Thursday 28 Mar 2024
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SHAH ALAM: Aviation consultancy firm Jentayu Danaraksa Sdn Bhd (JDSB), among the many companies keen on participating in reviving ailing Malaysia Airline System Bhd (MAS), wants to set up a new premium economy airline.

The company has tweaked its US$2.5 billion (RM8.75 billion) revamp plan to set up a new airline, to be called Fly JD, to buy out the loss-making Penerbangan Malaysia Bhd (PMB), which currently leases aircraft to MAS, Jentayu director Shukor Yusof told reporters yesterday.

Shukor said Fly JD will provide shuttle services for passengers to and from destinations not covered by Malaysian Airline Bhd (MAB), the new entity that will emerge upon the implementation of Khazanah Nasional Bhd’s five-year 12-point MAS recovery plan.

He said Jentayu had dropped its original plan of taking over MAS assets, MAS Engineering Sdn Bhd and Firefly Sdn Bhd.

“Our understanding is that MAS Engineering and Firefly are not for sale, while PMB is loss-making. We think the deal will be attractive to Khazanah,” said Shukor.

He revealed that Jentayu will be meeting Khazanah today to discuss its plan.

“We will be meeting with Khazanah’s officials tomorrow (today) at 5pm to discuss our proposal. But we are not sure if Tan Sri Azman Mokhtar will be present,” Shukor said, when asked whether the managing director of the sovereign fund will be in the meeting.

Jentayu is proposing to form an entity called JD Leasing to fully acquire PMB, while providing strategic shares to Khazanah, at no cost.

Subsequently, JD Leasing will allocate up to US$1.5 billion out of the total fund that it has to raise to acquire MAS-owned aircraft via a “sale-and-leaseback” agreement with MAS.

Shukor said the aircraft will be leased back to MAS at “significantly” discounted rates, which will vary, depending on each aircraft’s risk profile.

On the source of funding to acquire the aircraft, Shukor said Jentayu has been talking with top aircraft leasing companies around the globe — which he declined to say who — and noted that these discussions have entered into an “advanced” stage.

Jentayu said it will raise the remaining US$1 billion it needs — which it did not specify for what purpose, but presumably for setting up and operating Fly JD — by refinancing PMB’s US$1 billion bonds that are due in mid-2016.

Jentayu managing director Feriz Omar said the main agenda of the plan is to secure the 6,000 jobs that will be retrenched under Khazanah’s 12-point plan. He said these employees may be available to work in Fly JD’s business or JD Leasing.

“Mainly, what we are proposing is that MAB’s business should be expanding, instead of shrinking,” Feriz said, adding that with the Asean Open Skies policy to be implemented in 2015, there are plenty of business opportunities for MAB.

With the funds that Jentayu expects to secure, Feriz said there will be significant savings for Khazanah, which intends to spend RM6 billion in its final bid to turn around the ailing carrier. However, he did not say exactly how much Khazanah will still need to spend if it accepts Jentayu’s proposal.

 

This article first appeared in The Edge Financial Daily, on December 16, 2014.

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