(AFP) Malaysia Airline's asset sale plan was a form of "bailout" but necessary in order to retire some urgent debts, analysts said today.

The flag carrier said yesterday it would sell properties and aircraft to the government to raise some RM6.1 billion to repay yen-denominated bonds, retire RM1.3 billion in short-term loans and take delivery of five new aircraft worth RM2.5 billion.

Analysts said the airline, struggling under some RM10 billion in debt, has few options to raise funds and seeking government help was a viable option.

The carrier has embarked on a restructuring plan last year to return to the black by 2004 after the government renationalised it last February.

While some analysts were optimistic it could turn around in 2004, concerns emerged over its operational and sales performance.

"It is good for the company because they will get immediate cash to tide over their short term debts which they need to retire," said an analyst with a local brokerage.

"But it is just an indirect form of cash injection from the government - a bailout... People are saying that the company is depending on the life line from the government."

New aircraft

OSK Research senior analyst Hilmi Mokhtar told AFX-Asia , an AFP -owned financial news service, that the carrier also need to take delivery of several new aircraft.

"The gist of the proposal is to bring in cash and to retire some of its urgent debts," he said.

He noted the carrier had taken delivery of one out of five new aircraft - three Boeing 747-400s and two Boeing 777-200ER - and was due to take delivery of the remaining four within the next few months.

Malaysia Airlines has proposed to sell these five and another three existing aircraft to raise some RM4.13 billion and dispose of property assets to free up RM2.2 billion in cash.

The aircraft and property assets will be sold and leased back from a special vehicle set up by the finance ministry.

"The two transactions involve about RM6 billion and that is not a small amount of money. They need to do that (to raise funds). I would think this is a positive move. This is a major proposal," Hilmi said.

Lotus Asset Management fund manager Christopher Leow said the asset sales should have been done much earlier.

"Restructuring of this sort is always welcome... if they don't do anything, it will buckle under the debts. They have to do something quickly and this is one of the ways," Leow said.

Revenue generation

Other analysts said a connected move to hive off its catering arm to a consortium led by LSG Skychefs was positive as the unit was been suffering losses and it would help cut its workforce.

"The good thing from the whole proposal is the potential sale of MAS Catering which has been loss making as it will trim down the staff by 10 percent," one local analyst said.

But analysts said the airlines should place more emphasis on its operations, especially after adverse impact from the Sept 11 attacks in the United States.

"It's not so much cost cutting but more a question of revenue generation," a senior dealer with a local brokerage said.

"With this major corporate proposal, there is a possibility the company will turn around in 2004, which is in line with their timetable," OSK's Hilmi said.

Lotus Asset Management's Leow also expect Malaysia Airlines to break even in 2004 if it continues with its restructuring plan.

"You will not see the results overnight... maybe in 2004, it will probably break even," he added.