| AirAsia benefits, Malaysia Airlines loses |
| Last Updated(Beijing Time):2006-03-29 09:39 |
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MONEY-LOSING Malaysia Airlines will lay off 6,500 workers and surrender 96 domestic routes to budget airline AirAsia under a major restructuring plan that will end 59 years of near-monopoly in the nation's aviation market.
The state-owned airline will be left with only 19 domestic routes and it will lose all government subsidies as of August 1, the prime minister's office said in a statement late Monday.
AirAsia, Southeast Asia's biggest low-cost carrier by fleet, will also fly the 19 trunk routes in competition with Malaysia Airlines, the statement said.
The airline will continue to operate as a full-service airline, while AirAsia will stick to its no-frills business model, providing distinct choices to customers on the 19 routes, it said.
The restructuring comes amid efforts by the government to reduce state expenditure, while Malaysia Airlines also strives to become profitable and shed its unsavory reputation for corruption and mismanagement.
Malaysia Airlines, 69 percent owned by the government, said last month that only four of its 118 domestic routes were profitable. In the nine months through December, the airline suffered a 1.26 billion ringgit (US$340.5 million) loss.
To keep the airline afloat, the government has been bearing an annual loss of about 300 million ringgit - in essence providing the airline an indirect subsidy.
From August 1, "the government will not be giving any subsidy to Malaysia Airlines or AirAsia to operate the domestic sector," the statement said.
Also, "the profit and loss account for domestic routes will be borne by Malaysia Airlines, not by the government," it said.
Separately, Malaysian Airline System Bhd, the company that operates the airline, said on Monday night it will fire 6,500 employees from its current staff of 23,000 because of the reduced operations. It will also reduce its domestic fleet from 40 to 21 aircraft, the airline said.
It is expected that AirAsia will absorb some of the Malaysia Airlines employees and lease its redundant aircraft. AirAsia, which flies mainly international routes, has been trying to get a foothold in the domestic sector.
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