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KUALA LUMPUR, May 22: Loss-making flag carrier Malaysian Airline System Bhd launched what it called the country's biggest round of job layoffs on Monday, budgeting up to $234 million to shed up to a fifth of its staff.

The separation scheme is aimed at helping state-controlled MAS overcome a crisis caused by stiff competition, lower fares, rising fuel prices and its traditional role as a full-service carrier with a big and unprofitable route network.

''It's possibly the largest in the history of the country,'' Managing Director Idris Jala said in describing the scheme, which he estimated would cost the airline up to 850 million ringgit. ''This is maximum exposure. It could be less.'' Up to 5,000 employees, or nearly a third of the 18,000 staff the airline has invited to apply for the scheme, are expected to leave the company, Jala told a news conference.

''This is strictly voluntary and mutual, on the basis of willing buyer, willing seller,'' he added.

The airline has a total of 23,000 staff.

Jala said the job cuts would help attain the airline's target of reducing losses this year to 620 million ringgit.

The staff reduction cost will be partially funded by the airline's parent, Penerbangan Malaysia Bhd, through a payment in compensation for opening domestic services to private competitors, Jala added, but declined to say how much this was.

MAS employees would receive payments ranging from one to three months' salary for every year of service under the plan, which is expected to be completed by the end of July, the company said.

''There are many things we have to do to turn around this company,'' Jala added. ''This is one of the things that we have to do at this juncture.'' After reporting widening third-quarter losses in February, the airline moved to raise a $1.1 billion cash-lifeline, increased local fares for the first time in 13 years and reconfigured its domestic route network.

Having since changed to calendar-year accounting, the airline is due to report its first-quarter results on May 29. For calendar 2006, it has said it expects to bring net losses down to 620 million ringgit before breaking even in 2007.

MAS shares fell 0.3 percent to 2.90 ringgit by the close of trade.

($1=3.630 Malaysian Ringgit)

REUTERS