sources said.

A security officer passes a Malaysia Airlines advertisement at the Kuala Lumpur International Airport in Sepang in this July 18, 2014 file photo. Malaysia's state investment fund will pay 1.4 billion ringgit ($435.73 million) to take troubled Malaysian Airline System (MAS) private, the airline said on August 8, 2014, paving the way for a "complete overhaul" of its loss-making operations following two devastating jetliner disasters this year.
A security officer passes a Malaysia Airlines advertisement at the Kuala Lumpur International Airport in Sepang in this July 18, 2014 file photo. Malaysia's state investment fund will pay 1.4 billion ringgit ($435.73 million) to take troubled Malaysian Airline System (MAS) private, the airline said on August 8, 2014, paving the way for a "complete overhaul" of its loss-making operations following two devastating jetliner disasters this year.

A de-listing would pave the way for Khazanah, which is chaired by Prime Minister Najib Razak, to revive the ailing carrier, possibly by selling off its profitable engineering, airport services or budget airline units, trimming its payroll and installing a new management team.

MAS officials could not immediately be reached for comment on the share suspension. A Khazanah spokesperson said the fund could not comment on "speculation."

The restructuring and potential sale of MAS is politically fraught due to opposition to job losses from its labour union, which has hampered previous revival plans, and its status as Malaysia's national flag-carrier.

At MAS's current price of 24 sen per share, majority shareholder Khazanah would need to pay around 1.23 billion ringgit ($383 million) for the 30.6 percent of shares it does not already own, according to  calculations.

Sources said Khazanah is expected to pay a premium over Thursday's closing price.

Already squeezed by intense local and longer-haul competition from rivals such as AirAsia, MAS turned in its worst quarterly performance in two years in the January-March period and is currently burning through its operating cash.

The company is expected to announce its April-June earnings on Aug. 20. Analysts said it could be the airline's weakest quarterly performance yet partly due to flight cancellations after the disappearance of MH370.

MAS shares ended unchanged at 24 sen per share on Thursday, 4 percent lower than where they were before the disappearance of MH370. The broader index rose 1.9 percent during the same period.

Reuters

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