Press Room

Mas Optimistic On Future Despite Looming Challenges

Singapore, 17 June 2011 : Despite vast challenges facing the airline industry, Malaysian Airline System Berhad or MAS is positive on being able to surmount them.

Not denying the severity of the challenge posed especially by spiraling oil prices, Chairman Tan Sri Dr. Mohd Munir Abdul Majid said: “With oil prices cutting into the airline’s margins and, of course, the sluggish world economy, we are obviously in some bother as evidenced by the poor Q1 2011 results.

“We have a tight game to play but we will not lie down and die. We will work at increasing our yield to improve our margin. We have done well in keeping cost under control and will keep at it. It is going to be tough but we are not going to be defeated,” he told Bernama on the sidelines of the IATA AGM in Singapore recently.

He said the reaction to the Q1 results has been overdone. While hinting the second quarter continues to be tough, he pointed to measures being taken to address the situation, both in the short and longer term.

Apart from having management working really hard to improve yield and enhance revenue, he said other immediate measures to counter the challenge should not be disregarded.

“First, the fuel surcharge did not kick in during the first quarter as we sell tickets in advance. It will have an impact in the second quarter.

With our oil price hedge, we should cover half the increase in the cost of jet fuel. There is still the other half to cover and we have to narrow the gap on the revenue side running into the rest of the year.”

Munir admits the MAS profit margin of between two and three per cent is far too low, but points out this is actually the IATA average. He said the best performing full service carriers had a margin of about 10 per cent, while the best margin for low cost carriers was 25 percent, and they obviously have more leeway in contending with higher jet fuel cost which came close to 40 per cent of “our cost.”

“We have only one way to go in the immediate term and that is to improve our yield, keep cost down and widen our margin” he added.

Munir also said the second half of the year was usually better and “therefore we hope to rake in some gains.”

“Whether we achieve the target of between RM300-600 million for the year is not for us to speculate, but the board wants management to work very hard towards it. It is not good discipline to let up just on the basis of one quarter’s figures,” he said.

Munir also pointed to other things that have been done and are doing well. He said new planes have come in to replace the ageing fleet and the improved product is now available. This process will continue and will be capped by the introduction of the A380 from April next year.

He added: “Firefly jet has taken off nicely to supplement the successful turbo-prop community service. We are expanding the low-cost community airline now that our balance sheet is stronger. This is a growing segment of the market as the successful low-cost airlines have shown.

Our third party MRO (maintenance, repair and overhaul) work is now chalking up over RM450 million in revenue and our engineering and maintenance people and facilities are in the top three in the world. MASkargo has been doing well.”

Munir also intimated that MAS joining the One World alliance showed only a limited bit of the bottom line benefits that will come the airline’s way in the near future. So, he repeated, there is a lot to look forward to.