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UPDATE 1-Malaysian Airlines revival plan ready within 6-12 months - state investor

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* Airline has enough cash to ensure operations for 12 months

* Sales slump since disappearance of Flight MH370 in March

* Carrier has reported losses for last three years

(Add comments from state investor, industry context)

KUALA LUMPUR, June 10 (Reuters) - The state investor that controls Malaysian Airlines said the government will disclose plans to restructure the loss-making carrier within six to 12 months, as a slump in business since the loss of Flight MH370 leaves the airline burning through cash reserves now set to be used up by this time next year.

"Malaysian Airlines has a special shareholder, which is the government," said Azman Mokhtar, managing director of the Khazanah investment fund that owns 69 percent of the airline.

"I think the final decision will be made by special shareholder and our job is to advise what needs to be done," said Azman, speaking to reporters on Tuesday at an investment conference. He said the government was committed to formulating a revival plan for the airline, formally known as Malaysian Airline System Bhd (MAS), within a year because its operating cash reserves are on course to run out by then.

While the carrier has been reporting losses for the past three years, squeezed by intense local and longer-haul competition, it turned in its worst quarterly performance in two years in January-March as ticket sales slumped after the unexplained loss of MH370 on March 8. The jet was carrying 239 passengers and crew when it disappeared.

Shares in MAS have fallen 28 percent since the aircraft went missing, with investor confidence undermined by the slide in the airline's traffic and uncertainty over how Khazanah and the government plan to rescue the company. Its market value has tumbled 85 percent over the past five years - giving it a value of 3 billion Malaysian ringgit ($937 million) - while the broader Malaysian market has risen nearly 80 percent.

Shares of MAS were unchanged at 17.5 sen per share at 0650 GMT, underperforming the broader index's 0.1 percent rise.

At the investment conference, Azman said any rescue plan would need to address the company's productivity, the competition it faces internationally, and its leadership, without giving further details. He said Khazanah has injected more than 5 billion ringgit into MAS over the last 10 years.

The airline and its key stakeholders are in talks with banks for a strategic overhaul that could include the partial sale of its engineering unit and an upgrade of its ageing fleet, sources involved in the discussions have told Reuters. 1/8ID:nL3N0NY0WN)

Resistance to previous restructuring efforts by a robust trade union has hampered the airline's plan to cut costs and improve competitiveness in the face of fast-growing low-cost carriers such as AirAsia.

Khazanah tried to cut its stake in the airline in 2012 a share swap deal with AirAsia, but the main union successfully blocked a move that would have brought in a profitable airline with experience of competing aggressively. ($1 = 3.2005 Malaysian Ringgit)

(Editing by Stuart Grudgings and Kenneth Maxwell)