Malaysia Airlines says looking at all options following Airbus delay


KUALA LUMPUR (XFNews) - Malaysian Airlines System Bhd (MAS) is looking at all options available regarding the terms of agreement with European aircraft manufacturer Airbus following delayed delivery of six A380 superjumbo jets, the airline's managing director Idris Jala told reporters.

He declined to comment further on the matter and refused to answer questions whether cancellation of the order is an option.

The airline's chairman Munir Majid also turned down questions on speculation that MAS could be looking at cancelling the A380 order with Airbus and replace it with an order with Boeing

"This is speculation, it will not be appropriate for us to comment," he told reporters after an annual shareholders meeting. 

MAS said the Airbus delay will not have any impact on the national carrier's turnaround plan.

Asked how important the six A380 aircraft are for MAS' plans, Idris said: "Based on the 'hubs to spokes' concept that we have revealed in our business turnaround plan, it would be good for MAS whether with or without the A380." 

Separately, Idris said developments regarding the sale of the company's headquarters building in Kuala Lumpur will be announced soon.

Idris said the airline is in advance stage of negotiations for the sale of the building, but he declined to name the buyer and the potential value of the building.

He said the priority is to generate cash from the airline's operations instead of depending on proceeds from assets sales.

He noted that in the business turnaround plan, the management had promised to generate cash of 1 bln rgt from operations as well as assets sales. But he declined to say how much of the 1 bln rgt cash will be generated from proposed assets sale.

On the airline's mutual separation scheme (MSS) for staff, Idris said that up to 4,300 employees have applied for the scheme. Idris said the MMS cost will be entirely met with compensation from parent Penerbangan Malaysia Bhd(PNB).

As such, the exercise will not have any impact on MAS's profit and loss account.

On the possibility of a second round of retrenchment, Idris said it is the company's objective to improve its productivity going forward, but cutting the headcount is not the only option.

"Ideal number (of staff size) is a judgemental thing -- going into the third year of our business turnaround plan, it will be the growth year for us, we may need more workers by the time -- the balancing act has to be taken into account," he said.

Idris added that the company's 3-year turnaround plan is well on track, as its first quarter losses were within the management's forecast and yields are improving.

MAS posted a loss of 1.26 bln rgt in 2005, and the company is looking at a 620 mln rgt loss this year.

The company's 2005 annual report showed operating costs up by 32 pct, of which 15 pct or 1 bln rgt can be attributed to higher fuel price, Idris said. 

"Even with a fuel surcharge imposed, Malaysia Airlines still had to bear approximately 66 pct of the increased fuel price," he added.

At 3.30 pm, MAS was flat at 2.69 rgt on volume of 17,000 shares.

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