KUALA LUMPUR (Aug 26): Khazanah Nasional Bhd will set up a new entity (NewCo) to migrate Malaysian Airline System Bhd’s (MAS) operation and reduced size workforce.

The Cabinet has approved Khazanah’s latest plan to revamp the national carrier, including cutting 30% of its workforce, renegotiation of all contracts and cutting unprofitable routes, according to Khazanah’s managing director Tan Sri Azman Mokhtar.

Khazanah will pump in fresh capital of RM3 billion into the NewCo to revive MAS, in addition to an estimate RM1.6 billion for the migration of operation and workforce to the NewCo, and RM1.38 billion cost for privatisation.

The government investment arm will only implement the plan, if it manages to wholly own the national carrier through the privatisation exercise at 27 sen per share.

Azman stressed that the plan has to be implemented upon conditions set by Khazanah, which will inject fresh capital.

To smoothen and facilitate the restructuring exercise, a new act called “MAS Act” will be drafted and presented to the Cabinet for approval.

Also, an aviation commission will be set up to regulate and manage the competition.

MAS will also renegotiatiate with its creditors, where Kumpulan Wang Persaraan (Diperbadankan) has agreed to swap up to RM750 milion of its existing perpetual sukuk into ordinary shares.

Meanwhile, the existing entity, which will continue to be led by its current group chief executive officer Ahmah Jauhari Yahya, will be shut down by July 01 next year, upon completion of the migration.

Khazanah is currently looking for candidates locally and abroad, to helm the top management of the NewCo.

If the restructuring exercise is implemented according to plan, Khazanah expects the national carrier to turn profitable in three years. And MAS will be relisted in three to five years after it turns profitable.

However, should Khazanah fail to take MAS private, the proposed restructuring exercise would not be implemented.

Consequently, MAS’ cashflow will reach a critical low level and Khazanah would not inject more money into it. It will eventually go bankrupt, said Azman.