KUALA LUMPUR: Khazanah Nasional Bhd expects the global aviation industry to recover at the earliest, in 2023 or 2024, but believes Malaysia Airlines Bhd has the right cost structure and balance sheet to ride through the tough journey, post-pandemic.

Managing director Datuk Shahril Ridza Ridzuan said the industry’s recovery, especially in terms of revenue, would take years to be at par with that during pre-COVID and very much depends on how the pandemic phases out; the reopening of international borders; and travel demand.

He said MAB’s wide-ranging restructuring plan, where the United Kingdom Court on Feb 22 had given its approval, provided the airline with much better prospects despite being seen by many, that some form of consolidation in the industry is inevitable.

"Roughly about RM15 billion of outstanding liabilities in this whole debt structure were taken out, either through debt forgiveness or through the convergence of debt to equity, allowing the balance sheet to reset at a much more sustainable level.

"We (also) received significant support from creditors in terms of liquidity management, for instance, to create a more viable cost structure in the immediate future,” he told a virtual conference after presenting Khazanah's 2020 financial performance report today.

Shahril Ridza said Khazanah also deferred delivery of new aircraft to a time, where hopefully the market will recover, as it was essentially taking out a substantial amount off its ongoing cost structure.

Under the restructuring plan, Khazanah was committed to inject up to RM3.5 billion over the course of the next five years, an essential move to give certainty to creditors so that in turn, they could provide the kind of discounts, haircuts and debt-to-equity convergence that are required to fix the airline's balance sheet.

According to Shahril Ridza, the sovereign wealth fund is committed to supporting the Malaysia Aviation Group Bhd (MAG) in implementing internal restructuring.

He said MAG would focus on working closely with the government and stakeholders on restarting air travel and promoting industry recovery, as well as continuing its cash conservation initiatives for the airline.

Khazanah Nasional is the sole shareholder of MAB, through its subsidiary MAG.

Asked on any guarantee that MAB would be able to turn around post-restructuring, Shahril Ridza replied, “no guarantee but what we have done with MAB’s restructuring plan is to negotiate will all stakeholders to put the airline in a good position”.

He said the aviation industry in Malaysia has had an oversupply situation for a very long time, which renders consolidation inevitable.

However, he said having the national carrier was the right approach for Malaysia to connect with the world, to bring in valuable cargo and COVID-19 vaccine supplies, where Malaysia Airlines has been at the forefront for the country.

"The investment that we are doing over the next few years will keep the airline afloat until they can get to the turnaround, which is part of the necessary support for our economy and infrastructure," he added.

In 2020, Khazanah’s profit from operations fell to RM2.9 billion as compared to RM7.4 billion in 2019.

Dividend income from investee companies rose to RM5.2 billion from RM3.8 billion but was offset by lower divestment gains of RM2.7 billion against RM9.9 billion in 2019.

The impact of the COVID-19 pandemic led to higher impairments of RM6.0 billion, particularly in aviation and hospitality assets, compared with RM4.9 billion in the previous year.

-- BERNAMA