Malaysia Airlines: traffic growth resumes as loads improve; outlook brightens, but still challenging

Malaysia Airlines is again growing. Passenger numbers were up 8% in 2H2016, marking the first year-over-year gains since 1Q2014. Passenger numbers are expected to increase by another 10% in 2017, driven by load factor improvements and a resumption of capacity expansion.

The government owned airline, which completed a drastic network restructuring in early 2016, is still unprofitable. However, Malaysia Airlines was profitable in Dec-2016 and expects to be consistently profitable from 4Q2017, despite rising oil prices and intensifying competition.

The outlook is significantly brighter than a year ago, but is still relatively cloudy given the highly competitive landscape in Malaysia. Malaysia Airlines continues to work on cutting costs – a prudent move given the depreciation of the Malaysian Ringgit – and to pursue a relatively conservative growth plan. It expects to maintain its fleet at the current level of 75 passenger aircraft over the next two years, but adjust the mix to include a larger widebody component.

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