MAS Pre-Tax Profit Falls To RM282.03 Million

[N Azman 0]

But sadly in 2010, that is not happening. MH's domestic market shares in KLIA further decreased to only 42% in 2010 from 44% in 2009. I have no data of MH's international market shares but AK claimed to control 37% of the market share, which means MH is no longer a market leader.

 

 

1) Then for your argument's sake, mind sharing the breakdown of that RM 607,163,000 of Other operating income just to be sure?

 

2) You made false sweeping conclusions all the time. Good luck with that.

 

3) So a 0 fare/free seat promotions which was offered after like 2 days AK did theirs is the result of a thorough and detailed studies by an entire department of brains/think tanks? We are talking about 0 revenue here. Sorry, I am not convinced.

 

For someone who spun the way you have been spinning, it is of utmost shock to find out that you are still confused with which airlines is based in the Kingdom of Saudi Arabia and which airlines is based in the United Arab Emirates. Air Arabia does not fly on domestic routes in Saudi Arabia, just like MH.

 

1) the breakdown is not revealed! geez get over this already.

2) unproductive statement due to frustration. my statement is simply referring to why you need to know FY info when the powers that be already knows them. with all due respect, if a companies going down a 2bil loss road, no amount of info disclosed can save them.

3) are you sure youre not creating this story? i personally dont remember any zero fare promos MH did. even during the worst of times in 2009. i know it became very low but even on grab-a-deal its not down to zero. i think somebodys creatingg storiessssss.....

 

unlike you geniuses here i dont make an effort to memorize locations and bases of airlines as well as ICAO codes, unless of course theyre my customers. i give you an A++ for that an also the ability to wiki locations and financial results within the blink of an eye. awesome! you should be a researcher.

 

besides the point though, i asked simply because im curious of the airline. heard good things about them! arent they coming to KUL thru katmandu or something like that?

Edited February 28, 2011 by N Azman

[flee 5]

3) are you sure youre not creating this story? i personally dont remember any zero fare promos MH did. even during the worst of times in 2009. i know it became very low but even on grab-a-deal its not down to zero. i think somebodys creatingg storiessssss.....

I think you owe Azizul an apology. Life began earlier than 2009.

 

Here is an excerpt from a 6 May 2008 NST story:

ANALYSTS believe that Malaysia Airlines' move to offer zero or low fares on unsold domestic seats is a positive one, with minimal cost increase expected.

 

"Despite the slight drop forecasted in domestic yields and higher fuel costs, the additional revenue from the higher load factor should more than offset the higher costs," OSK Research Sdn Bhd associate director Chris Eng said in a research report yesterday.

 

The additional RM0 fare passengers will increase the fuel consumed due to additional weight on the planes and some processing fees.

 

However, given that these are domestic flights, the in-service costs will be minimal. The limitation that tickets can only be booked online also means that incentive costs to sales agents and other ticket handling costs are minimised.

 

Eng has raised his core net profit forecast for MAS by three per cent, 3.4 per cent and 2.8 per cent for the financial years 2008, 2009 and 2010.

 

Yesterday, MAS announced that it would be offering zero fares for 30 per cent of its domestic flights, under its Everyday Low Fares programme.

 

And The Star also covered it here: http://thestar.com.my/news/story.asp?file=/2008/5/5/nation/21151876&sec=nation

[Mohd Azizul Ramli 2]

1) the breakdown is not revealed! geez get over this already.

2) unproductive statement due to frustration. my statement is simply referring to why you need to know FY info when the powers that be already knows them. with all due respect, if a companies going down a 2bil loss road, no amount of info disclosed can save them.

3) are you sure youre not creating this story? i personally dont remember any zero fare promos MH did. even during the worst of times in 2009. i know it became very low but even on grab-a-deal its not down to zero. i think somebodys creatingg storiessssss.....

 

unlike you geniuses here i dont make an effort to memorize locations and bases of airlines as well as ICAO codes, unless of course theyre my customers. i give you an A++ for that an also the ability to wiki locations and financial results within the blink of an eye. awesome! you should be a researcher.

 

besides the point though, i asked simply because im curious of the airline. heard good things about them! arent they coming to KUL thru katmandu or something like that?

1) In the past, proceed from sales of properties was also regarded as 'Other Operating Income'. Does that mean selling properties is part of MH's operation? Since when MH becoming a property developer? Since you don't know the breakdown, then I guess there is no point arguing on MH's favour.

 

2) No, it's not. I am saving your credibility from further diluted.

 

3)

 

 

 

If you think that I Photoshopped those, then you are seriously needing some mental help.

 

Sorry, I don't do Wiki here. I gained information from official publications, like annual reports, analyst reports, presentation slides, Bursa announcements and stuff. And sorry, I have no interest with Air Arabia whatsoever. We are in the wrong thread to discuss whether they should fly via 'katmandu or something like that' or not. Since you are interested in them, maybe you should fly them, and make a trip report for us.

[N Azman 0]

I think you owe Azizul an apology. Life began earlier than 2009.

 

Here is an excerpt from a 6 May 2008 NST story:

 

 

And The Star also covered it here: http://thestar.com.my/news/story.asp?file=/2008/5/5/nation/21151876&sec=nation

 

ahaaaa the search engine prevails! i stand corrected, with utmost apologies for my accusations of slander. BUT.....has it happened in the last two years? why is it relevant anymore then?

 

We are discussing strategies applied in 2008, in relations to 2010 results and future strategies? great. this explains the whole government bailout statement. you critics must really look forward lah. baggage is baggage. Tajudeen ramli is long gone and so is Idris Jala. i'm sure you AK fans also hate it when everytime people bring up the unpaid airport taxes thing.

 

Give the airline the benefit of the doubt for change and i believe there is hope. Axiata and CIMB has shown how legacy companies can move forward and become market leaders...why not MAS?

 

1) In the past, proceed from sales of properties was also regarded as 'Other Operating Income'. Does that mean selling properties is part of MH's operation? Since when MH becoming a property developer? Since you don't know the breakdown, then I guess there is no point arguing on MH's favour.

 

2) No, it's not. I am saving your credibility from further diluted.

 

3)

 

 

 

If you think that I Photoshopped those, then you are seriously needing some mental help.

 

 

 

LOL. its hilarious how a thread can rile a person up. chill a bit winston. go get a drink or something. we might be in for the long haul!

 

OK my apologies for the accusation of slander, apparently this did happen, and stupidly so if i might add.

 

But, it is all in 2008 as per my last posting. history, not relevant anymore. they did this, and made big losses in 2009. so i suppose theyve learned and now no more zero fares following AK. good lesson learned innit? can we continue talking about the future?

 

Or will you guys continue to label MH for its past inefficiencies dating back to previous 2 CEOs? like that undefendable lah brader. Proven to be loss making what. Spinning has its limits. and you've yet to use the SYD and JED card so im down a few points.

Edited February 28, 2011 by Mohd Azizul Ramli

[Mohd Azizul Ramli 2]

Give the airline the benefit of the doubt for change and i believe there is hope. Axiata and CIMB has shown how legacy companies can move forward and become market leaders...why not MAS?

 

can we continue talking about the future?

 

Or will you guys continue to label MH for its past inefficiencies?

Ok, let's take current and ongoing examples.

 

The whole website/booking from AU fiasco. We want to believe that MH can be a market leader and we are longing for the day when MH can trumpet SQ in some areas but if the airline is still unable to fix its website, its main ticket sales gateway, its main revenue sources, then how can flee and I convinced that there is hope when even a petty matter like that could not be solved for close to a month now?

 

SQ has implemented fuel surcharge since December 2010 in view of the current rise of oil prices. MH is still taking the wait and see approach and keep on mulling 'We are monitoring the situation closely'. Are we going to see a Q1 2011 loss until the airline thinks 'oh we should impose the fuel surcharge much earlier'?

 

This is what I meant by slow management. MH really does not give avenues to us to believe that its management is as efficient as AK's.

[N Azman 0]

Ok, let's take current and ongoing examples.

 

The whole website/booking from AU fiasco. We want to believe that MH can be a market leader and we are longing for the day when MH can trumpet SQ in some areas but if the airline is still unable to fix its website, its main ticket sales gateway, its main revenue sources, then how can flee and I convinced that there is hope when even a petty matter like that could not be solved for close to a month now?

 

SQ has implemented fuel surcharge since December 2010 in view of the current rise of oil prices. MH is still taking the wait and see approach and keep on mulling 'We are monitoring the situation closely'. Are we going to see a Q1 2011 loss until the airline thinks 'oh we should impose my fuel surcharge'?

 

This is what I meant by slow management. MH really does not give avenues to us to believe that its management is as efficient as AK's.

 

ahhh now we're on an agreement path.

 

1) AU fiasco. you guys have heard that this is not a technical glitch right? I can't disclose what i know but someone got pretty close to it on the other thread. eitherway its a complete shame that it had happened and it should justify a firing if theyre in my field.

 

2)fuel surcharge - MH has always practised dynamic fuel surcharging hence there is almost a monthly review on this. ive been the victim of this during my last trips to hkg and icn and i can vouch that they do increase the fsc. When i inquired them on this, an insider told me that since its a dynamic review, they can't be coming up with fsc increase announcments every month! itll be a nightmare trying to explain this in the media.

 

While, the other airlines like SQ, raise it ONE SHOT and almost systemwide. maybe because they find it easier to deal with that way. but who knows which one is better. but that does not mean they do not do it.

 

On your last statement, yes. AK have set the bar for reactiveness of the mgmt and i think part of the reason for this is the maniacal workaholicness of tony and the insistence that everything goes through him, and that his word is final. they trust him over on that side and that helps him make quick decisions, albeit not always the right one, but at least its quick.

[KK Lee 5]

As per page 1 of 2010/Q4 quarterly report, ‘other operating income’ for 2010 and 2009 is RM607,163 million and RM264,601 million respectively.

 

Assume ‘other operating income’ is derived from ‘other revenue’. As per page 158 of 2009 financial report; other revenue consists of lease of aircraft and engines, airport handling and engineering services, catering and cleaning services, charter services, etc totaled RM11,309 million.

 

From 2010/1Q report;

‘The national carrier reported an operating profit of RM290 million which included compensation for the delayed delivery of the A380. Operating profit was up RM431 million compared to 1Q09.’

 

Believe significant portion of ‘other operating income’ is from ‘compensation for the delayed delivery of the A380’.

 

[Sri Ramani K. 0]

Give the airline the benefit of the doubt for change and i believe there is hope. Axiata and CIMB has shown how legacy companies can move forward and become market leaders...why not MAS?

 

Believe that many have done that for donkeys of years and they're yet to see change which we should have seen 5-10 years back. My personal opinion is as long as they're stuck with the GLC mentality, they're never going to move forward or even move ahead. They seem to look like they're being held back all the time and most of the time slow in making quick decisions. This is not some "kedai runcit" (grocery store) business, but they seem to take everything so lightly. It can take a million BTPs from a million IJ and they'll probably be where they are currently (or even worse). But hey, I'm just an average joe so nobody's going to be bothered about what I say. So why do they deserve my benefit of the doubt?

[flee 5]

And we know it has got something to do with costs. Staff cost they can't do much as theyre burdened by the legacy workforce that can't be retrenched unlike their other competitors.

This is a self imposed limitation of most GLCs. However, if there is a programme to become more efficient, staff cuts can be done through natural wastage. Those who resign or retire need not be replaced with new recruits. They can be replaced using existing people who can be transferred or promoted. In order to do this, there must be a comprehensive review of the HR requirements.

 

 

And, get more money then! expand expand expand and regain market share. which is exactly what they are doing.

Well they are going for a rights issue this year. They need money for their new aircraft.

 

Many of us here at MW criticised MH for their slow, slow, aircraft purchasing decisions. We can see that having a fleet of aircraft that is very old (B734) aircraft has a detrimental effect on core operating profit. Now that they are beginning to receive more fuel efficient aircraft, it is hoped that they will deploy them effectively.

 

 

but who knows? we've seen FY launch jet services this year, new planes and new branding are coming in, social media is getting more creative with that facebook booking thingy, maybe alliance in the future? who knows what lies next? not me, but certainly not you either. Which is why i keep questioning your bullish statements and assumption driven thoughts about how they're gone case.

With the FY launch of KUL-KCH and KUL-BKI (as well as KCH-BKI) using B738's, significantly higher capacity is being introduced into the routes. We will have to wait and see if the overall load factors of MH and FY combined can be sustained. However, since FY does not report any numbers, we won't know that bit of info.

 

As for social media, do we know if MH has an overall strategy or is it just trying it and see how it works? As we have seen from the MH website revamp, they are not very good at doing their research into the requirements of each of their markets. So there will be a big question mark about how effective their foray into social media will be.

 

My statements are bullish? You gotta be kidding - I would say that they are more like bearish!

 

Assumption driven thoughts? Yeah right - with the lack of information coming out from MH, it is only natural that one has to make certain assumptions. However, they are not without basis because MH does have a track record for us to go on.

 

All of us do want MH to do well. However, MH keeps frustrating us with questionable management decisions.

[flee 5]

BUT.....has it happened in the last two years? why is it relevant anymore then?

 

We are discussing strategies applied in 2008, in relations to 2010 results and future strategies? great. this explains the whole government bailout statement. you critics must really look forward lah. baggage is baggage. Tajudeen ramli is long gone and so is Idris Jala. i'm sure you AK fans also hate it when everytime people bring up the unpaid airport taxes thing.

 

Give the airline the benefit of the doubt for change and i believe there is hope. Axiata and CIMB has shown how legacy companies can move forward and become market leaders...why not MAS?

Azizul is right! You are a spinmaster.

 

The zero fare issue was brought up to support the fact that MH is taking on AirAsia head on. It was offering LCC like fares but its cost structure is far from that of a LCC. And now you say it is not relevant? It is still relevant because we do not wish to see MH repeat this kind of reckless revenue slashing that does no good to its bottom line. I hope that they learnt that offering zero fares may not bring in significantly larger market share.

 

MH has not forgotten TR - there is still ongoing litigation with him.

 

CIMB is one very good example of a GLC that has woken up to exploit its position and it is competing without the need for government protection. Kudos must also go to Bank Negara for allowing them to flourish. Lets hope the DCA and other GLCs like MAHB will become more like Bank Negara and allow Malaysian aviation to flourish too.

 

Why not MAS? Yeah, why not indeed? Lets see if the MAS management is able to uphold your expectations!

[N Azman 0]

Azizul is right! You are a spinmaster.

 

The zero fare issue was brought up to support the fact that MH is taking on AirAsia head on. It was offering LCC like fares but its cost structure is far from that of a LCC. And now you say it is not relevant? It is still relevant because we do not wish to see MH repeat this kind of reckless revenue slashing that does no good to its bottom line. I hope that they learnt that offering zero fares may not bring in significantly larger market share.

 

MH has not forgotten TR - there is still ongoing litigation with him.

 

CIMB is one very good example of a GLC that has woken up to exploit its position and it is competing without the need for government protection. Kudos must also go to Bank Negara for allowing them to flourish. Lets hope the DCA and other GLCs like MAHB will become more like Bank Negara and allow Malaysian aviation to flourish too.

 

Why not MAS? Yeah, why not indeed? Lets see if the MAS management is able to uphold your expectations!

 

Thanks even though i get the sarcastic notion, but can't say i haven't deserved it If you're offended, i am truly sorry but thats just my nature to pick poke and probe in a discussion. This is the problem with online forumming. I think if we were at a mamak having coffee where you can see my jest and expression, you wouldn't take any of the above personally. I didn't mean to offend bro

 

1) fair enough. personally i don't think its relevant because in my mind i even struggle to remember when the last time such low fares were given. Nowadays there's nothing but complains of high fares hence, there is an improving trend. Why do we keep whacking the child who used to cut school 3 years ago as his records are improving today? agreed, lessons learned.

 

2) TR. litigation will take years lar brader doesn't mean everyone is holding on to him. That means we park the 'thought' aside, and start thinking of positive things that helps. if we keep holding on the baggage, susah lah.

 

3) Why not? exactly! so let's see! in the meantime, i still don't understand the need to continuously badger an organization due to its old baggages but hey, its a free country innit. I don't think its positive attitude, UNLESS of course you're proven right when MH launches yet another zero fare promo.

[flee 5]

If you're offended, i am truly sorry but thats just my nature to pick poke and probe in a discussion. This is the problem with online forumming. I think if we were at a mamak having coffee where you can see my jest and expression, you wouldn't take any of the above personally. I didn't mean to offend bro

No offence taken at all... Its just a discussion and we should all be able to see the light side of it.

[flee 5]

Some analysis from The Star: http://biz.thestar.com.my/news/story.asp?file=/2011/3/1/business/8158634&sec=business

 

PETALING JAYA: On the back of year-end school holidays and festive seasons, the last three months of 2010 have proved to be another bumper quarter for the local aviation industry, with national carrier Malaysian Airline System Bhd (MAS) and budget airline AirAsia Bhd both reporting passenger growth that helped boost their financial results.

 

It seems clear, though, that AirAsia's business model continues to thrive, and gives the company a performance that outshines the national carrier, be it in terms of passenger growth or earnings.

 

AirAsia's net profit for the fourth quarter (Q4) of last year jumped more than eight-fold to RM316.5mil, compared with only RM33.9mil in Q4 2009, while full year earnings doubled and hit RM1.1bil, driven by strong passenger numbers and yields. This was despite the increase in fuel costs, after the average fuel prices surged 35% year-on-year (y-o-y) to US$92 per barrel in 2010.

 

MAS, on the other hand, could not effectively avert the effects of higher fuel prices. The company saw its net profit for Q4 2010 fell 65% y-o-y to RM226mil, on account of higher fuel costs, which rose 13% y-o-y, as well as other operational costs such as sales and commission expenses. Its full-year earnings of RM234.5mil were in line with management's guidance.

 

During the quarter in review, AirAsia carried one billion more passengers than MAS. Passenger volume growth was also stronger at AirAsia, with the number growing 11.1% y-o-y and 10% quarter-on-quarter (q-o-q) to 4.44 billion in Q4, while that of MAS grew only a marginal 1.4% y-o-y and 3.9% q-o-q to 3.44 billion. In terms of passenger load factor, AirAsia's rose three percentage points to 82% in Q4, while that of MAS increased a mere 0.9 percentage point to 77.4%. AirAsia attributed its Q4 revenue growth of 32.7% y-o-y to RM1.2bil mainly to higher ancillary income and average fares, while MAS, which reported a revenue growth of 8.9% y-o-y to RM3.6bil in Q4 2010, attributed its topline growth to strong passenger traffic as well as higher fuel surcharges and average fares.

 

It was obvious that MAS' passenger business was still lagging behind AirAsia's. For instance, MAS' yield for the segment, as measured by revenue per RPK (revenue passenger kilometer), grew 5.4% y-o-y to 24.3 sen, while that of AirAsia grew 10% y-o-y to 22.3 sen.

 

Revenue per ASK (available seat per kilometer) for AirAsia in Q4 2010 stood at 18.4 sen, up 29.6% y-o-y, while MAS' stood at 18.8 sen, up 6.5% y-o-y. In terms of cost management, MAS seemed to perform better. During the quarter in review, MAS' cost per ASK (including fuel) fell 3.4% y-o-y to 27.2 sen; excluding fuel, cost per ASK fell7.3% y-o-y to 17.8 sen.

 

“This is an area whereby MAS is the top performer. Revenue is volatile, but cost reduction is structural,” Maybank Investment Bank Bhd said in its report. AirAsia's cost per ASK rose 4.6% y-o-y to 11.85 sen; excluding fuel, cost per ASK rose 1.2% y-o-y to 7.31 sen.

 

The shares of both AirAsia and MAS were presently trading above their book value, of RM1.31 and RM1.05 per share respectively.

 

Yesterday, AirAsia shares closed at RM2.52, a gain of three sen, while MAS shares closed at RM1.89, a loss of three sen from last Friday.

[KK Lee 5]

It was obvious that MAS' passenger business was still lagging behind AirAsia's. For instance, MAS' yield for the segment, as measured by revenue per RPK (revenue passenger kilometer), grew 5.4% y-o-y to 24.3 sen, while that of AirAsia grew 10% y-o-y to 22.3 sen.

 

Revenue per ASK (available seat per kilometer) for AirAsia in Q4 2010 stood at 18.4 sen, up 29.6% y-o-y, while MAS' stood at 18.8 sen, up 6.5% y-o-y. In terms of cost management, MAS seemed to perform better. During the quarter in review, MAS' cost per ASK (including fuel) fell 3.4% y-o-y to 27.2 sen; excluding fuel, cost per ASK fell7.3% y-o-y to 17.8 sen.

 

“This is an area whereby MAS is the top performer. Revenue is volatile, but cost reduction is structural,” Maybank Investment Bank Bhd said in its report. AirAsia's cost per ASK rose 4.6% y-o-y to 11.85 sen; excluding fuel, cost per ASK rose 1.2% y-o-y to 7.31 sen.

 

MH CASK is graeter than RPK and RASK?!

[Mohd Azizul Ramli 2]

This is the full analyst report that The Star quoted in its article. http://research.maybank-ib.com/download.php?did=569&mid=

 

Some notes to share:

 

- Look to 2011 with optimism. 2010 was a transformation year for MAS. Much of its positive progress (record load factor, lower unit cost) had largely been overshadowed by its kitchen-sinking exercise (provisions for aircraft redelivery). We are optimistic that the worse is behind us, and that the benefits of new aircraft induction will show up in the form of better products and services at lower cost.

 

- 4Q10 net recurring loss of RM103m was lower than our RM159m profit due to higher than expected cost. Despite these satisfactory operating statistics, RASK growth lags regional peers SIA (RASK +22%) and AirAsia (RASK +21%).

 

- Based on our computation of net recurring income, MAS made a loss of RM738m, which was substantially higher than our forecast and consensus, stemming from FRS139 adjustments and fuel derivative unwinding.

 

- Cashflow underpins optimism. 4Q10 cashflow of RM249m (+24% YoY; 34% QoQ) indicates that things are better than what the P&L suggests. We suspect a lot of cost items were loaded in 2010’s financials to make it easy on 2011 – close scrutiny of annual report will affirm this. Nonetheless, the cashflow confirms MAS is churning cash and should be able to navigate the higher oil price environment.

 

- Yields struggling to get “there”. MAS’ yield growth for the quarter was 5.4% YoY, which is lower than our estimate for 7% YoY. It is obvious that MAS is lagging its peers, namely AirAsia and SIA. To recap, MAS has a new yield management team and it appears their primary focus is to obtain high load factors first, and then to be followed up later with yield gains.

 

- Most of the cost items were in line, with the exception of higher staff cost (due to higher bonus and 5%-7% wage inflation). Secondly, “other” cost was surprisingly higher, by RM100 more. “Other” cost is very volatile over the quarter and is proving to be an impossible variable to uncover. We will get clarity on these items pending a company visit.

 

- New aircraft. A total of nine aircraft (4 Boeing 737-800 and 5 Airbus A330-300) will be inducted in 2011. These aircraft will provide 8%-12% unit seat cost improvement against its predecessor. In addition, these new aircraft will be fitted with significantly better seats and in-flight entertainment system. We are hopeful that these overdue service enhancements will boost demand and help push for higher yields.

 

- New revenue management system (RMS). A new RMS is in place, purportedly more powerful and sophisticated fuzzy logic and is said to potentially provide 1.5% revenue enhancement, but for which we would rather adopt a wait-and-see attitude. We have factored in a yield increase of 5% in 2011, based on historical observation of yield increase in the growth stage of an aviation up-cycle.

 

- Marketing overdrive. MAS is on a marketing and advertising frenzy – something it lacked miserably in the past. Management has approved a significantly higher budget for brand-building and promotional activities. We are positive on this development as we have been highlighting this as MAS’ crucial weakness. Our initial view based on the recent MAS adverts is positive: corporate colour is consistent, adverts are memorable and the brand personality is depicted every time.

 

- MAS to join One World Alliance. This is our guess; management remains tight lipped about it. We are of the view that it is imperative for MAS to join an airline alliance as quickly as possible. This is the fastest way for MAS to expand its geographical reach and capture premium class passengers. We are of the view that code-sharing agreements between airlines (like that of MAS with KLM) are less effective as the branding prominence is not exalted and it very often that your partner airline is half-hearted in making promotions.

 

- 2011 Growth Assumption Rates

Year on year growth 2010A 2011F ∆ (%)

Passengers carried (m) 13,112 14,161 +8.0%

Analysts are positive towards MH. At RM 1.9 billion, MH has more cash than AK (RM 1.5 billion). The aircraft delivery is clearly without the 2 A332F for MASkargo (since MASkargo is a public listed unit, the analyst will review the entity separately from MH). The bit about One World is unassuring to me. It could be just a point blank guess by the analyst? Passenger numbers are expected to grow by 8% to 14,161,000 passengers in 2011.

[N Azman 0]

I think the analyst just simply missed out mentioning the freighters. maskargo is not a public listed unit.

 

good things observed from the quote above, but nonetheless i think most analyst still have a hold/sell recommendation.

[Mohd Azizul Ramli 2]

Sorry, I stand corrected. MASkargo is a Sendirian Berhad unit.

[Mohd Suhaimi Fariz 2]

The analysts predict MH to join Oneworld? Interesting.

[Mohd Azizul Ramli 2]

A friend of mine just forwarded an analyst report from another investment house, RHB Research Institute.

 

Here are some pointers from the report:

 

- MAS has only hedged forward 25% of its FY12/11 fuel requirement at US$88/bbl WTI. For every US$1/bbl increase in jet fuel cost (vis-à-vis our assumption of US$95/bbl), MAS’s FY12/11 net profit will be eroded by 7%.

 

- The better yields will be driven by MAS’s ability to roll out higheryielding product offering, targeted predominantly at the front end, with more new aircraft equipped with more advanced in-flight facilities coming into the system. Recall, under MAS’s fleet renewal programme, it will gradually phase out its existing leased older generation B747-400, A330-200, B737-400, and used new generation A330-300 and B737-800 aircraft, replacing them with new generation A380-800 and brand new A330-300 and B737-800 aircraft (see Table 2).

 

- In addition, various operational initiatives will also be put in place to boost yields including:

(1) The migration to a new Origin & Destination (O&D) revenue management system;

(2) Re-positioning of its regional managers to Kuala Lumpur to enhance their involvement in MAS’s transformation programme;

(3) The distribution among MAS ticket offices around the world of flight seats via a “bidding” process vis-à-vis fixed allocation previously (for instance, if the London office is confident about selling more tickets at higher prices of a particular KL-London flight, it should bid for more seats in the flight as compared with the KL office); and

(4) Beefing up the medium haul sectors (largely regional, 7-8 hour flights) that command the highest yields, as compared with the long-haul and domestic sectors.

 

- MAS reiterated that it has no plan for another cash call over the next 1-2 years as a strong balance sheet, positive operating cashflow, coupled with the availability of options to lease and/or enter into sale-and-lease-back agreements should take care of the funding of its massive new aircraft delivery. Recall, MAS intends to at least own and lease one-third each of the aircraft, leaving the own-lease option open for now for the remaining one-third, depending on its future financial positions. Based on our estimate, assuming a 30% discount to the catalogue prices, the aircraft orders carry a total cost of RM16.4bn (see Table 3).

Table 2 in particular is very interesting. It shows that MH will phase out almost ALL of its current aircrafts by 2015, which includes 6 B744s, 3 A332s, 11 A333s and 37 B734s. The B744 number raised so much questions on my mind. So MH only need 6 B744s under its current network, which means all these while we have 4 idle B744s. The old A333 number is incorrect as we all know that MH only have 9 of such aircrafts in its current fleet.

 

Table 3 shows the delivery schedule, as follows:

 

2010 - 3 B738 (MXA, MXB, MXC). This one is ticked off.

2011 - 4 B738, 5 A333, 2 A332F.

2012 - 7 B738, 3 A333, 2 A332F, 5 A380.

2013 - 12 B738, 3 A333, 1 A380.

2014 - 9 B738, 3 A333.

2015 - 1 A333.

 

MH has 10 options for the A333 and 20 options for the B738.

[Mohd Suhaimi Fariz 2]

Table 2 in particular is very interesting. It shows that MH will phase out almost ALL of its current aircrafts by 2015, which includes 6 B744s, 3 A332s, 11 A333s and 37 B734s. The B744 number raised so much questions on my mind. So MH only need 6 B744s under its current network, which means all these while we have 4 idle B744s. The old A333 number is incorrect as we all know that MH only have 9 of such aircrafts in its current fleet.

 

IIRC, MH managed to transfer ownership on several 744 back to them, plus several 777. Can't remember the exact amount.

 

But I don't understand how you got the 4 idle 744 from?

[Mohd Azizul Ramli 2]

IIRC, MH managed to transfer ownership on several 744 back to them, plus several 777. Can't remember the exact amount.

 

But I don't understand how you got the 4 idle 744 from?

No. The aircrafts that MH purchased back from PMB are 9M-MPR, MPS (both are B744F) and MRP and MRQ (2 of the youngest B772s).

 

Well, it is a well known fact that MH only have 10 B744s at the moment. If the RHB report is true that MH only use 6 B744s in its current operation, then there'll be 4 idle B744s (10-6). One of these 4 is of course MPQ, which is primarily used for Charter. MPQ could not be used on normal operation because the aircraft does not have a J cabin.