Malaysia Airlines delivered the news its employees feared (ATWOnline, March 24), announcing it will abandon all but 19 domestic routes to AirAsia, take 19 aircraft out of service and lay off approximately 6,500 employees, or about 28% of its workforce.AirAsia will take over the remaining 96 routes and compete with MAS on the other 19, giving passengers the option of choosing a full-service or a low-cost carrier. The Malaysian government said it will stop subsidizing MAS from Aug. 1, according to press reports, although the carrier said in a statement that the government will compensate it for costs incurred in the restructuring of its domestic network.

The government decided two weeks ago that MAS, which operates domestic services on behalf of Penerbangan Malaysia Berhad, will retain several popular routes while ceding most services to AirAsia. MAS has been losing money on its domestic routes but said when it unveiled its Business Turnaround Plan (ATWOnline, March 6) that it did not expect to make a definitive decision on layoffs until 2007.

"Our original intention was to take back the P&L for the domestic sector from PMB in 2007 and build this out as a viable business unit. Having said that, we understand the government's vision to establish two national champions in the international aviation sector, one in full service and the other in low cost," MAS MD Idris Jala said.

The airline said each of the 19 routes it will continue to operate generates an annual average of 15,000 international connecting passengers and/or 13,000 business/first class passengers. It will operate seven routes between Kuala Lumpur and peninsular cities, six between KLIA and Sabah/Sarawak and six within Sabah and Sarawak. It said it has a "free hand" from the government to control capacity, frequency and pricing.