Commercial Aviation

Malaysia Airlines continues uptrend in growth

b2987e3bafec9f6c9bbde0d383998252Malaysia Airlines today announced a Net Income After Tax (NIAT) of RM51 million for the fourth quarter ended 31 December 2012 against a Net Loss of RM1.3 billion in the previous corresponding quarter.

For the full year of 2012, Malaysia Airlines reported a Net Loss of Tax of RM433 million compared to a Net Loss of RM2.52 billion registered for the 12 months ended 31 December 2011.

Without the one-off provisions amounting to RM1.09 billion recorded in Quarter 4, 2011, NIAT for the fourth quarter 2012 registered an improvement of RM233 million. For the full year 2012, there was an improvement in the results of RM1.0 billion.

This is the second consecutive quarter of profit for the national airline following 6 consecutive quarters of losses. This is also the best result since the launch of the airline’s Business Plan at the end of 2011.

“The massive swing from a RM1.3 billion loss in the fourth quarter of 2011 to a profit of RM51 million achieved in the similar quarter of 2012 shows that our Business Plan is working. We continue to gain traction in multiple initiatives that focus on increasing revenue and managing costs. The results are very encouraging for our team who has worked hard throughout the year”, said Ahmad Jauhari Yahya, Malaysia Airlines Group CEO.

The operating profit of RM44 million and NIAT of RM51 million for the fourth quarter of 2012 compared favourably against an operating loss of RM1.32 billion and a Net Loss After Tax of RM1.28 billion y-o-y in 2011.

A key contributor to the continued positive trend in yearly financial performance at the operating level was the Route Rationalisation Programme which saw an overall 6% reduction in ASK (Available Seat Kilometre) over 2012. This was matched by a marginal 2% reduction in revenue to RM13.76 billion in 2012 and Seat Factor holding at 75 ppts. The reduced ASK also helped Malaysia Airlines register a corresponding 13% decrease in expenditure.

Fuel spending, which accounted for 38% of expenditure, fell 9% equivalent to RM518 million, to RM5.33 billion for the twelve months of 2012. The average price of fuel over the period continued to remain high at an average USD134 per barrel.

With fuel prices remaining high, Malaysia Airlines’ current fleet renewal programme becomes even more significant for operations. Over the course of 2012, Malaysia Airlines took delivery of 18 new fuel efficient aircraft (7 B738s, 7 A333s, 4 A380s). The fleet renewal programme began in 2010 and will see progressive deliveries until 2017.

For the twelve months ended 31 December 2012, the Group was able to make savings of RM1.8 billion on aircraft fleet-related expenses of maintenance, fuel costs, depreciation expenses and leasing costs.

Commenting on the recent quarter’s performance, Ahmad Jauhari Yahya said, “The 4th quarter of 2012 is really a milestone for our team. There were signs of solid revenue recovery as seen in the improvement in Seat Factor and RASK (Revenue per ASK) – the highest registered in 8 quarters to-date. Yields were also maintained at a high level.”

The national airline had much to celebrate in 2012 – from its award wins at Skytrax for recognition as a 5-star airline, World’s Best Cabin Crew and Best Signature Airline Dish, to the arrival of the A380 super jumbo into its fleet starting from July, to improving productivity through ensuring the right mix of fleet for its network, amongst a long list of initiatives.

On Time Performance (OTP) for 2012 averaged 87.3%, up from 84.6% in 2011.

“When we began the year 2012 by announcing our Business Plan, many were sceptical on our team’s ability to make a change and succeed especially in a highly competitive market, with high operating costs, particularly fuel spending. The business environment continues to be very dynamic and challenging. Going forward, we will need to work even harder to ensure we keep up this strong momentum to deliver sustainable profitability”, said Ahmad Jauhari.

2013 Prospects

The International Air Transport Association (IATA) projected the outlook for 2013 to be moderately better than 2012. Economic growth and world trade growth is expected to increase at a slightly faster pace in 2013. Air traffic volume in Asia Pacific is expected to see strong growth in 2013 as cargo recovers.

Whilst Malaysia Airlines is located at the centre of aviation’s future growth hub, the airline remains cautiously optimistic of a challenging operating environment in the future. Although increased demand will be driven by emerging markets, a host of low cost carriers (LCCs) now offer value-for-money travel and increased competition, thereby putting pressure on yields of all airline players. In addition, rising fuel costs, demand shocks and seat over-capacity continue to bring challenges.

Malaysia Airlines will however continue to improve its products and services for the growing premium customer markets globally.

oneworld®

On 1 February 2013, Malaysia Airlines becomes part of oneworld®, adding one of Asia’s leading airlines to the global airline alliance that aims to be the first choice for frequent international travellers the world over.  For Malaysia Airlines, joining oneworld completes yet another successful phase of its Business Plan.

Becoming part of the world’s premier global airline alliance strengthens the Malaysian national air carrier’s competitiveness, enabling it to offer customers an unrivalled alliance global network served by partners including some of the best and biggest airlines in the world.

More significantly, this membership strengthened Malaysia Airlines’ connectivity between many key business cities in Asia and other parts of the world providing increased opportunities for improved loads and yields on its services.

Better Value Proposition Our Guests – Increased Free Checked Baggage Allowance

Effective 14 February this year, Malaysia Airlines introduced an additional 10 kilograms free checked baggage allowance and reduced excess baggage charges for travel in all classes.

The revised checked baggage policy improves the airline’s product proposition in the ever-changing competitive landscape of the commercial aviation industry and also simplifies the excess baggage rates to introduce a consistent policy for its passengers, providing significant savings while they enjoy the airline’s premium service hospitality.

Fleet Renewal Continues with More Deliveries

The national carrier is currently continuing its fleet renewal plan, essential to maintaining relevance in the competitive premium service market. This started in 2010 for 35 new B737-800 and in 2011 for 15 A330, in addition to the six A380s ordered earlier.

The more technologically efficient aircraft reduce the fuel bill (current Malaysia Airlines fuel spending is equivalent to 38% of monthly operating costs) and enable Malaysia Airlines to offer a heightened level of products and services to guests at better yields.

This year alone, the company is taking about one B737-800 every month, and that is 12 deliveries with the remaining 9 of the 35 to be received by next year. In addition, it will receive a total of 4 new A330s in 2013 with the last one by early next year to complete the 15 firm order. Last week the fifth A380 joined its fleet and the sixth one will be added by end of March this year, completing the A380 programme.

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