The plan is to completely overhaul the airline, which has been reeling after two devastating air disasters. The Khazanah Nasional Bhd. said it will spend $430 million to take complete control of the airline and take it private, the first step, it said, in a restructuring effort to rebuild the airline.
The trading of Malaysia Airlines stock was suspended on the local stock market.
"The proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier on all relevant aspects," a statement from Khazanah said.
The airline has been posting a loss for the last three years and the government has had to inject more than $1.56 billion to keep the company afloat. But the disappearance of flight MH370 and shooting down of MH17 over Ukraine last month have prompted the government to take drastic steps.
The Malaysian Prime MInister Najib Razak said Friday the restructuring plan would "involve painful steps and sacrifices from all parties" and the process would be "carried out professionally, with proper principles of fairness, transparency and compassion."
The restructuring plan includes the re-listing of the airline, restructuring its board of directors and layoffs, as well as the prospect of finding a strategic partner in the venture.
The turnaround plan would require the support of the airline's influential employee union, which has turned down earlier deals. The union has consistently asked that management, including the airline's CEO, Ahmad Jauhari Yahya, be replaced.
"We want people who understand the industry and have a background in aviation" but Mr. Ahmad Jauhari "must go regardless," said Mohd Jabbarullah Abd Kadir, executive secretary at Malaysian Airline System Employees Union.
"We have no objection to taking the airline private, but we want to see a good business plan before we support it," he added.