Aug 14, 2014

    MAS may retrench up to 20% of workforce

    MALAYSIA Airlines (MAS), a state-owned carrier tottering over hefty losses and reeling from twin tragedies, could lay off up to 20 per cent of its workforce to slash cost as part of a deep restructuring to revive the ailing airline.

    The Business Times understands that the airline, which major owner Khazanah Nasional has just proposed to buy out and delist from the Malaysian stock exchange, is in the midst of collating detailed data which will be "reality tested" to make the tough decision on who stays and who goes.

    Said a reliable source: "MAS' new business model that is being fine-tuned will not require the staff strength it has and there will be redundancies. There are many, not in the few hundreds, but some thousand or so who may be let go. It will also involve those holding senior positions who have made some poor day-to-day decisions."

    Staff cuts, deemed a low-hanging fruit in keeping MAS afloat, appear to be inevitable for the airline, which has a bloated workforce of 19,577 employees as at the end of last year. It is a painful decision it has long evaded, not least for fear of a political backlash.

    "Layoffs are not easy. It's an emotional subject as it's about one's livelihood. The airline wants to be very careful in deciding who will be laid off, who can be trained or redeployed and those who need to retire," the source added.

    The cuts will be done in a just manner.

    "If Khazanah is prepared to pay a decent sum to take MAS private, then it's a given that employees who will be taken off will be offered a morally fair sum. The airline is not going to simply shaft people. Also, it wants to avoid the political noises that may arise," said the source.

    On Friday, Malaysia's sovereign wealth fund Khazanah proposed to take MAS private by offering remaining shareholders 27 sen per share - an exit plan for minority shareholders that will cost RM1.4 billion (S$550 million) and deemed fair by the analyst fraternity. It is a relatively more preferred option to total collapse or bankruptcy.

    The airline's last downsizing took place eight years ago and cost nearly RM500 million in payouts to some 2,600 employees.

    A 19 per cent reduction in workforce and 10 per cent capacity cut could nearly halve MAS' estimated losses in fiscal 2015 of RM767 million, according to RHB Research.

    Yet, there are major hurdles. One of them is the fear that a big cut could lead to disgruntlement among a workforce whose morale has already been beaten down by the recent tragedies, and, in turn, trigger political ramifications at the polling booth.