PUTRAJAYA may consider bailing out Malaysia Airlines Bhd and AirAsia Group Bhd, which have been hit hard by the Covid-19 outbreak, reports Bloomberg.

A special purpose vehicle may be set up to take over the debt of companies or a merger is possible, the report said, citing unnamed sources with knowledge of the matter.

Deliberations are at an early stage and the government hasn’t decided on a course of action.

Malaysia Airlines, which has been operating at a loss despite announcing a turnaround plan in 2015, has been in talks with lenders about modifying its borrowings, the people said.

Khazanah Nasional Bhd is the sole shareholder of Malaysia Airlines after taking it private in 2014 after one of its planes vanished over the Indian Ocean and another was shot down over Ukraine.

Malaysia Airlines confirmed yesterday in a statement it has been in talks with the government on emergency measures to help airlines weather crisis.

The carrier isn’t in discussions with the government on mergers with other airline groups, it said. 

“Solutions to address the industry oversupply situation and long-term sustainability need to be addressed holistically,” Malaysia Airlines Chief Executive Officer Izham Ismail said in the statement.

“Whilst mergers between airlines is one option, addressing the issues via regulations and policies should also not be ignored as it could just be as effective.”

Any merger proposal would need to take into account antitrust regulations and address numerous integration challenges, including personnel issues and both carriers’ liabilities, he said.

Representatives for the Prime Minister’s Office and Khazanah declined to comment, while a representative for AirAsia didn’t immediately respond to requests for comment. – March 26, 2020.