Malaysia Airlines is “technically bankrupt”, its new German CEO said
Monday as the carrier slashed 6,000 jobs as part of plans to recover
from deadly disasters and a long run of red ink.
Christoph Mueller made public his plans for the troubled flag
carrier for the first time since the aviation turnaround specialist was
brought in on May 1 to save it from collapse.
They include the thousands of job cuts — expected but made official
on Monday — a trimmed route network, a revamped brand image and an
overhaul of the company’s organisation and operations.
Mueller,
whose job-cutting stints at Ireland’s Aer Lingus and Belgium’s Sabena
earned him the nickname “The Terminator”, said Malaysia Airlines’
desperate situation made drastic action unavoidable.
“We are technically bankrupt and that decline of performance started
long before the tragic events of 2014,” Mueller told reporters,
referring to a pair of disasters that rocked the already loss-making
airline last year.
“The restructuring process will start today with a hard reset.”
Beset by poor management, Malaysia Airlines had struggled for years to
remain competitive, posting losses for most of the past five years.
But its two shocking disasters in 2014 were the final straw, pushing the carrier to the brink of collapse.
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, killing all 298 aboard, by a suspected
ground-to-air missile over Ukraine.
A Malaysian state investment fund took the reeling airline over late
last year, later tapping Mueller to take the helm. He is the company’s
first non-Malaysian CEO.
On Monday the airline said it had issued termination letters to all
of its roughly 20,000 employees, followed by new contracts offered to
14,000 of them as it aims to slim down.
Mueller said the 6,000 job losses were necessary as the company
suffered from cost burdens 20 percent higher than those sustained by its
rivals.
Under Mueller, 52, the carrier plans to “re-invent” itself
beginning from September 1 with a yet-to-be-revealed new brand image and
livery as it seeks to shed the stigma of disaster.
Mueller indicated a name change was possible.
“We will test that
very diligently with test groups because we have to achieve a
perception of a completely new start in certain markets where our brand
is particularly tarnished,” he said.
But 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 said there would be no turning back as he focuses on
“stopping the bleeding” this year, stabilising the company next year and
starting to grow again by 2017.
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
unfavourable 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 revitalisation of
technology, training and in-flight entertainment and service, he said.
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