Malaysia Airlines losing USD1.3 mln per day, sees “soft” outlook, downward pressure on yields


Malaysia Airlines (MAS) plunged to a MYR420 million (USD120.3 million) operating loss in the three months ended 30-Jun-2009 (its fiscal second quarter), but is trumpeting record quarterly net profits, thanks to a massive MYR1.3 billion (USD371 million) fuel hedging gain. But the underlying business is challenged, and the outlook for the third quarter is "expected to remain soft", according to MAS.

The airline noted, "while there are some signs of improving economic climate, the airline industry is still faced with weak demand and downward pressure on yields. The operating environment remains volatile with the H1N1 "pandemic" impacting travellers' confidence".

Load factors rose to 66% in 2Q2009, up from a worrying low 56% in 1Q2009.

An upbeat Managing Director & CEO, Idris Jala, noted, "we are managing well in this crisis. While the operating environment remains tough, the load factors have increased due to our aggressive strategies to boost sales. On the domestic front, more passengers are travelling with us. On the international routes, we have performed better than the industry average, as we are less dependent on the front end" (ie premium traffic).

In its notice to the Stock Exchange, MAS noted it has "aggressively pushed sales by offering various fare promotions ranging from Everyday Low Fares, Get MAS Deals and the MAS Stimulus Package which offers 9 fare options covering all classes of travel. In addition, it has launched innovative travel options such as Business First which allows customers to be upgraded to First Class while paying business class fares.

MAS' 1H2009 yield fell 16% and revenue tumbled an alarming 29%.

Growth and yield?

The MAS Managing Director added, "our forecasted booking numbers for the second half of the year are encouraging. With the loads on an upward trend, we will now be able to work on increasing the yield."

But with the global economy still struggling and AirAsia/AirAsia X taking delivery of significant amounts of capacity (and MAS undergoing its own short-haul fleet renewal) over the next 12 months, yields could remain under pressure for the foreseeable future.

MAS stated it expects the economy to recover next year, and it is looking forward to take delivery of new B737-800 in 2010 "to capture the expected growth". The airline will increase frequencies into key ASEAN capitals, South Asia, China and offer more flights to certain points in Australia. In the Middle East, MAS is looking at expanding services into at least three new destinations and is currently in the process of finalising details.

AirAsia X aims to launch a 'virtual' hub in Abu Dhabi before the end of 2010 as a platform for high density/utilisation A330 expansion into Europe and North Africa.

Idris Jala concluded, "we will remain focused on what truly matters - bringing in the sales, and preparing to capture the growth next year. These are challenging times but when the going gets tough, the tough get going. We will emerge out of this, stronger, more resilient and a winner."

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