Two Malaysian Airlines May Merge To Survive Impact Of Coronavirus Pandemic

Two of Malaysia’s largest airlines, the national carrier Malaysia Airlines and budget carrier AirAsia, may merge in order to survive the coronavirus pandemic intact, reported Reuters.

Malaysia Airlines, or MAS, was struggling to survive even before the emergence of the COVID-19 crisis grounded its fleet. It is owned by the government of Malaysia.

But Mohamed Azmin Ali, Malaysia’s minister of international trade and industry and the government’s second-in-command, told Reuters that talks will soon begin on ways to save the country’s airlines. He noted that a merger between Malaysia Airlines and AirAsia had been considered as long ago as last year.

“That discussion took place even last year, even before this pandemic came. But we need to continue the discussion,” Azmin said. “We need to see how best we can save those airlines, and it’s not going to be a very simple answer. Things are very bad, the aircraft are not flying. We need to sit down and discuss how to address these issues.”

Azmin added: “We were also looking at some of the proposals coming from international players. Now the situation is becoming more complex because of this pandemic. We are looking at all options.”

SimpleFlying reported that a merger of AirAsia and MAS would create by far the largest airline in the nation, as well as a strong regional competitor.

Based near Kuala Lumpur, AirAsia operates in multiple countries, including Malaysia, Thailand, Philippines, India, Indonesia and Japan. AirAsia only flies Airbus A320 aircraft -- it boasts 66 of the A320ceo, 29 of the A320neo and two of the A321neo.

In addition, AirAsia has outstanding orders for an additional 362 A320neo aircraft.

AirAsia has delivered strong growth since it began operations in 1992. In 2019, the carrier produced profits of $2.8 billion, with a 16% growth in passenger volume and a 31% jump in ancillary revenue.

MAS has a fleet of 81 aircraft, with a sizable number of 737-800s and some Airbus widebodies.

But MAS has not turned a profit in years – in January of this year it reportedly needed a cash infusion of $5 billion to keep going.

“Clearly, AirAsia has both the knowledge and bankroll to make a success of MAS,” wrote Joanna Bailey of SimpleFlying. “However, the details of any merger could require some serious thought. If it did merge with Malaysia Airlines, it’s likely it would be on condition of very little state involvement and would probably involve a fleet reshuffle too.”

As such, a merger might lead to the cancellation of MAS’ outstanding order for Boeing’s (BA) 737 MAX in order to streamline the merged company’s combined fleet.

Meanwhile, Malaysia is planning to end its partial lockdown on Apr. 28, although it could be extended.

Malaysia has so far confirmed 5,182 COVID-19 infections and 84 related deaths.

When the government finally lifts the lockdown, the resumption of passenger airline travel will likely take some time, given the uncertainties surrounding other countries’ travel restrictions.

Last week, AirAsia said it had no incoming revenue and that 96% of its fleet was grounded.

AirAsia has tentatively planned to restart domestic service in Malaysia after Apr. 28, then later resume domestic flights in Thailand, the Philippines, India and Indonesia, contingent upon required government approvals.

MAS has been reeling from two tragedies in recent years – the mysterious disappearance of flight MH370 in March 2014 and the shooting down of flight MH17 over eastern Ukraine in July 2014 – an act which killed 300 people .

Reuters reported that AirAsia and Japan Airlines Co, Ltd. had previously shown interest in buying stakes in MAS. Earlier this month, Golden Skies Ventures, a privately held Malaysian group, said it made a $2.5 billion offer to take over MAS’ holding company.