Air France-KLM has apparently submitted a proposal to invest in cash strapped Malaysia Airlines, seeking to buy as much as 49 percent, while Japan Airlines is looking at a 25 percent stake.

Malaysia Airlines has been in financial difficulties for years and it’s owner, Malaysias sovereign wealth fund Khazanah has appointed Morgan Stanley in 2019 to explore options to offload the airline.

The airline has burnt through several CEO’s in recent years, some of which have initiated deep cuts in the companies staff numbers and other streamlining measures.

This afternoon MalaysiaKini reported that insiders have knowledge about a possible carving up of the company between AirFrance/KLM, Japan Airlines and local ownership.

Proposals to invest in ailing Malaysia Airlines include one from Air France-KLM which wants as much as 49 percent, while Japan Airlines is looking at a 25 percent stake, sources with knowledge of the matter said.

Domestic carrier AirAsia Group Bhd and Malindo Air, the Malaysian arm of Indonesia’s Lion Air, have also submitted proposals, the sources said.

“The bids from the foreign carriers are more comprehensive and strategic as both plan to capitalise on the strategic location of Malaysia for their operations,” said one of the sources. …

The sources declined to be identified as the discussions are confidential. Representatives for Air France-KLM, Japan Airlines (JAL), AirAsia and Malindo did not immediately respond to requests for comment.

Prime Minister Dr Mahathir Mohamad said yesterday five proposals had been received as part of a review that started last year but declined to name the suitors.

Malaysia Airlines last year signed a joint venture agreement with JAL covering flights between Malaysia and Japan, which the Japanese airline said could be expanded in the future to cover US flights.

Malaysia Airlines and JAL are both members of the Oneworld airline alliance, while Air France-KLM is part of the rival SkyTeam alliance.

Khazanah, which appointed Morgan Stanley last year to advise on potential options for the airline, said it was working closely with the government.

“While there have been several proposals in this regard, a review of the options available to us is still ongoing,” Khazanah said in a statement.

Sources said Air France-KLM had proposed setting up a hub for maintenance, repair and overhaul services in Malaysia, while Japan Airlines had offered to make the Southeast Asian country its regional hub, including for low-cost flights.

There are some implications when Malaysia Airlines goes into foreign ownership, especially if AirFrance/KLM would be the majority shareholder if their cut of 49% and JAL’s 25% becomes reality.

For sure there will be further reductions in staff and possibly routes, even though the route network has already been cut dramatically so not sure where else they could roll back.

Another consequence could be that Malaysia Airlines and their Enrich program could leave the oneWorld alliance and move to SkyTeam, possibly even adapting Flying Blue as their frequent flyer program.

Conclusion

Right now these are only proposals but given how long Malaysia and Khazanah have been looking for a way out it’s more likely than not that we’ll see a sale of the carrier sometime down the road in 2020. To finalize it might take a bit more time but since there is no competition / antitrust issue here it could move quickly.

Seeing Malaysia Airlines leave oneWorld would be unfortunate and put an end to the cheap tier point runs in Asia but that’s all speculation at this point.

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