Loss-making Malaysia Airlines said that it will receive RM650 million from its parent company for the early termination of an agreement to operate domestic air services.

Malaysia Airlines said it entered into an agreement with Penerbangan Malaysia Bhd (PMB) yesterday for the proposed early termination.

"PMB will pay Malaysia Airlines RM650 million as a result of the proposed termination ...," the carrier said in a statement to Bursa Malaysia.

Prior to the unbundling plan, the profit and loss account of the domestic business was borne by the government through PMB.

Cover downsize costs

Malaysia Airlines said the termination may take effect Aug 1, when a new aviation policy to rationalise domestic routes comes into effect, or on another date to be agreed by the two parties.

The carrier said the money would be used to cover the costs incurred to downsize its workforce.

Malaysia Airlines announced last week it would shed some 6,500 of its 23,000 employees and reduce its fleet from 40 to 21 aircraft after posting a RM1.3 billion annual loss.