KUALA LUMPUR, Malaysia (2nd UPDATE) – Malaysia Airlines is “technically bankrupt,” its new German CEO said Monday, June 1, as he outlined plans to stabilize the failing flag carrier, including 6,000 job cuts.
“We are technically bankrupt and that decline of performance started long before the tragic events of 2014,” Christoph Mueller told reporters, referring to two deadly disasters that rocked the airline last year.
Malaysia Airlines took its first major steps on Monday under Mueller, sending termination letters to all of its roughly 20,000 employees, followed by new contracts offered to 14,000 of them.
The exercise – which was expected – trims around 6,000 jobs.
Mueller had previously initiated turnarounds at Ireland’s Aer Lingus and Belgium’s Sabena that earned him the nickname “The Terminator” for his job-slashing.
Under Mueller, 52, the carrier plans to “re-invent” itself beginning from September 1 with an unspecified new brand image and expected new livery as it seeks to shed the stigma of a disastrous 2014.
Mueller indicated a name change was possible.
In March of last year, Flight MH370 disappeared with 239 passengers and crew aboard and remains missing. Four months later, Flight MH17 was blown out of the sky by a suspected ground-to-air missile over Ukraine and all 298 people on board were killed.
The tragedies were the final straw for an airline that analysts say had been poorly managed for years, slipping further into the red.
A state investment fund took it over in a rescue bid late last year, tapping Mueller to take the helm.
Mueller said he planned to “stop the bleeding” in 2015, stabilize the business next year, and seek to start growing again by 2017. (READ: New Malaysia Airlines CEO warns of tough path ahead)
Mueller, in an email to staff last month, had warned that a major overhaul was necessary as the airline was weighed down by “uncompetitive cost levels” 20 percent higher than its rivals.
Besides cutting staff, Malaysia Airlines is expected to trim unprofitable long-haul routes, but Mueller said those plans could not yet be divulged for competitive reasons.
‘Darkest moment’ for employees
The plans were attacked by the carrier’s flight attendants union, which said employees were paying the price for the company’s poor management over the years.
“Today is the darkest moment for employees of Malaysia Airlines. I am having a tough time dealing with the emotions of those who have been terminated,” said Ismail Nasaruddin, the union’s head.
“It is very distressing. I have crew members crying all over the phone, saying they had been terminated despite having a sterling performance record.”
Ismail said the union would decide this week whether to take action.
Other major unions at the airline have been quiet about the brewing plans, with Malaysian media reports suggesting they would go along with them.
Mueller indicated the company would also reassess its route system. He gave no details but rejected suggestions it pull back to become merely a regional carrier.
Aviation analysts have long blamed the airline’s failure to compete on poor management, over-reaching on routes, government meddling and unfavorable service and supplier contracts stemming from Malaysia’s crony capitalist system.
Mueller said all of the carrier’s service and supplier contracts would be reassessed and brought in line with industry norms.
The airline also would embark on a major revitalization of technology, training ,and in-flight entertainment and service, he said. – Rappler.com