New Malaysia Airlines CEO warns of tough path ahead

KUALA LUMPUR - The new CEO of Malaysia Airlines has told its employees that the troubled carrier faces a more dire outlook than previously thought and warned of coming job cuts, saying the company does not "have enough work for you."

The gloomy outlook from Christoph Mueller was contained in a memo to the stricken airline's employees dated May 5 and obtained by AFP on Friday.

"The financial situation of MAS in 2015 is more challenging than we all thought and it is a call for swift action," wrote Mueller, who took his new position on May 1.

The state fund that controls the airline said last year it planned to slash 6,000 jobs, or about one-third of the workforce.

It also has said it would kill off unprofitable routes and make other wrenching changes to rescue a carrier facing possible collapse after years of losses and two devastating disasters in 2014.

Appointing a new CEO was a key part of the rescue strategy.

Mueller is a German national who had previously initiated a turnaround plan at Ireland's Aer Lingus that involved hefty job cuts.

He is Malaysia Airlines' first foreign boss, replacing Ahmad Jauhari Yahya.

"Since the new airline will be smaller in size, we simply have not enough work for all of you," he wrote, without giving further details.

Mueller appeared to echo the long-time assessment of aviation analysts that Malaysia Airlines was a bloated firm.

"The reason for our precarious situation is mainly our uncompetitive cost levels," which he said were 20 per cent higher than its rivals.

He also said the "majority" of staff will be offered new contracts around June 1, saying packages for some will be reduced, and others raised.

Responding to Mueller's memo, the union representing Malaysia Airlines flight attendants said Friday it planned to appeal to Prime Minister Najib Razak to prevent an "aggressive" retrenchment.

The National Union of Flight Attendants Malaysia, which also represents other cabin crews at other Malaysian airlines, said the carrier should consider salary reductions rather than layoffs.

Lingering effects of two disasters

Malaysia Airlines had already suffered years of red ink and implemented a series of failed turnaround plans before last year's disasters struck.

In March 2014, flight MH370 disappeared with 239 passengers and crew aboard and remains missing. Four months later, flight MH17 was blown out of the sky by a suspected ground-to-air missile over Ukraine.

Mueller told employees that some workers appeared "rather depressed" and that customers were complaining that service levels were "deteriorating".

Malaysia Airlines previously had a good safety record, but the stigma of the tragedies has further pummelled its bottom line, necessitating the rescue plan.

Analysts have long blamed the airlines' failure to compete on poor management, unwise business decisions, and government meddling in the legacy carrier's direction.

The appointment of a foreigner has sparked some grumbling in Malaysia, but he called on employees to pull together to save the airline.

"But let me be clear, I cannot walk on water. What is ahead can only be achieved as a team, a strong team," he wrote.

"Please help me to get the job done."