International Finance

Malaysia Airlines merger could hit Malaysia AirAsia X

The newly merged entity will see less competition, particularly from the mid-haul segment

The potential merger between AirAsia X and Malaysia Airlines would lead to the creation of a new aviation company which will operate under the Malaysian Airlines brand, and this could affect Malaysia Air Asia X’s long-haul low-cost business, according to reports.

With regard to the merger between Malaysia Airlines and AirAsia X, Ahmad Maghfur Usman, an aviation analyst, wrote in a report that, “The formation of the new company would see less competition, particularly from the mid-haul segment, although competition from Malindo Air, AirAsia Group, and foreign carriers are likely to persist.”

He added, “With regards to Malaysia, we think the viability of operating a long-haul low-cost airline is less
feasible compared to Singapore and Bangkok, where both Singapore Airlines’ Scoot and Thai AirAsia X have seen a financially more sustainable performance than Malaysia AirAsia X, where Kuala Lumpur is its base.”

Keeping in mind AirAsia X’s deal with Airbus to acquire 78 Airbus A330-900s, 30 A321XLRs, and 10 A350-900s, Ahmad Maghfur Usman believes the new company must trim its short-haul business even further and concentrate on boosting its mid-long-haul segment.

It was reported earlier this week that Khazanah Nasional Berhad, which owns Malaysian Airlines is pushing for a merger with AirAsia X. According to the reports, the Malaysian government would inject money to recapitalise the state-owned airline and settle all of its debts prior to the merger.

In the month of June, Khazanah Nasional Berhad hired Morgan Stanley as an adviser to review the Airline’s business model and to explore possible options to turn around the loss-making airline.

This is not the first time both Malaysia Airlines and AirAsia X have held talks for a potential deal. In 2012, a share swapping deal between the airlines was proposed. However, the deal was called off after Malaysian Airlines’ worker’s union objected the deal.

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