Malaysia Airlines’ Group today announced a net loss of RM527 million for the second quarter 2011, impacted by higher fuel costs that offset yield and Revenue Available Seat Kilometer (RASK), higher than the same quarter for 2010.

The Group’s total revenues for 2Q 2011 increased to RM 3.485 billion, 8% more than 2Q 2010 (RM3.213 billion), while passenger revenue registered a 9% growth of RM2.086 billion, compared to RM1.912 billion for 2Q 2010.

The airline’s aggressive and consistent cost control measures also yielded positive results, with a 2% reduction in non-fuel related expenses for 2Q 2011, compared to the same quarter for 2010.

Fuel costs, however, continued to have the greatest impact to the group’s operations, increasing by 41% from RM1.102 billion for 2Q 2010, to RM1.550b for 2Q 2011.

The Board of Malaysia Airlines does not anticipate to make a profit for the 2nd half of 2011, although the anticipated losses will not be as severe as the first half of 2011.

Moving forward

The Malaysia Airlines Board has identified immediate priorities to focus on in the short term. Firstly, the Board will focus on putting in place strong leadership to steer MAS, and are proactively looking to fill the MD/CEO and key senior management positions.

Working with the new Executive Committee (‘EXCO’) formed two weeks ago, recovery initiatives will be implemented to turn the company’s fortunes around and to start rebuilding cash reserves. Immediate initiatives will include, amongst others, better capacity management; the implementation of dynamic pricing to improve yields and revenues; a review of products and brand positioning; and a review of Firefly’s business to focus on its turbo-prop operations out of Subang and to realign the Firefly jet business to focus on providing regional premium services. For the longer term, the EXCO will look into establishing a strategic plan to chart the airline’s course back to sustainable profitability.

As a result of the Collaboration Agreement signed by Malaysian Airline System Berhad and AirAsia Berhad and AirAsia X Sdn Bhd. A Joint Collaboration Committee (‘JCC’) was formed on 9 August 2011, to look into key areas for collaboration to realise synergies and cost efforts.

The JCC shall deliver more detailed terms of the collaboration, manifested in separate detailed agreements, whilst ensuring full compliance with anti-trust regulations. This will also contribute to shape the medium and long term direction of the company.

MAS will continue with its re-fleeting exercise to strengthen its competitive edge by further enhancing its product and services. The multi-year fleet renewal programme has commenced with the delivery of five new Boeing 737-800 aircraft and five new Airbus A330-300 aircraft as at mid August 2011. The first new Airbus A330 freighter will be delivered in September 2011. There will be six more aircraft deliveries in 2011 (two B737-800, two A330 Freighters and two ATR72). Beyond 2011, MAS has a firm order of thirty eight B737-800 aircraft, ten A330 aircraft, six A380 Airbus SuperJumbos and two Airbus A330 Freighters. The aircraft delivery will gather pace in the next few years. The financing activities for 2012 deliveries have commenced in earnest.

For remaining of the year, IATA reported that the outlook of the airline industry remains bearish with fuel prices remaining high, fears of sovereign debt crisis in Europe and the possibility of a recessionary outlook for the United States. MAS current forward booking profile indicates key challenges for the Europe, US and Japan regions, with normal forward booking trend for other major regional destinations.

In response to the tough operating environment, MAS is moderating its short-term capacity growth. The management team shall have a serious review of its current network moving forward, and shall adjust deployed capacity accordingly. MAS is currently executing the return of two B747-200 freighters, one B747-400 and three B737-400 aircraft by end September 2011. MAS will also continue to enhance its yield performance through successful front-end business class initiatives, implementation of fuel surcharges and step up its yield/revenue management.

Author: The Crew
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