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Malaysia Airlines accelerates Business Transformation Plan, committed to B737/A380 deliveries

2-Oct-2009 4:05 PM

Malaysia Airlines announced (02-Oct-2009) plans to accelerate its Business Transformation Plan (BTP2), focusing on three core areas to "speed up its transformation into the world’s Five Star Value Carrier (FSVC)". Details include:

  • Cost savings: The carrier stated it has "no intention" to become a LCC, despite its continued focus on structural cost reductions of MYR700 (USD202) million in 2009. (Over the last three years, Malaysia Airlines have saved more than MYR2 billion (USD577 million) through aggressive cost saving measures). As part of this, the carrier aims to reduce overtime by 10% in 2010, while recruitment will be carried out only in critical areas;
  • Fleet: Will take delivery of 35 firm B737-800 aircraft, from 4Q2010, with another 20 aircraft on option. The carrier stated it would own some of the 35 aircraft and also lease some of the aircraft. The aircraft will be deployed in Malaysia, ASEAN, South Asia and China. A total of six A380 will be delivered from 2011, which will be used for high density routes, such as London, Sydney and Amsterdam. MD/CEO, Tengku Datuk Azmil Zahruddin, stated 2011 will be good timing for the carrier to take delivery of the A380, given the expected industry upturn (Associated Press, 03-Oct-2009);
  • Non-core business:
    • Cargo and MRO: Will continue to grow its cargo, and third party maintenance, repair and overhaul (MRO) businesses;
    • Firefly: The community airline will continue to use KL Subang as its base for growth. The airline is also developing Singapore as a key destination in its network;
    • MASkargo: Aims to return to profitability next year;
    • MAS Aerospace Engineering: Aims to achieve revenue targets of MYR1 billion (USD288 million) by 2010 and MYR3 billion (USD265 million) by 2013;
  • Strategic Partnerships: Plans to continue to pursue strategic partnerships, stating, "we are always open to partnerships and strategic alliances. The most important criterion is that these partnerships must add synergy and value add";
  • Aquisitions: Mr Tengku Azmil stated the carrier is "open to the idea" of acquiring other airlines (Bernama, 02-Oct-2009);
  • Capacity plans: Expects capacity (ASKs) to be “flat” in 2010, with capacity in 2H2009 higher than 1H2009’s 12-13% contraction (ANTARA/Bernama, 05-Oct-2009);
  • Outlook: Aims to return to profitability in 2010, with Tengku Azmil stating, “we expect to get better yields and seat factors in 2010 but it's difficult to say which quarter as there are too many uncertainties” (ANTARA/Bernama, 05-Oct-2009). The carrier added that 3Q2009 and 4Q2009 would be "tough" for the carrier, which is still targeting to report an operating profit in 2009. [more]

Malaysia Airlines: “There is a lot more room for cost savings. A 62 year old legacy carrier inherits a lot. But we are only getting rid of bad costs such as those that don’t add value or give poor returns. A significant portion of our savings is returned to customers in the form of lower fares and better services. We will continue to invest in good costs. We are consciously spending on products and services such as inflight food, safety and regulatory requirements and to generate third party revenue,” Tengku Dato’ Azmil Zahruddin, MD and CEO. Source: Company Statement, 02-Oct-2009.