MIAMI – Malaysia Airlines (MH) is facing an air of uncertainty after a restructuring plan was rejected by lessors on Friday. The Oneworld alliance member may be forced to shut down if an agreement cannot be reached, according to Malaysia Airlines Group CEO Ismail Izham.

The airline group’s majority shareholder, Khazanah Nasional, has previously threatened to push MH into liquidation if a deal could not be struck.

The COVID-19 pandemic has taken a particularly hard toll on the Southeast Asian travel market as long haul travel is at an all-time low.

MH Airbus A350-900. The lack of demand for long-haul travel has had a crippling effect on the industry. PHOTO: Anna Zvereva/Wikimedia

Conflicting Reports

On Friday, a group of lessors claiming to own a large majority of MH aircraft called the proposed restructuring plan “fatally flawed”, according to a document obtained by Reuters. However, CEO Ismail Izham has a more optimistic take on the situation:

“There are creditors who have agreed already. There are others still resisting, and another group still 50:50″, he said in an interview with Malaysian daily newspaper The Edge Weekly.

Izham has set October 11th as the deadline for lessors to agree upon a plan. If no agreement is reached, MH will look to alternate solutions, which may include the transfer of Malaysia’s Airline Operator Certificate to a new airline under a different name.

MH Airbus A350-900 wearing the Malaysia Negaraku Livery. PHOTO: Anna Zvereva/Wikimedia

Details of the Restructuring Plan

Although the details are vague, Izham outlined the initial restructuring plan during the interview with the Edge Weekly. As of now, no official communication from MH or Malaysia Airlines Group has been released.

The initial plan relies upon an additional cash injection from Khazanah Nasional, which would give the airline some breathing room as the market makes an initial recovery.

The centerpiece of the plan is based upon the optimistic forecast that demand will return to 2019 levels by Q3 2022, at the latest. The balance sheet would be restructured over a five year period, with MH breaking even by 2023.

While viable, this plan is clearly not enough for many of the airlines’ lessors. MH officials will race against time to find an agreement before the October 11 deadline.

Featured Image: MH Airbus A380. PHOTO: Channelsking/Wikimedia