MAS should reconsider LCC strategy as losses continue while AirAsia reports more leading profits

Malaysian low-cost carrier AirAsia has reported another highly profitable quarter, including the highest operating margin among publicly traded Asian airlines (both LCCs and full service carriers) while restructuring flag carrier Malaysia Airlines (MAS) remains one of Asia's most unprofitable carriers. The outlook for AirAsia Malaysia is bright, particularly if MAS fails to adjust its strategy following the unbundling earlier this month of the equity swap with AirAsia. The MAS outlook remains bleak as the group continues to push on with its new business plan, which focuses entirely on the challenging premium market just as nearly every other major airline group in Asia is investing significantly in the budget sector.

AirAsia Malaysia is the only publicly traded LCC in Southeast Asia to record an improvement in profitability for 1Q2012. The carrier reported a pre-tax net profit of MYR212 million (USD67 million), an improvement of 5%, while its after tax net profit improved by less than 1% to MYR172 million (USD54 million). Revenues at AirAsia Malaysia increased by 11% to MYR1.17 billion (USD371 million) as passenger traffic and seat capacity both increased by 12% to 4.8 million and 6.1 million, respectively.