KHAZANAH will stop funding Malaysia Airlines, its holding company is warning lessors as they renegotiate terms as the state carrier tries to stem bleeding in the face of Covid-19, reports Reuters.

Malaysia Aviation Group (MAG) offered “Plan A”, asking creditors and lessorts to take a haircut and if that fails, it will resort to “Plan B” and divert funds to its subsidiary, Firefly, said the report.

The airline, like many others, is suffering from travel bans and plummeting demand as a result of the pandemic, with the national carrier now staring at the prospect of bankruptcy.

“In the event Plan A fails, shareholder (Khazanah) will cease funding for MAG and will trigger winding down/liquidation process for MAG,” Reuters quoted an internal document as saying.

Khazanah is MAG’s sole shareholder.

Last week, reports said MAG is set to default payments for aircraft leases if it doesn’t get funding from Khazanah.

The group is requesting steep discounts on aircraft lease rates as part of a broad restructuring plan.

MAG was experiencing “an average monthly operating cash burn of US$84 million (RM350 million)” but only had US$88 million in liquidity as of August 31 and an additional US$139 million available from Khazanah.

Malaysia Airlines has struggled to recover from two tragedies in 2014, with the mysterious disappearance of flight MH370 and the shooting down of flight MH17 over eastern Ukraine.

Khazanah took it private that year as part of a US$1.5 billion restructuring but turnaround efforts have been upended by the pandemic. – October 8, 2020.