Air France-KLM look to buy major stake in struggling Malaysia Airlines

Malaysia is seeking a strategic partner for its ailing national airline. (Reuters)
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Updated 21 January 2020

Air France-KLM look to buy major stake in struggling Malaysia Airlines

  • Malaysia Airlines last year signed a joint venture agreement with JAL covering flights between Malaysia and Japan

KUALA LUMPUR: Proposals to invest in ailing Malaysia Airlines include one from Air France-KLM which wants as much as 49 percent while Japan Airlines is looking at a 25 percent stake, sources with knowledge of the matter said.

Domestic carrier AirAsia Group Bhd and Malindo Air, the Malaysian arm of Indonesia’s Lion Air, have also submitted proposals, the sources said.

“The bids from the foreign carriers are more comprehensive and strategic as both plan to capitalize on the strategic location of Malaysia for their operations,” said one of the sources.

The Malaysian government has been seeking a strategic partner for its national airline, which has struggled to recover from two tragedies — the disappearance of flight MH370 and the shooting down of flight MH17 over eastern Ukraine.

In 2014, it was taken private by sovereign wealth fund Khazanah Nasional, which paid 1.4 billion ringgit ($345 million) for the 30 percent of shares it did not already own. The sources declined to be identified as the discussions are confidential. Representatives for Air France-KLM, Japan Airlines (JAL), AirAsia and Malindo did not respond to requests for comment.

Malaysian Prime Minister Mahathir Mohamad said on Monday five proposals had been received as part of a review that started last year.

Malaysia Airlines last year signed a joint venture agreement with JAL covering flights between Malaysia and Japan, which the Japanese airline said could be expanded in the future to cover US flights.

Malaysia Airlines and JAL are members of the oneworld airline alliance, while Air France-KLM is part of the rival SkyTeam alliance.

Khazanah, which appointed Morgan Stanley last year to advise on potential options for the airline, said it was working closely with the government.

“While there have been several proposals in this regard, a review of the options available to us is still ongoing,” Khazanah said.

Sources said Air France-KLM had proposed setting up a hub for maintenance services in Malaysia, while Japan Airlines had offered to make the Southeast Asian country its regional hub, including for low-cost flights.

Business news website Focus Malaysia said on Monday, citing an official document, that Khazanah had been pushing for AirAsia’s long haul unit AirAsia X to merge with Malaysia Airlines.


Oil slumps more than 4% on coronavirus fears

Updated 28 February 2020

Oil slumps more than 4% on coronavirus fears

  • Traders fret about impact of spreading virus on crude demand, particularly from China

LONDON: World oil prices tumbled by more than 4 percent on Thursday, as traders fretted about the impact of spreading coronavirus on crude demand, particularly from key consumer China.

Brent oil for April delivery tanked almost 4.2 percent to $51.20 per barrel, while New York’s WTI crude for the same month dived nearly 5 percent to $46.31.

“Concerns that the virus will prompt a global slowdown, weaker consumer confidence and reduced travel has raised concerns about lower demand, weighing on prices,” said CMC Markets analyst Michael Hewson.

Investors are growing increasingly fearful about the economic impact of the new coronavirus or COVID-19 outbreak. 

The virus continues to spread meanwhile, with Brazil reporting Latin America’s first case, and Denmark, Estonia, Greece, Georgia, Norway and Pakistan following suit.

Around 2,800 people have died in China and more than 80,000 have been infected. There have been more than 50 deaths and 3,600 cases in dozens of other countries, raising fears of a pandemic.

The spread of the virus to large economies including South Korea, Japan and Italy has raised concerns that growth in fuel demand will be limited. 

Consultants Facts Global Energy forecast oil demand would grow by 60,000 barrels per day in 2020, a level it called “practically zero,” due to the outbreak.

US President Donald Trump sought to assure Americans on Wednesday evening that the risk from coronavirus remained “very low,” but global equities resumed their plunge, wiping out more than $3 trillion in value this week alone.

“The negative price impact would intensify if the coronavirus were declared pandemic by the World Health Organization, something that looks imminent,” said PVM Oil Associates analyst Tamas Varga.

“The mood is gloomy and the end of the tunnel is not in sight – there is no light ahead just darkness. Not even a refreshingly positive weekly US oil report was able to lend price support.”

Gasoline stockpiles dropped by 2.7 million barrels in the week to Feb. 21 to 256.4 million, the Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

US crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA said, which was less than the 2-million-barrel rise analysts had expected.

The crude market is watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

“Oil is in freefall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters,” said Edward Moya, senior market analyst at OANDA. 

“Expectations are growing for OPEC+ to deliver deeper production cuts next week.”

OPEC+ plans to meet in Vienna on March 5-6.