MAS Pre-Tax Profit Falls To RM282.03 Million

[flee 5]

KUALA LUMPUR, Feb 25 (Bernama) -- Malaysian Airline System Bhd's (MAS) pre-tax profit for the year ended Dec 31, 2010 fell to RM282.036 million from RM491.832 million in the same period of 2009.

 

Its revenue, however, rose to RM13.587 billion from RM11.605 billion previously, the national air carrier said in a filing to Bursa Malaysia Friday.

 

Earnings per share fell to 7.25 sen compared with 25.32 sen in 2009.

 

In the fourth quarter, MAS reported a pre-tax profit of RM258.301 million compared with RM599.150 million in the same period of 2009, after including among others, a derivative gain of RM143.8 million.

 

Revenue rose to RM3.673 billion from RM3.388 billion previously.

Edited February 25, 2011 by flee

[JuliusWong 0]

Congrats MH on the achievement although it may be pale in comparison to AK's!! Still an amazing feat despite the difficult operating environment.

 

However I think MH needs to get their act together as the fourth quarterly profit had slipped even though its the peak travel season.

[Mohd Suhaimi Fariz 2]

Congrats MH on the achievement although it may be pale in comparison to AK's!! Still an amazing feat despite the difficult operating environment.

 

However I think MH needs to get their act together as the fourth quarterly profit had slipped even though its the peak travel season.

 

Wasn't it during the fourth quarter that their flights to London had to be cancelled due to the heavy snow? Could have affected the results some, since they have to incur additional expenses to cater for the delayed pax, not to mention loss of revenue due to AOG.

[flee 5]

.pdf"]Click here for the Bursa Malaysia Announcement

[JuliusWong 0]

Wasn't it during the fourth quarter that their flights to London had to be cancelled due to the heavy snow? Could have affected the results some, since they have to incur additional expenses to cater for the delayed pax, not to mention loss of revenue due to AOG.

 

D7 took the same hit as well. MH in fact is better position as they have more international destinations comparing to AK to offset the snow crisis in London. It can be safely said both D7 and MH cancelled or delayed their London flight.

[flee 5]

If you look at the two companies' results, they tell very different stories. MH does not look very efficient.

 

Turnover for Y/E 31 Dec 2010

AirAsia RM 3,992,722,000

Malaysia Airlines RM 12,980,447,000

 

Profit Before Tax

AirAsia RM 1,099,299,000 (27.53% of Turnover)

Malaysia Airlines RM 282,036,000 (2.17% of Turnover)

 

Profit After Tax

AirAsia RM 1,066,877,000 (26.72% of Turnover)

Malaysia Airlines RM 237,346,000 (1.83% of Turnover)

 

Malaysia Airlines very nearly went into a loss situation - its cost of sales exceeded revenue! Only other operating income came in to spare it some blushes. MH really either needs to increase its fares or reduce its cost of sales.

Edited February 25, 2011 by flee

[N Azman 0]

If you look at the two companies' results, they tell very different stories. MH does not look very efficient.

 

Turnover for Y/E 31 Dec 2010

AirAsia RM 3,992,722,000

Malaysia Airlines RM 12,980,447,000

 

Profit Before Tax

AirAsia RM 1,099,299,000 (27.53% of Turnover)

Malaysia Airlines RM 282,036,000 (2.17% of Turnover)

 

Profit After Tax

AirAsia RM 1,066,877,000 (26.72% of Turnover)

Malaysia Airlines RM 237,346,000 (1.83% of Turnover)

 

Malaysia Airlines very nearly went into a loss situation - its cost of sales exceeded revenue! Only other operating income came in to spare it some blushes. MH really either needs to increase its fares or reduce its cost of sales.

 

Yes, MH very nearly scraped past positive margin. but the above comparison is wrong. At the same ASK, the LCC makes much higher margin compared to a FSC. No airline in the world even SQ or LH can make the airasia margin, its just the rules of business.

 

Maybe compare with SQ figures then you'll have a realistic figure of what MH margins should be.

[flee 5]

Since you insist, here are Singapore Airlines' numbers. However, their financial year ends on 31 March. So this is a 9 month period.

 

Turnover - S$ 10,938.0m

Profit before tax - S$ 1,207.3m (11.04%)

Profit after tax - S$ 964.4m (8.82%)

 

These margins are still a lot healthier compared to MH's.

[Mike P 0]

D7 took the same hit as well. MH in fact is better position as they have more international destinations comparing to AK to offset the snow crisis in London. It can be safely said both D7 and MH cancelled or delayed their London flight.

 

Can this be part of the reason too? Does it include the affect of KIA closure due to AK skidding off the runway and closing the airport for nearly 24 hours?

[JuliusWong 0]

Can this be part of the reason too? Does it include the affect of KIA closure due to AK skidding off the runway and closing the airport for nearly 24 hours?

 

Most probably both airlines had taken account into the delay, rescheduling of flights and other associated issues. One thing for sure, AK may also taken into account cost of repairing the aircraft or insurance may help them to cover it.

[N Azman 0]

Since you insist, here are Singapore Airlines' numbers. However, their financial year ends on 31 March. So this is a 9 month period.

 

Turnover - S$ 10,938.0m

Profit before tax - S$ 1,207.3m (11.04%)

Profit after tax - S$ 964.4m (8.82%)

 

These margins are still a lot healthier compared to MH's.

 

Yep no doubt MH is not in its optimum state. I would say these margin figures would be the one to target. thanks for the quick research.

[flee 5]

Malaysian Air Bhd is monitoring oil prices “very closely” and may increase fuel surcharges if the need arises, Chief Executive Officer Tengku Azmil Zahruddin said.

 

“If the Middle East becomes volatile, it is highly likely,” he told reporters in Selangor, Malaysia today. -- Bloomberg

[JuliusWong 0]

Malaysian Air Bhd is monitoring oil prices “very closely” and may increase fuel surcharges if the need arises, Chief Executive Officer Tengku Azmil Zahruddin said.

 

“If the Middle East becomes volatile, it is highly likely,” he told reporters in Selangor, Malaysia today. -- Bloomberg

 

Well its very THE volatile now...

 

I dun know how all these FSC calculate. Take MH as an example. RM 65 deal per way for SIN..by the time they add in airport charges, fuel surcharges, and whatever not, the whole return comes to about RM460++....so much for having 'LOW' or 'PROMO' fare...try MH Search engine then you will know. <_>

 

LCC is a different story.....

[Mohd Azizul Ramli 2]

I actually posted something that should sits between reply #3 and #4 in this thread but due to bad internet connection it was not went through. Anyway, it was something like flee's analysis in reply #6.

 

A spy from the MH Rumour Department went to MH press conference today. Quoting him right out from his mouth,

 

"Tengku Azmil was talking about how the "enhanced website" was one of the key milestones for Q1 2011. This is a direct quote of him: "Feedback from the public had been very good... the comment from the public is they are finding the site much faster and more intuitive."

 

Seeing the amount of complaints on MWings, thought you'd enjoy that from the CEO!

 

Also he revealed a pic of a new 333 in the new colors. "We weren't planning to show you the picture until it was unveiled but it's already on the internet."

LOL! Is he delusional? Reminds me the incident of Idris Jala with the snackbox version 1.

[flee 5]

From The Edge:

http://www.theedgemalaysia.com/business/182332-flash-mas-4q-earnings-down-647pct-to-rm2259m-from-rm640m-yr-ago.html

 

KUALA LUMPUR: MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) posted net profit of RM225.92 million in the fourth quarter ended Dec 31, 2010, a decline of 64.7% from RM640.12 million a year ago, on lower derivative gains, higher finance costs and losses from foreign currency hedging contracts.

 

The national carrier said on Friday, Feb 25 its revenue rose 8.2% to RM3.67 billion from RM3.39 billion a year ago. Earnings per share were 6.76 sen compared with 31.17 sen. It recorded an operating profit of RM137.3 million in 4Q mainly due to higher operating revenue and improvement in its yield.

 

MAS said it recorded lower derivative gain of RM143.77 million, down about 75% from the RM581.69 million in derivate gains a year ago. Its finance costs rose to RM32.44 million from RM19.94 million. It also incurred loss of RM28.6 million in foreign currency hedging contracts compared with loss of RM7.4 million a year ago.

 

For FY10, it recorded net profit of RM234.47 million, down 54.9% from RM520.24 million in FY09. Revenue was higher by 17% at RM13.58 billion from RM11.60 billion.

 

MAS said it met its “target” range of RM200 million toRM425 million, adding that for 2011, its operating profit target was RM300 million to RM600 million, while on time performance target was 84.7% to 87%.

 

Commenting on its prospects, MAS said although the International Air Transport Association (IATA) reported strong full year 201 demand in both the passenger and cargo business, IATA now expects industry profits to fall in 2011.

 

It said a number of uncertainties had plagued the market, with recent oil prices movement being one of the major concerns. In addition, economic uncertainties and severe weather setbacks will add to the challenges faced by airlines globally, it said.

 

The operating environment will become more challenging in 2011, with the average fuel price expected to increase significantly and global GDP growth expected to fall to 2.6% compared to 3.5% in 2010, it said.

 

MAS said it would continue to strengthen its competitive edge by continuously improving customer experience, improving external and internal systems and infrastructure as well as improving its pricing approach to strengthen yields.

 

The carrier said it would take delivery of a further four B737-800s and five A330s in 2011, and work was also underway to prepare for the delivery of its flagship A380 in 2012.

 

“In total, MAS has ordered 45 B737-800s, six A380s and four A330s freighters which will be delivered in the next five years. By 2015, MAS will be operating one of the youngest fleets in the region, supporting its vision of becoming Asia’s Number One Full Service carrier,” it said.

 

 

From Business Times:

http://www.btimes.com.my/Current_News/BTIMES/articles/ptma/Article/

 

MALAYSIA Airlines (3786)has targeted an operating profit of between RM300 million and RM600 million for 2011, but warns a tough first quarter as jet fuel prices escalate and instability in the Middle East continues.

 

MAS managing director and chief executive director Tengku Datuk Seri Azmil Zahruddin, however, did not want to commit if this could mean that it would see operating losses in the first quarter.

 

"Fuel prices going up and having this instability (in the Middle East) happening at the same time are not helpful. The first and second quarter are seasonally weaker as well ... so it's something that we need to watch out for," he said.

 

Azmil added that demand for its seats had so far not been affected by the unrest in Middle East. He also said that any fuel surcharge increase would be affected only if fuel prices remain high.

 

"If the situation in the Middle East remains volatile, then there is a higher chance of fuel prices remaining high or going up even higher, that would probably see a likelihood of a surcharge increase. So you can't have a formula (of when an increase will be affected) because you really have to assess how the situation looks like," he said.

 

The national carrier's fourth quarter net profit more than halved to RM225.9 million compared to a year ago, due to lower derivative gains from its fuel contracts for the year.

 

Its operating profit, however, jumped more than fourfold to RM137 million for the quarter.

 

Group revenue was up by almost 9 per cent to RM3.59 billion for the fourth quarter ended December 31 2010.

 

The performance was helped by yield improving by 5 per cent, traffic going up by 10 per cent and Revenue per Available Seat Kilometre (ASK) moving up by 18.8 sen. Non-fuel unit Cost per ASK also dropped by 7 per cent to 17.5 sen in the quarter.

 

Net profit for the full year was also halved to RM234.5 million due to lower gains from its fuel contracts.

 

Operating profit for 2010 stood at RM263.8 million as opposed to losses of RM614.7 million in 2009.

 

Revenue for the year grew by 14.4 per cent to RM12.9 billion in 2010, compared to 2009.

[Waiping 12]

I'm not very good with economics but just my 2 cents.

 

Is it possible that while MH is trying to fight AK with routes that both are flying, MH must also performed their RAS whereby from what I understand they are actually making a lost.

[flee 5]

Can this be part of the reason too? Does it include the affect of KIA closure due to AK skidding off the runway and closing the airport for nearly 24 hours?

Zero effect - this happened in 2011 and might only show up in the Q1 2011 results.

[flee 5]

I'm not very good with economics but just my 2 cents.

 

Is it possible that while MH is trying to fight AK with routes that both are flying, MH must also performed their RAS whereby from what I understand they are actually making a lost.

One good thing that came out of the FAX debacle is that RAS is now run by a subsidiary of Malaysia Airlines, MASWings. Any losses will be reflected in their accounts and shown separately in the financial statements.

 

For 2010, there was a profit of RM 27.728m from their associated companies and losses of RM 10.147m from jointly controlled entities. These numbers are not very significant - not enough to materially affect the overall results of the company.

 

The Bursa Malaysia announcement from MAS shows significantly less detail than that issued by AirAsia. We will have to wait for them to post the annual numbers at the investor relations pages.

 

From The Star:

http://biz.thestar.com.my/news/story.asp?file=/2011/2/26/business/8145589&sec=business

 

 

PETALING JAYA: Malaysia Airlines (MAS) net profit fell by 65% to RM226mil for the fourth quarter ended Dec 31, 2010 from RM640mil a year earlier due to higher cost of fuel despite carrying more passengers during the quarter.

 

The fourth quarter is normally the best quarter for most airlines and in terms of revenue the airline reported an 8% a rise to RM3.6bil from RM3.3bil previously.

 

However, its operating profit increased five fold or RM108mil during the quarter to RM137mil from RM29mil and this was due to a 5% increase in ticket sales.

 

Earnings per share (EPS) for the quarter also dropped from 31.17 sen per share to 6.76 sen per share in the 4Q10. No dividend was declared.

 

“Operationally we have done well for the quarter. We recorded a 10% rise in traffic volumes and yields were up by 5%,'' MAS managing director/CEO Tengku Datuk Seri Azmil Zahruddin said when releasing the airline's results yesterday.

 

Load factor was at 77.4% for the quarter compared with 76.5% in 2009 while yields (with fuel surcharge) was at 24.3 sen, slightly higher from 23.1 sen a year ago. Its fuel bill was higher by 13% to RM1.2bil for the quarter from RM1.06bil on higher fuel prices and consumption.

 

Tengku Azmil said fuel remained a major expense for the airline as jet fuel had risen to US$120 a barrel.

 

“It is difficult to predict how the price will behave over the course of the year but for now, we have restructured our hedge levels to cover 25% of fuel requirements for 2011 at US$88 a barrel. This is in line with our peers,'' he said.

 

For the full year, capacity grew by 4% which was in line with industry estimates but in terms of traffic growth, MAS saw a 15% growth rate which was higher than the industry's average of 10%. The load factor was also higher at 76.2%.

 

Despite the better traffic numbers, the airline posted a drop in net profit by more than half to RM522mil from RM237mil in 2009. But revenue was higher at RM13.5bil for full year (FY) compared with RM11.7bil in 2009. The airline's operating profit was at RM264mil for FY10.

 

The fourth-quarter net profit exceeded a forecasted net loss of RM65.3mil according to a consensus of 18 analysts tracked by Thomson I/B/E/S, Bloomberg said. It added that MAS' full-year net profit of RM237mil also exceeded an estimated full-year net profit of RM191mil.

 

The airlines' EPS for the full year fell from 25.32 sen to 7.25 sen a share.

 

“We were able to see strong rebound in 2010 due to added capacity through increased frequency, new destinations and stronger international revenue from higher seat factor and yield. However, for the first quarter of 2011, the (conditions) remain tough given the Middle East unrest which will cause a steep rise in fuel prices and the European and North American economies (outlook) remain uncertain,'' he said.

 

He also warned that the airline may increase fuel surcharges if oil price keep going up. Unlike some airlines, MAS has not removed the fuel surcharge since 2008 even though the rates did come down when oil prices were lower.

 

“We are monitoring the situation,'' Tengku Azmil said when asked if the airline would raise fuel surcharges.

 

On possible airfare hike, MAS woukd also monitor and review the situation, he added.

 

“Competition is also expected to intensity and in a challenging and unpredictable industry such as this. We are vulnerable to many things beyond our control which can quickly have an impact on the business,' he said.

 

Despite that, he expects Asia-Pacific to drive growth over the next five years and the industry projects a 10% growth rate. The airline is set take delivery of five new B737-800 aircraft, increasing the total number to eight.

 

MAS intends to deploy the new aircraft for the Asian region but that depends on market conditions. If the market softens, the aircraft will be used as replacement for its fleet.

 

“Over the next few years, we will be growing our network and with new aircraft, especially with the A380 in 2012, we expect to see more capacity as well,'' he added.

 

He said the airline was focusing on enhancing customer experience was its focus this year.

 

MAS' call centre transformation would be completed by the end of the first quarter and the airline will take delivery of its first A330 aircraft in the second quarter. During this period, its wholly-owned subsidiary, Firefly will set up a hub in Senai and begin flying the KL-Miri and KL-Sibu routes.

[Mohd Suhaimi Fariz 2]

MH's biggest cost is fuel, because their fleet isn't exactly economical, fuel-wise. And they're not really fuel hedge experts.

[BC Tam 2]

To put things into perspective, it wasn't too long ago that we breathed collective sighs of relief whenever our national carrier did not report anything in the red. To now have 282m to the good is I think quite commendable. Perhaps a pat on the back is in order after all ?

[KK Lee 5]

MH's biggest cost is fuel, because their fleet isn't exactly economical, fuel-wise. And they're not really fuel hedge experts.

 

If this is the case, why don’t they order or commission fuel efficient aircrafts (e.g. A350, 787, A380) early?

[flee 5]

I think that their cost of sales situation should improve somewhat in 2011 as they will have more significant numbers of B738's and the new A333s contributing to greater fuel efficiency. I think that in their quest to fight AK, they are handicapped by the less efficient B734's vs AKs newer A320's. With the B738 and with FY now taking up the fight, things might change a little in 2011. With oil prices shooting up once more, it should be interesting to watch how they deal with it.

 

MH aren't good at fleet renewal planning either. So one begs to question, if they are not good at fuel hedging and fleet renewal, why are they in the airline business?

[KK Lee 5]

MH aren't good at fleet renewal planning either. So one begs to question, if they are not good at fuel hedging and fleet renewal, why are they in the airline business?

 

Believe CEO, CFO, most board members and THE decision maker were not from the airline industry originally

[flee 5]

Believe CEO, CFO, most board members and THE decision maker were not from the airline industry originally

Neither was TF and his AirAsia board. The same goes for Singapore Airlines management team. I believe that their current CEO may be the first guy who spent most of his career in the airline industry.

 

You can have advisors and consultants, can't you? Good management will ensure a business is professionally and properly run. I think that in Malaysia, we have too many politicians and not enough professionals in GLCs. That is why we see a great deal of incompetence and not enough transparency and accountability.

[suadrif 0]

Neither was TF and his AirAsia board. The same goes for Singapore Airlines management team. I believe that their current CEO may be the first guy who spent most of his career in the airline industry.

 

You can have advisors and consultants, can't you? Good management will ensure a business is professionally and properly run. I think that in Malaysia, we have too many politicians and not enough professionals in GLCs. That is why we see a great deal of incompetence and not enough transparency and accountability.

 

Well said.