MH Stock Suspended,Theoretically Insolvent

[Nigelinoz]

FROM:
Malaysian Airline stock suspended from Friday | Markets | Markets News | Reuters

KUALA LUMPUR, June 12 (Reuters) - Malaysian Airline System (MASM.KL) posted its first quarterly loss in two-and-half years on Friday, with overcapacity, volatile fuel prices and a global downturn pushing it towards insolvency.Malaysia's national carrier said it had recognised fuel hedges under new accounting rules to reflect their market value and took a charge to its balance sheet of 3.8 billion ringgit ($1.1 billion) effective Jan. 1, 2009The mark-to-market charge makes MAS' group equity holders fund negative 458 million ringgit, effectively making it an insolvent company, analysts said.
"This means that MAS is theoretically insolvent," Raymond Yap, analyst at CIMB investment bank said. "In reality however, MAS still has 0.95 ringgit net cash per share

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Worrying times for the aviation industry at the moment.

 

[docjames]

MAS are being carved apart in their short haul market by AirAsia, and it's spreading to the long haul now too. Their legacy costs, even in a country considered low cost compared to EU, Aus, US etc are killer when up against AirAsia.


Under Australian rules you'd think they'd end up in receivership. But of course that may not be the case (i'm not familiar with malaysian financial workings!)

Wonder what will happen - first of the "big carriers" to go under?

 

[oz_mark]

Under Australian rules you'd think they'd end up in receivership. But of course that may not be the case (i'm not familiar with malaysian financial workings!)

Not sure they would go into receivership in Australia. Comes largely down to whether they can pay their bills as they fall due, and notwithstanding the accounting treatment of their fuel hedging, they do seem to have some cash on hand.

 

[Nigelinoz]

I don't know anything about the ownership structure of MH but I am reminded of the abortive merger talks with Qantas late last year,I know Qantas said this week that they are not in any merger talks at the moment but you would have to wonder wouldn't you whether Alan Joyce may find a few dollars in his desk drawer with which to make a play for MH?.
Or would it be a crazy thing to even consider in the current economic environment?.

 

[mvjs]

What does this mean for people with tickets on Malaysian? Will they be protected through their credit card?

 

[Ric]

The Malaysian Government will never let it go down! Too much of a "loss of face" :shock:!! They will use their oil money or super funds to prop it up.

Last I know there were a few ex Qantas staff working there in senior positions though I doubt they would be in a position to make serious decisions. I think one of the reason, if not the main reason, for QF to pull out of the talks earlier on is that they were not allowed majority ownership and/or management control. The Malaysian would not let go of these even though they are bleeding to death.

Case in point.......Volkswagen pulled out of talks with Proton.

Ric

 

[Nigelinoz]

What does this mean for people with tickets on Malaysian? Will they be protected through their credit card?

I would point out that the report from Reuters says that MH is technically insolvent,I am unaware of any affects on services.MH appears to be operating as normal,how long that situation will continue for however is anyone's guess.

 

[Mal]

Accounting rules can give some abnormal results. MH seem to be sound enough, but are in a bit of trouble.

The Govt will step in if required.

 

[oz_mark]

They are reported to have RM3.8 billion in cash (The New Straits Times Online: MAS reports Q1 RM138m loss but liquidity still strong), so they are in a reasonably liquid position.

 

[Nigelinoz]

I hope it's understood that I was not intending to "scaremonger" by posting this thread,I had an email about it from a friend who sent me the Reuters link and I thought it was sufficiently interesting to post here,I had no intention of causing concern to anyone who is booked on an MH flight in the near future,it's news which I honestly thought was worthy of being posted here.

 

[Mal]

I hope it's understood that I was not intending to "scaremonger" by posting this thread,

Don't worry - it's the "news" forum... All sorts of weird and wonderful things get posted here that people react to in different ways.