(Reuters) — After losing colleagues in two plane disasters this year the 19,500 staff of Malaysia Airlines (MAS) now face a new ordeal – a quarter of them may lose their jobs at the unprofitable airline.
Deep job losses, route cuts and a change of leadership are expected to feature in a restructuring plan being prepared by Malaysia’s government, likely to be announced when MAS also reports second-quarter results, probably the last before being de-listed.
The numbers are expected to show plunging ticket sales and heavy losses even before July’s shooting down of MH17 over Ukraine.
As state fund Khazanah Nasional, the majority owner, prepares to take the company private and inject efficiency into the airline, it must tackle crumbling staff morale and win over the powerful main labour union if turnaround efforts are to succeed.
Even before the lost aircraft tragedies, airline insiders said staff discontent had been growing for years due to strategy U-turns, leadership changes and poor career prospects.
One of the region’s most prestigious and fastest-growing airlines in the 1990s, MAS has steadily fallen behind high-end rivals such as Singapore Airlines and been battered by the rise of Asia’s budget carriers like Air Asia. The company hasn’t made an annual profit since 2010.
Moshin Aziz, Associated Director, Research, Equity Market, with Maybank Investment Bank, says the airline has multiple problems to tackle.
“Nowadays we have the advent of more competitions from the likes of Middle Eastern carriers who have been growing aggressively and who have got superior cost structure. So that has somewhat put a huge impact to not only Malaysia Airlines but to all the full service carriers in this region. Secondly the market is more attuned towards low cost or budget travel. That’s a global phenomena and that phenomenon is very strong in Asia Pacific, so it kind of does not coincide with Malaysia Airlines captive market. They’re more premium and up-market by nature but at the same time the market (is) moving towards more budget,” he said.
This year’s twin disasters have caused new stresses. A total of 186 MAS flight crew quit between January and July, many of them due to family pressure not to fly after the crashes, MAS says. Over 5,000 MAS staff work as cabin crew or pilots and the airline says the resignation rate has now returned to normal.
About a quarter of MAS staff are likely to lose their jobs under Khazanah’s plan, a source with direct knowledge of the matter told Reuters. The pill is likely to be sweetened with costly redundancy packages and offers of jobs at other state enterprises.
The company has cut fares on most of its routes in an attempt to lure back nervous passengers, though it is too early to gauge its success. It has almost doubled its commission payments to Australia-based travel agents to revive sales there, according to Australian media reports.
Aziz says the company is heading into the history books unless it can come up with a deep and effective restructuring plan that he believes will take at least two years to show results.
“There’s a multitude of problems from a very outdated fleet type and also product offering is something that they’re trying to address but probably will take another year or so to complete. Apart from that they also have over bloated workforce in terms of size, management communication between the company that is less efficient compared to other corporations,” he added.
Still reeling from the disappearance of Flight MH370 in March, the downing of one of its planes over eastern Ukraine just four months later, dealt another blow to Malaysia Airlines.
The airlines’ Flight MH17, bound for Kuala Lumpur from Amsterdam, was downed over eastern Ukraine on July 17, killing all 298 people on board.
The crash came just after Flight MH370 went missing on a flight from Kuala Lumpur to Beijing in March with 239 passengers and crew on board.
Losing two planes in the span of just four and half months is a tragedy that has never happened to any airline in history.