SINGAPORE -- Japan Airlines, which only recently crawled out from bankruptcy protection, has emerged as one of four finalists to sponsor the turnaround of faltering flag carrier Malaysia Airlines.
If selected, JAL will lend capital support and expertise to help the Southeast Asian airline turn profitable. Malaysian Prime Minister Mahathir Mohamad's administration will choose the sponsor by early next year.
The finalists also include Qatar Airways, local news reports say. Reuters quotes a local news source in citing China Southern Airlines as well. Foreign airlines are ideal candidates, as they are well positioned to assist in cost-saving measures such as joint aircraft purchasing.
Malaysia Airlines lost two planes in 2014 -- one vanished after departing Kuala Lumpur while the other was shot down over Ukraine. The disasters exacerbated the carrier's financial hardships, which led to a government takeover the same year.
Despite the bailout funds and the introduction of new management, Malaysia Airlines continued to bleed losses amid competition from budget carriers.
Mahathir's government opted to base the turnaround on an outside infusion of capital as well as operational support. The state hired a brokerage as an adviser to help select sponsors.
The capital structure of Malaysia Airlines after a sponsor is chosen will be a subject of interest, though the government is expected to retain a stake.
After Japan Airlines filed for bankruptcy protection in 2010, the government bailed out the carrier with a set of conditions that restricted operations. The airline finally escaped those conditions in April, becoming fully empowered to expand.
JAL and Malaysia Airlines entered an expansive operational tie-up in May. Called a "joint venture" within the industry, it lets the two carriers share income like a single company and adjust schedules and fares. The deal has helped Japan Airlines stay in the running to be a sponsor.
The venture would not generate the full benefits if one partner's finances are in doubt. Furthermore, JAL's domestic rival ANA Holdings has formed tie-ups with some of Southeast Asia's top carriers, such as Singapore Airlines and Thai Airways International.
"Talks of an investment have surfaced amid ways we can best strengthen the joint venture" with Malaysia Airlines, a JAL executive said.
