Malaysia Airlines may sell its engineering unit in a bid to return to profitability

0a11_2153
0a11_2153
Avatar of Linda Hohnholz
Written by Linda Hohnholz

KUALA LUMPUR, Malaysia – National carrier Malaysia Airlines (MAS) is believed to be mulling over the idea of selling MAS Engineering, as part of its plan to return to profitability.

KUALA LUMPUR, Malaysia – National carrier Malaysia Airlines (MAS) is believed to be mulling over the idea of selling MAS Engineering, as part of its plan to return to profitability.

The spin-off of the non-core business division will allow the ailing carrier to pump the proceeds into its core unit, which is passenger chartering.

According to an aviation industry source, the plan is much better for MAS, rather than declaring bankruptcy or calling for a privatisation exercise.

โ€œSingapore Airlines did the same by selling non-core units as part of its restructuring plan.

MAS can sell its engineering division to raise money to finance its airline operations instead,โ€ the source told Business Times last week.

The source said the spin-off would allow MAS to focus on its core operations while lowering its maintenance, repair and overhaul (MRO) costs.

โ€œThat would eventually help reduce its overall operation cost. The sale will also bring strategic investors into the company and allow MAS to tap third-party investors, too,โ€ the source said, adding that MAS could still hold some shares in MAS Engineering.

According to Cheng-Lung Wu, the author of an aviation book, the spin-off or outsourcing of non-core businesses is currently in trend as it helps the airline to become more competitive.

โ€œThese non-core units do not always work efficiently within an airline structure, especially if the sole function of these units is to serve the core business,โ€ Wu wrote in his book, Airline Operations and Delay Management.

He said an airlineโ€™s core business, namely passenger chartering, requires many supporting units within the organisation, such as ticketing, marketing, planning and sales. Other non-core businesses such as ground-handling, catering and maintenance are likely to be outsourced in the future to other airlines or thirdparty
companies.

It could also be spun-off as independent companies within the group of the mother airline organisation.

However, it is understood that MAS does not yet have a solid plan on the sale of its engineering division.

โ€œThey (MAS) are thinking about whether to build value in the unit (MAS Engineering) first and then sell it or to just spin it off to another company. It is only an idea,โ€ the source said.

Alliance Researchโ€™s aviation analyst Tan Kee Hong said the spin-off of MASโ€™ non-core businesses, such as the engineering division, is possible as the airlineโ€™s management continues to implement cost-cutting initiatives with a focus on labour and maintenance expenses.

โ€œThere will be a review of the network, which could reduce the frequency of unprofitable routes or see them dropped altogether,โ€ Tan said in a research report.

Meanwhile, MAS Employee Union (MASEU) president Alias Aziz said the union will oppose the idea of selling MAS Engineering.

He said the division has some of the worldโ€™s top aircraft engineers who are currently servicing both MAS and other airlines.

MASEU executive secretary Mohd Jabarullah Abdul Kadir said he is also unsure if the divisionโ€™s 4,000 employees would be able to keep their jobs should MAS decides to sell.

Both Alias and Jabarullah are concered that MAS Engineeringโ€™s fate would end up like the airlineโ€™s catering service department.

MAS disposed of 70 percent of its stake in MAS Catering in 2003 as part of its restructuring strategy.

About the author

Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

Share to...