8-Dec-2011 8:50 AM

Malaysias Airlines unveils new business plan, focus on premium travel

Malaysia Airlines (MAS) announced its business plan on 07-Dec-2011, outlining efforts to return to profitability by 2013. Cost cutting measures include cutting capacity by 12% in 2012 by suspending unprofitable routes early in the year including to/from Cape Town, Johannesburg and Buenos Aires. It will also launch a new regional premium airline by mid-2012 focussing on short-haul premium travel to routes such as ASEAN, South Asia and Greater China using B737-800s by mid-2012. It will spin off its cargo, aerospace engineering, pilot training and safety academy, and ground services, raising as much as USD107 million (MYR337 million) from the move, and will identify strategic partners shortly.

Read CAPA's full analysis: Malaysia Airlines new business plan targets premium sector, following strategies of Cathay and SIA

MAS also announced it would deploy 23 new aircraft next year to phase out its fleets of ageing A330-200 and B747-400 aircraft. It requires approximately USD3.8 billion (MYR12 billion) over 2012 and 2013 to pay for aircraft purchases it has made and is looking at debt and leasing options but will not conduct a cash call.

Its ‘base case’ target is for the core business to generate a significantly reduced loss of approximately USD108 million (MYR340 million) in 2012. It is targeting further improvement with a ‘stretch target’ where the core business would breakeven in 2012. With estimated core airline losses of approximately USD419.6 million (MYR1.32 billion) in 2011, this represents a one-year recovery of between USD374.5 million (MYR1,178 million) and USD479.4 million (MYR1,508 million). With the latest business plan, the carrier aims to make an annual profit of USD286 million (MYR900 million) in 2016.

The carrier has also begun discussions on cooperation with AirAsia after the two carriers’ biggest investors undertook a share swap in Aug-2011. Potential areas for cooperation with the LCC and its long-haul affiliate AirAsia X include fuel-purchasing, maintenance, training and ground-handling.

MAS: "The market environment remains very challenging for Malaysian Airline given the increased competition from low-cost and full-service carriers, overcapacity in the Asian aviation sector, high fuel costs and the volatile global economy," CEO, Ahmad Jauhari Yahya. [more - original PR]

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