After keeping silent about the rumored merger between Malaysia Airlines Berhad (MAB) and LCC AirAsia, the Malaysian government is saying a union between the two carriers could be an option to save the loss-making national carrier.

Malaysia’s minister of international trade and industry Mohamed Azmin Ali—the government’s second most senior politician—said discussion between both parties began in 2019, prior to the pandemic, and will continue during the crisis. 

“We were also looking at some of the proposals coming from international players,” he told local reporters. “Now the situation is becoming more complex because of this pandemic. We are looking at all options.” 

Malaysian government-owned investment company Khazanah Nasional had earlier expressed skepticism regarding a $2.5 billion proposal by local company Golden Skies Ventures (GSV), saying foreign investors will be cautious in investing in airlines amid the mass disruption in its operations. 

It is widely agreed that the Malaysian government would prefer for a local company to take over MAB as one of the ways to exert influence over the national carrier. Some analysts are suggesting the widely polarizing business models, culture and large pool of affected employees would make the merger difficult. 

Regulator Malaysian Aviation Commission (MAVCOM) warned of the potential monopolization of the country’s aviation sector if both airlines merge, urging caution over competitive issues and possible degradation of services and frequencies. Both carriers command over 80% of the Malaysian market share. 

The COVID-19 crisis has all but stopped air travel in Malaysia in the past several weeks, though AirAsia has announced it will resume domestic flights from April 29. MAB has already begun one weekly flight between peninsular Malaysia and East Malaysia from April 17, after the service was suspended at the onset of the country’s lockdown on March 18. Resumption of AirAsia X service remains uncertain.