MALAYSIA Aviation Group (MAG), the parent company of Malaysia Airlines Bhd, will receive fresh capital amounting to RM3.6 billion from its sole shareholder Khazanah Nasional Bhd to fund the business during the restructuring period which is to run until 2025.

This is after a United Kingdom High Court approved a Scheme of Arrangement between the group’s leasing entity, MAB Leasing Limited, and the majority of its aircraft operating lessors.

The British court heard yesterday that all but one creditor had consented to the proposed scheme of arrangement with the group’s aircraft leasing unit at a creditors meeting.

However, the group managed to achieve 100% consent after the single creditor who was initially not in favour of the scheme agreed to it at the eleventh hour.

The remote hearing was held before Justice Snowden.

Meanwhile, MAG said in a statement last night that the unanimous support of lessors to the scheme represents an important component of the group’s wider restructuring exercise which entails liabilities amounting to more than RM15 billion.

“This financial restructuring exercise, which is expected to complete in early March 2021, involves all of MAG’s key stakeholders and, in addition to the Scheme, will see the airline successfully achieve bilateral agreements with finance lessors, spare engine lessors, maintenance service providers, corporate lenders, and Government of Malaysia-related entities,” it said.

Apart from the fresh capital injection, MAG has also taken proactive measures such as network cuts, structural cost savings, cash conservation and payment deferral initiatives to weather through the Covid-19 crisis.

This has translated into a savings of RM5.5 billion in 2020. The group is also targeting to achieve another RM397 million in savings in the first quarter of 2021.

Operating lessors have also continued to support the airline with a reset of lease rates to market and deferrals while lenders and hedging counterparties agreed on term-out for their Revolving Credit Facility.

MAG added that various concessions from government-linked entities have also enabled a solvent recapitalisation Malaysia Airlines.

The conclusion of the legal process and the holistic reset of the operating platform and balance sheet has given MAG room to fulfil its enhanced Long-term Business Plan 2.0 and achieve Vision 2025, while also paving the way for a more agile and lean future for the carrier.

Group CEO of MAG, Captain Izham Ismail, said that the long-term vision is to establish MAG as a leading global travel group.

“This signifies a paradigm shift in the way we prioritise the different business segments and subsidiaries in the Group’s portfolio,” Izham said.

“We seek to expand MAG’s involvement into other travel-related products and services beyond flights, which will go a long way in helping our customers complete their end-to-end travel experience. Our geographical advantage, award-winning solutions and services, plus signature Malaysian Hospitality will also help us in diversifying our revenue stream by minimising the need for us to rely on the heavily competitive air travel industry for survival,” he added.

Reuters had earlier reported on October 10 that the restructuring plan had been rejected by a group of aircraft leasing companies.

The companies that supposedly represent 70% of the aircraft and engines leased to MAB said they will challenge the “inappropriate and fatally flawed” plan, according to sources and a letter from a London law firm sighted by Reuters.

The group then went on with an “urgent” restructuring exercise which entailed renegotiating with lessors, as it saw little sign of the Covid-19 pandemic abating. – February 23, 2021.