Crisis-hit Malaysia Airlines faces 'complete overhaul'

Malaysia Airlines will be taken over by the country's state investment fund and de-listed, as part of plans announced Friday for a "complete overhaul" to rescue the company after two crippling air disasters.

Khazanah Nasional, which owns 70 percent of the airline, said it intends to purchase all minority shareholdings – later pulling the stock from the Kuala Lumpur exchange – and will finalize a restructuring plan by the end of the month.

The 68-year-old flag carrier has hemorrhaged cash for years as it struggled to cope with intensifying industry competition, and the double tragedies of MH370 and MH17 have further pummeled bookings.

Flight MH370 disappeared mysteriously in March with 239 people aboard, en route from Kuala Lumpur to Beijing. No trace has been found and the airline was widely criticized for its handling of the crisis.

On July 17, MH17 was shot down over Ukraine, with 298 people killed.

The airline is burning through an estimated $2 million a day as a result of its crumbling business and disaster-related costs, and speculation had been mounting that Khazanah would step in.

The investment fund said all stakeholders would need to work together to rescue the company through a "complete overhaul" extending across "the airline's operations, business model, finances, human capital and regulatory environment."

"Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity," a Khazanah statement said.

The widely expected move requires approval from Malaysia Airlines’ board. The airline said its operations would be unaffected in the interim.

Aviation expert Todd Curtis told Al Jazeera that while the loss of flight MH370 was bad, the airline might have eventually recovered if it had not been for the downing of flight MH17. Curtis says there is more at stake for Malaysia than just saving the airline.

“Does the government see the airline as a flag carrier, representing the country as a whole? It’s quite frankly a marketing device to show the world that Malaysia is a serious country,” Curtis said.  “And the benefit in the long-run of having a flagship carrier are worth the potential losses in the short term.”

Having a government step in to essentially save an airline is not a new tactic either, he added, noting that the United States has done something very similar over the years following the deregulation of the aviation industry, and particularly after the Sept. 11, 2001 attacks.

“There was a special 9/11 fund for the victims and one of the general stipulations was if people accepted money from the fund, you couldn’t sue the airlines, or the city or government,” Curtis said.

Saying the carrier was "a part of Malaysia's history," Prime Minister Najib Razak called on all Malaysia Airlines stakeholders to support the government fund's move despite the "painful steps" that may be involved.

"Piecemeal changes will not work," he said.

Analysts said Khazanah would need to undertake a management purge, painful layoffs, and scrap major routes in order to restore the company's bottom line and global reputation.

"It needs a new heart, a new brain. As it exists now, the airline is doomed," said Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics.

Earlier Friday, Malaysia Airlines suspended its shares on the Kuala Lumpur stock exchange ahead of the Khazanah statement.

Analysts have long blamed poor management, government interference and powerful, reform-resistant employee unions for preventing the airline taking the steps needed to stay competitive.

Malaysia Airlines previously had a solid safety reputation.

However, it lost 1.3 billion from 2011-13, and a further $138 million in the first quarter of this year, blaming MH370's "dramatic impact" on bookings.

Local media reported that Khazanah would need to spend nearly $437 million to acquire the outstanding shares.

Al Jazeera and Agence France Presse