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Alan B.

MAS's Q1 loss expected to top RM2billion

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True, may be those responsible will become CFO or Finance Director. Oooops! :pardon:

 

:drinks:

 

You know some people believe in second chance :p

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From the NST

MAS fuel-hedging strategy gets mixed reviews

ANALYSTS are mixed about whether Malaysia Airlines (MAS) is doing the right thing in its fuel contracts, but they agree that the outlook for the national carrier looks sombre.

 

"I do not find the mark-to-market losses it posted all that worrying because, it is something that most companies will have to go through come 2010, and MAS did take some measures to mitigate its affects," Maybank Investment Bank senior analyst Khair Mirza told Business Times.

 

"What I am more worried about is that the carrier does not seem to be reacting fast enough to passengers' needs. They are not doing enough.

 

"With the second quarter being traditionally its weakest quarter, and the H1N1 flu gathering more intensity, it is hard to imagine the carrier making a profit (in the second quarter of 2009)," he added.

Khair estimated that during the January-March period, MAS had lost 30 per cent of its passengers to its competitors.

On Friday, MAS reported a net loss of RM695 million in its first quarter ended March 31 2009, versus a year-ago net profit, largely due to its fuel hedging contracts.

 

Notwithstanding the RM640 million mark-to-market fuel hedging losses, the carrier posted RM138 million in operating loss.

 

It also said it had spent some RM400 million to restructure its hedging contracts into 2011.

 

Standard & Poor's Asian Equity Research analyst Shukor Yusof said MAS' mark-to-market losses is an indication of what to expect from the carrier in the coming months.

 

For MAS to be a trend setter, he believes that it should take a more proactive approach in its fuel hedging strategies.

 

"One of MAS' main problems is that it adopts a herd mentality when it comes to fuel hedges. There is no real vision and MAS is obviously afraid to take risks," Shukor said.

 

The airline could still make a profit in the second quarter, though, albeit not an operational one, again due to the airline's new accounting standard.

 

This is because just as how the airline saw a paper loss of RM640 million in the first quarter, it could see a paper gain of RM1.1 billion on fuel hedging if oil prices average US$66 a barrel in the second quarter.

 

Meanwhile, in a reply to a local blog posting on Rocky's Bru on Saturday, MAS executive director and chief financial officer Tengku Azmil Zahruddin said any business in which its major cost item doubles to US$180 per barrel in six months, only to fall to US$40 per barrel in the next six months, must take steps to protect itself against such volatility.

 

He added that because airlines typically sell seats six months into the future and sometimes even up to 340 days in advance, the need to hedge against the unpredictability of fuel price is critical.

 

"As with other airlines which hedge, MAS only enters into long fuel hedges, where we are buying fuel, and do not speculate by selling short in the fuel market, as may be the case with certain low-cost carriers," Tengku Azmil said.

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It also said it had spent some RM400 million to restructure its hedging contracts into 2011.

 

.....

 

This is because just as how the airline saw a paper loss of RM640 million in the first quarter, it could see a paper gain of RM1.1 billion on fuel hedging if oil prices average US$66 a barrel .....

 

Ah, these two quotes offer some glimmer of hope then ?

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Not the "new accounting standards" trick again... Boring... *yawn*

 

Without the so called 'new accounting standards' the true picture may not even have been revealed.

It's just not quite right to say that 'had it not been due to our early adoption of this accounting standard which required us to report marked-to-market figures, we would not have to present such a gloomy figure'. So agreed, this trick (excuse) is getting somewhat stale.

 

I'm pretty sure they will have gladly adopted the 'new accounting standard' way earlier if it projects a better set of financials for them.

 

It'd be interesting to see their extent of reporting when they have to comply to 2 other upcoming accounting standards. More things currently 'hidden' would hopefully be revealed.

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BA asks staff to work for nothing

 

British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.

 

The appeal, sent by e-mail to more than 30,000 workers in the UK, asks them to volunteer for between one week and one month's unpaid leave, or unpaid work.

 

BA's chief executive Willie Walsh has already agreed to work unpaid in July, forgoing his month's salary of £61,000.

 

Last month, BA posted a record annual loss of £401m, partly due to higher fuel bills and other costs.

 

Mr Walsh said BA's drive to save cash was part of a "fight for survival".

 

"I am looking for every single part of the company to take part in some way in this cash-effective way of helping the company's survival plan," he said.

 

"It really counts," he added.

 

BA has been in urgent talks during the past few weeks with trade unions at the company over other ways to save money.

 

Details of a large pay and productivity deal are expected to be announced on Wednesday.

 

Flexible scheme

 

A company spokesman said it did not have an exact target for the expected savings from its appeal.

 

"As much as possible, but we don't have a figure," he said.

 

The idea was first launched last month when the airline asked staff to volunteer for a month's unpaid leave, or to work for free for that time.

 

That attracted more than 1,000 applicants.

 

But the company's more recent version of its scheme, launched last week by e-mail and in an article in the internal staff newspaper BA News, is more flexible.

 

It asks staff to volunteer by the end of this month for between one week and one month of unpaid leave or unpaid work.

 

The lost salary will be spread over between three and six months.

 

BA said other airlines, such as Cathay Pacific, had launched similar schemes and a majority of their workforces had signed up for them.

 

from the BBC

 

Are we likely to see a similar initiative from Datuk IJ ?

And what would likely be the local reaction to such a proposal to MH's staff ?!

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Are we likely to see a similar initiative from Datuk IJ ?

And what would likely be the local reaction to such a proposal to MH's staff ?!

 

Looks like they already have something similar in mind:

 

From The Star

 

MAS in discussions on salary cuts

By LOONG TSE MIN and SHARIDAN M. ALI

 

 

KUALA LUMPUR: Malaysia Airlines (MAS), which posted disappointing results for its first quarter ended March 31, is looking at various areas to further reduce costs.

 

Executive director and chief financial officer Tengku Azmil Zahruddin said the company was currently talking to employees and exploring additional cost-reduction measures, including reduced work days and pay cuts across the board.

 

“No decisions have been made on this and, at this point in time, we are gathering comments and feedback from employees,” he told StarBiz.

 

Tengku Azmil pointed out that over the past three years, MAS had successfully implemented revenue-generating measures system-wide, including the introduction of Everyday Low Fares, Malaysia Airlines Travel Fairs, the MAS Stimulus Package and various other aggressive promotions, to drive sales.

 

“Tough cost-cutting measures, such as 7% budget cuts system-wide, freeze on hires, external training and all discretionary travelling, are already in place.

 

“The company is on track to save between RM700mil and RM1bil in cost-saving measures in 2009,” he said.

 

Most brokerages had under-estimated the “quadruple squeeze” effects and had not earlier expected the airline to mark-to-market its fuel hedges. Hence, their forecasts were wide off the mark.

 

OSK Research said the poor first-quarter results were due to the tough business environment and hedging losses.

 

MAS is once again experiencing a yield pressure from the removal of fuel surcharges and lowering of air fares, load pressure arising from lacklustre demand, and cost pressure from hedging losses.

 

“Despite the fact that MAS has cut capacity by 11.8% in the form of available seat kilometre, the load factor numbers were shocking as domestic load came in barely above 60% and international at 55.6%.

 

“Lower traffic, load and yield dragged MAS into its first operating loss of RM138.4mil since the third quarter of 2006.

 

“Including the derivative loss of RM557mil on early adoption of FRS 139 accounting standards, the reported net loss ballooned to RM695.4mil,” it said.

 

MAS decided to adopt the new Financial Reporting Standard (FRS) early although it will only be mandatory by Jan 1, 2010, to improve transparency in its financial statements.

 

MIDF Research, which has a “neutral” call on the stock, said MAS’ fuel derivatives would increase substantially in value although it had posted below-expectation results.

 

“As of the first quarter of the current calendar year, the hedge amounts are marked to market at US$49 per barrel (West Texas Intermediate crude oil) and we believe that fuel prices should be at US$85 to US$90 per barrel.

 

“Thus, MAS is forecast to recognise RM1.9bil in gains on fuel derivatives,” it said.

 

HwangDBS, which recognised a “fully valued” call on the stock, expects smaller losses from MAS in the next six months in anticipation of improving demand.

 

“We expect passenger load factor to remain flat year-on-year in the second half of this year after the double-digit decline in the first half of this year,’’ it said.

 

 

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I wonder how much is the saving if MH were not to pay the salary of the airline's newly appointed ADVISOR? I believe the saving is quite tremendous. On the other hand, is the Advisor willing to do the same thing as per what the CEO of BA is doing?

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