Malaysia Airlines swings to loss in Q2 on higher opg costs, widens loss vs Q1


KUALA LUMPUR (XFNews) - Malaysian Airline System Bhd (MAS) said it swung to a net loss of MYR367.70 million in the second quarter to September from a net profit of MYR132.70 million the year before, falling deeper into the red from the net loss of MYR280.7 booked in the preceding quarter due to higher operating costs.

MAS however said sales for the second quarter rose 9.3% year-on-year to MYR3.03 billion.

In the notes accompanying its results, MAS said operating costs for the second quarter increased by 32.2 pct year-on-year to MYR2.84 billion.

At the same time, it said fuel costs in the second quarter rose 45 pct to MYR1.16 billion compared to 799 million the previous year, while staff costs expanded by 33% to MYR427.1 million from MYR321.1 million previously.

During the second quarter, MAS said it carried a total of 2.41 million passengers, up 11.7% year-on-year while its seat factor grew to 73.5% from 69.1% previously.

It said its yield declined to 11.8 sen per passenger-kilometer from 19.1 sen in the second quarter last year.
MAS said however that including fuel surcharge, its yield improved to 19.9 sen per passenger-kilometer from 19.5 sen previously.

It also said the second-quarter load factor improved to 62.2% from 61.9% a year earlier.

Looking ahead, MAS said it sees the increase in fuel surcharge and the impact of high fuel prices on global economic growth having a dampening effect on travel demand in the near future, adding that it already sees some signs of slowing passenger growth rate.

"Competition remains intense with new capacity injected by Middle East carriers to Australia, Asia and from US airlines across the Pacific, as well as more direct flights mounted between Europe and India/China," it added.

MAS said as for cargo, subdued growth especially in Europe, North America and to a lesser extent Asia, is expected to continue.

With increased freighter capacity, fuel surcharge and greater competition, the outlook for the cargo business is challenging, it said.

The main external challenges facing MAS include continued security and health concerns, high fuel prices and a lower global economic growth, it said.

To meet the challenges ahead, MAS has embarked on various initiatives such as network optimisation and rationalisation, revenue enhancement, operating efficiencies through fuel conservation, strategic procurement and improving organisational productivity.

MAS executive director Tengku Azmil Zahruddin said at a media briefing that the airline is implementing these initiatives over several phases, with Phase One having been launched in August this year while Phase Two will begin Dec 1.

Under the first phase, the company expects an estimated cost containment of more than MYR100 million, he said. Phase Two, which will encompass the year 2006, is expected to cost more than MYR400 million.

For the third quarter, the company has also hedged 70-75% of its fuel requirement at a price of USD62 per barrel from USD65 in the second quarter, he said.

He said MAS is also considering raising fares for certain routes but declined to provide details.

Separately, MAS chairman Munir Majid said the short-term initiatives will take time to show results.

"We do not expect the short term initiatives to result in positive outcome in the fourth quarter.... It will take time," he said.

Asked if he can give a guidance on when MAS will make a turnaround, he said: "The problem will take time to be addressed and the processes will take time to bear fruit. One will like to see a quick outcome but it depends on circumstances."

On the air transport rationalization plan, Munir said MAS has not made any decision yet but it will be discussed at the sub-committee level.

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