Malaysia Aviation Group, the holding company for Malaysia Airlines Bhd, said in a letter to lessors the group is unlikely to be able to make payments owed after November unless it receives more funding from state fund Khazanah.

The letter, reviewed by Reuters, follows a request by the troubled carrier for steep discounts on aircraft rentals from its lessors as part of a broad restructuring plan, three sources with knowledge of the matter said.

The letter added that in the absence of an implemented restructuring by the end of the year, Khazanah, its sole shareholder, “intends to divert all efforts and funds to an alternative company with an existing air operator’s permit to ensure connectivity for Malaysia (i.e. Plan B).”

The alternative company was not named. Malaysia has two major airlines, the other being AirAsia Group Bhd AIRA.KL, as well as other smaller carriers.

Malaysia Airlines later confirmed in a statement on Friday it had reached out to lessors, creditors and key suppliers recently as it embarks on an urgent restructuring.

According to the letter seen by Reuters, the aviation group is experiencing “an average monthly operating cash burn of $84 million” but only had $88 million in liquidity as of Aug. 31 and an additional $139 million available from Khazanah.

“Based on the current run-rate, absent further funding from shareholders, the group will likely be unable to meet its obligations, including payments to lessors, post November 2020,” it said.

The letter was sent to lessors last month but the exact date was not immediately clear.

Khazanah, the country’s sovereign wealth fund, said it was supportive of the airline’s restructuring efforts but if they prove unsuccessful, it will need to evaluate options on how to maintain connectivity for Malaysia.

It did not provide clarity on whether it would provide additional funding beyond November.

STEEP DISCOUNTS

Malaysia’s national airline has struggled to recover from two tragedies in 2014 - the mysterious disappearance of flight MH370 and the shooting down of flight MH17 over eastern Ukraine.

Khazanah took it private that year as part of a $1.5 billion restructuring but efforts to turnaround its business have been further upended by the coronavirus pandemic.

Malaysia Airlines, which has been beset by high costs, a bloated workforce and a messy strategy, said in its statement that its current plan was “highly dependent on the individual contributions of all relevant stakeholders in supporting the group.”

“It is intended that this restructuring exercise be completed over the next few months. However, if such an outcome is not possible, the group will have no choice but to take more drastic measures,” it said.

Sources said Malaysia Airlines plans to negotiate the steep discounts with its lessors via a restructuring plan it is seeking to implement through a UK court process.

Lessors, who have been given an Oct.7 deadline to respond to the letter, and other stakeholders have been taken aback by the hardline stance shown by the airline, said the sources, who declined to be identified due to the sensitivity of the matter.

“The lessors are already under pressure in this market and what Malaysia Airlines is asking is just not doable,” said a banking source, adding that the carrier was seeking discounts as deep as 75% or so.

In addition to Malaysia Airlines, the holding company group includes other local carriers and entities involved in aircraft leasing and ground handling services.

The letter also said the group was in the process of restructuring about $2 billion in “debt/similar liabilities” with the support of its shareholder.