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Malaysia Airlines to receive $890m injection from sovereign wealth fund

Rescue capital comes after lossmaking flag carrier secures debt restructuring deal

Malaysia's flag carrier become a wholly owned unit of nation's sovereign wealth fund after a serious of incidents in 2014.   © Reuters

SINGAPORE -- Malaysia's sovereign wealth fund will pump an additional 3.6 billion ringgit ($890 million) in capital into the operator of Malaysia Airlines to pull the beleaguered flag carrier back from the financial brink.

Khazanah Nasional, which is the sole owner of the airline, decided to go ahead with the rescue after Malaysia Aviation Group announced Monday it won approval from a British court to proceed with a liability restructuring deal with aircraft leasing companies. The package includes lower lease rates and payment deferrals. The restructuring is due to conclude in early March.

The money will be used to fund business operations through 2025.

Malaysia Aviation's earnings have deteriorated amid the coronavirus pandemic. The group went to its creditors to negotiate debt relief under British corporate law. Izham Ismail, the group CEO, said in October that the organization "has no choice but to shut down operations if it fails to win the cooperation of the creditors."

The restructuring deal, combined with Malaysia Aviation's own cost cutting, will save 5.5 billion ringgit for 2020 alone. The company spent an estimated 9 billion ringgit a year in operational expenses prior to the pandemic, so the rescue will ease the blow from the coronavirus.

However, Malaysia's infection count remains high, and air travel is expected to underperform at least through this year. Izham said Malaysia Aviation will expand travel products and services as it looks to erase the red ink, which persisted prior to the pandemic.

Passengers declined after the disappearance of a Malaysia Airlines flight in 2014, followed by another flight being shot down over Ukraine the same year. This prompted Khazanah to completely nationalize the airline, risking the commitment of more capital support down the road.

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