This article first appeared in The Edge Financial Daily, on May 20, 2016.

KUALA LUMPUR: Khazanah Nasional Bhd has set up a holding company under which Malaysia Airlines Bhd and its subsidiaries such as FlyFirefly Sdn Bhd, MASwings Sdn Bhd, MAB Engineering Sdn Bhd and MAB Kargo Sdn Bhd will come under its control.

The new holding company structure will see Malaysia Airlines’ nine entities consolidated into four separate business segments — air transportation services, ground services, aircraft leasing and talent development.

In a statement yesterday, Malaysia Airlines said the largest contributing business segment in the group will be the air transportation services, which houses Malaysia Airlines, Firefly and MASwings.

To be known as Malaysia Aviation Group (MAG), the holding company will be helmed by Malaysia Airlines’ outgoing chief executive officer Christoph Mueller. The current board members of Malaysia Airlines will also sit on the board of MAG.

Malaysia Airlines said the new holding company structure will mean better transparency and focused management across the respective operating subsidiaries, creating profit centre subsidiaries for the group’s separate businesses.

“This will ultimately ensure profit and loss (P&L) accountability and unlock the value of the various assets by driving new levels of operational efficiency.” it said.

MAG will also have the added advantage of allowing flexibility for the individual companies to explore collaborative opportunities and agility for capital-raising opportunities, making the subsidiaries more competitive and responsive, and strengthening the position of the group in its various markets and business segments, said Malaysia Airlines.

“Looking forward, the new structure will support every business unit’s capability to access the capital market with its own value proposition,” said Mueller in the statement.

Under the new structure, MAB Kargo Sdn Bhd will apply for its own airline operating certificate (AOC) and will operate as a separate company as of 2017. MAB Kargo has a projected revenue of RM1.3 billion this year.

The group has also established two dedicated aircraft leasing companies, MAB Leasing Sdn Bhd and MAB Pesawat Sdn Bhd, to provide customised and competitive aviation leasing solutions to the group.

“MAB Leasing’s and MAB Pesawat’s fleet include all owned and managed aircraft operated by the group, featuring a range of narrow- and  wide-body aircraft,” said Malaysia Airlines.

The holding company structure’s fourth business segment, that is, talent development, will see MAB Academy Sdn Bhd commencing operations in late 2016. The company will offer aviation-related education and training programmes for MAG and other international airlines, as well as organisations.

Industry analysts said it remains to be seen how the new structure will help the national airline operate more efficiently and effectively as details on the new holding company structure are sketchy.

Maybank Investment Bank Research analyst Mohshin Aziz told The Edge Financial Daily that thereotically, the move will help make Malaysia Airlines’ journey back to Bursa Malaysia easier, but it can also increase bureaucracy and red tape among the various business units.

“It is just a demarcation of departments and duties. Seems like no difference to me,” he said.

When contacted, aviation consultancy firm Endau Analytics Sdn Bhd founder Shukor Yusof likened the move to that of Singapore Airlines, which on Wednesday set up a holding company to own and manage its budget airlines, Scoot and Tigerair.

“Like SIA Cargo, MAB Kargo will also be a standalone business. All with their own AOCs and P&Ls. There’s also SIA Engineering (which seems similar to MAB Engineering) and ground services (AeroDarat Services Sdn Bhd), which seems similar to Singapore Airport Terminal Services,” he said.

Shukor said the holding company structure also raises questions such as the status of Khazanah’s leasing unit, Penerbangan Malaysia Bhd (PMB), which was set up under the former Malaysian Airline System Bhd’s Widespread Asset Unbundling exercise in 2002.

PMB had reportedly racked up accumulated losses of RM1.92 billion as at Dec 31, 2003.

“I am unclear as to the reason behind the formation of MAB Leasing and MAB Pesawat. This is because Khazanah had already created PMB over a decade ago as a leasing company. Are MAB Leasing and MAB Pesawat replacements [of] PMB? What has happened to PMB which was set up at considerable cost?” he asked.

Shukor also noted that Malaysia Airlines’ board members, with which MAG will share, remains the same and “my view therefore, is that nothing has fundamentally changed”.

“The segregation of businesses and the further breakdown of them into respective segments are a definite plus if management provides the numbers for each (entity), as we can have more clarity on the performance of each of its units on a standalone basis,” said MIDF Research aviation analyst Tay Yow Ken.