Khazanah Asks Malaysia Air to Improve its Business Plan: Edge

(Bloomberg) -- Malaysia’s sovereign wealth fund asked its national carrier unit to produce a strategic plan to help it compete in the aviation industry and deliver better returns, the Edge weekly reported, citing Khazanah Nasional Bhd.’s Chief Executive Officer Shahril Ridza Ridzuan.

Malaysia Airlines Bhd. is reviewing its existing strategy and is expected to come up with new proposals in “a very short time,” Shahril told the Edge in an interview in Kuala Lumpur.

Khazanah, which took Malaysia Airlines private in 2014, invested 6 billion ringgit in the business in a bid to return it to profit within three years. Ringgit weakness and escalating jet fuel costs derailed the effort and caused the carrier to miss two profitability deadlines, the Edge reported.

Shahril said the airline is considered a strategic asset but didn’t indicate if Khazanah will inject additional funds into the company.

Other highlights from the interview:

  • To cut losses on non-performing assets early before they get worse
  • Plans to increase exposure to overseas assets over next 7 to 10 years from current 15 percent as it seeks to optimize risk-adjusted returns
  • Khazanah asset mix to be 70 percent commercial -- aiming for long-term growth -- and 30 percent strategic -- that contribute to the country’s development
  • Targets 3 percent returns above inflation over a rolling five-year period
  • Plans to downsize some regional offices
  • Asset allocation going forward will be 60 percent public equities, 30 percent private equity and 10 percent real estate

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