Struggling Malaysia Airlines on Monday announced an aggressive rescue plan aimed at achieving record profits by 2008, after posting massive losses for the last financial year.

"We are facing a crisis in Malaysia Airlines," said managing director Idris Jala, who was brought in by Prime Minister Abdullah Ahmad Badawi last December to revive the national flag carrier.

The airline on Monday posted a RM1.3 billion loss for the 2005 financial year, blaming crippling fuel prices and lower load factors.

The three-year turnaround plan calls for extensive cost-cutting and axing of unprofitable routes aimed at achieving profits of RM500 million in 2008, which would be an all-time record for the carrier.

"Without a full business transformation, (these measures) will not be enough to weather the tough airline industry environment," the airline said in the 47-page plan.

"Indeed, left to its current course and speed, Malaysia Airlines will fail."

Idris said the carrier was battling a cash shortage, overstaffing and an inefficient and unprofitable route network.

"The first crisis is a cash crisis. At the end of 2005, Malaysia Airlines had 1.0 billion ringgit and by April 2006 it will have hit a critical level of 600 million ringgit," he told reporters.

"Sixty-six international routes are unprofitable. Only 48 international routes are profitable.

"Part of our crisis is due to our business fundamentals. We have more staff compared to other carriers. We have relatively inefficient networks and our yields are low."

RM4 bil needed

Idris said the carrier had embarked on a cash rationing plan as part of the "survival actions" and was considering disposing of many of its assets including its Kuala Lumpur headquarters and closing offices worldwide.

Some RM4 billion was needed to carry out the turnaround, and the carrier would ask the government to secure some of the funds while raising RM2 billion internally, he said.

The first year of the restructuring will focus on cash flow, the second year on achieving profits and capacity-building, and in the third year the airline will look for new growth opportunities and investment in new aircraft.

"Over the next three years we will fundamentally change our customer focus, our products, our pricing and our network configuration to fly profitably," the company statement said.

In the future it would be run with fewer employees and become "leaner and more efficient", it said.

In a novel approach to identifying corruption and security risks, the airline said it has introduced a "whistle-blower" policy designed to curb poor practices.

"The policy provides a safe and acceptable way for employees to raise concerns about malpractices, irregulatories and negligence... without fear of adverse repercussions," it said.

The rescue plan projects a loss of RM620 million in 2006 and a modest RM50 million profit in 2007.

The RM1.3 billion loss was recorded over the nine months to December 2005, but represents the company's fiscal 2005 performance as it is changing its financial year-end to December from March.

The huge loss compared to a RM216.9 million profit posted in the previous corresponding nine months.

Fuel was the single largest cost for the carrier, with chief financial officer Tengku Azmil Zahruddin saying that average prices had risen by 38 percent year-on-year in fiscal 2005 while staff costs increased 54 percent.