Malaysia Airlines will axe a third of its workforce—6,500 people—and hand over all but 19 of its domestic routes to AirAsia under a sweeping rationalisation plan.
The national flag carrier is axing the staff as it will be operating a limited number of routes down from the 115 routes that it currently operates.
Malaysia Airlines will now operate 7 routes between KL International Airport (KLIA) and Peninsular Malaysia cities, 6 routes between KLIA and Sabah/Sarawak, and 6 routes within Sabah and Sarawak.
The Prime Minister’s Office said in a statement that the rationalisation plan would come into force soon, possibly by August 1 this year.
Yet AirAsia, Southeast Asia’s biggest low-cost carrier by fleet size, will also fly the 19 trunk routes in competition with Malaysia Airlines.
The restructuring comes amid efforts by the government to reduce state expenditure, while MAS strives to become profitable and shed its unsavory reputation for corruption and mismanagement.
AirAsia Bhd may also buy six to eight aircraft from state-controlled flag carrier Malaysian Airline System Bhd , AirAsia chief Tony Fernandez told Reuters news agency on Tuesday.
“We are confident that we will be able to work closely with Air Asia to ensure that connectivity and interlining issues are addressed in a timely manner and that international passenger traffic in and out of Kuala Lumpur will not be affected,” said Idris Jala, Managing Director, Malaysia Airlines.
“This collaboration is the beginning of a new era for the airline industry in Malaysia. Malaysia Airlines and Air Asia will use the current framework to build a strong platform for launching a airline powerhouse in Asia Pacific.”
“The Government has agreed to give us a free hand in managing the network, and this will mean that we will have full control on determining capacity, frequency and pricing. Managing yields will be a key factor to ensure profitability and its important for us to be able to manage this.”
This exercise will see Malaysia Alrines’ aircraft being reduced from 40 to 21, and stations right-sized from 32 to 16.
The Malaysian government has committed to provide financial assistance in order to compensate Malaysia Airlines for the cost involved in the restructuring of its domestic sector.
This will also result in Malaysia Airlines’ current manpower being reduced by around 6,500 from its existing staff strength of approximately 23,000.