Overhaul for struggling Malaysia Airlines

Malaysia Airlines told travel agents last month it was determined to keep flying. Photo / AP

All operations to be reviewed after state fund buys-out troubled carrier

Malaysia Airlines will undergo a complete overhaul following the public buyout of the struggling carrier, with all operations, including unprofitable routes, under review.

Malaysia's state investment fund Khazanah Nasional will pay 1.4 billion ringgit ($516 million) to take troubled Malaysia Airlines private, paving the way for its complete restructuring after the loss of two of its passenger planes this year.

The move had been expected after the mysterious loss of Flight MH370 en route to Beijing and MH17, downed by a rocket over the Ukraine. The loss of two planes sparked a slump in bookings that has hurt its already struggling operations amid intense competition from budget Asian airlines.

Khazanah, which owns 69.37 per cent of MAS, said it would take six to 12 months to complete its restructuring of the airline after it has secured approval from shareholders. It said it would give more details at the end of this month.

Malaysia Airlines flies daily between Auckland and Kuala Lumpur with most outward-bound New Zealanders flying on to Europe on what had been regarded in the travel industry as a sound second-tier, full-service carrier offering discount fares and competition for rivals.

The airline yesterday said it was "business as usual" in NZ and its operations remain unchanged.

The airline told travel agents last month that it was determined to keep flying.

"We are determined to rebuild trust in Malaysia Airlines as one of the best full-service carriers in the world and we appreciate the support of travel agencies, passengers and our valued employees," said Lee Poh Kait, regional senior vice-president, Australia, New Zealand and southwest Pacific.

The airline said then that the Australasian region was its main market outside Malaysia. As a result of increased demand, it boosted capacity to Australia and New Zealand in February 2014 by a third with new aircraft.

Khazanah said all stakeholders would need to work together to save the company via a "complete overhaul of the national carrier on all relevant aspects ... [including] 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."

Flight MH370 disappeared in March with 239 people on board, en route from Kuala Lumpur to Beijing. The airline was widely criticised for its handling of the crisis. On July 17, MH17 was shot down over Ukraine, with 298 people killed.

Though it formerly had a solid safety reputation, the carrier's association with tragedy has pummelled bookings, and analysts said it was burning through its cash reserves at a rate of about US$2 million ($2.3 million) a day as it struggled to survive.

- additional reporting: AP