MAS likely to incur hefty loss for financial year 2011

[alberttky 0]

PETALING JAYA: Analysts are expecting Malaysia Airlines (MAS) to incur a hefty loss for the financial year ended Dec 31, 2011 (FY11), which consensus estimates have pegged at RM1.21bil, when it announces its results this week.

 

Loss per share is expected to be 37 sen, while revenue could come in at some RM13.86bil. MAS was set to release its fourth-quarter results either today or tomorrow, analysts said.

 

However, in the longer term, analysts are predicting its loss per share to narrow to seven sen and net loss to RM221.17mil in FY12, based on Bloomberg data.

 

MAS posted a net loss of RM1.24bil in the nine months ended Sept 30, 2011 versus a net profit of RM8.55mil a year earlier. At the time, its cash and cash equivalents dwindled to RM968.5mil from RM1.92bil previously.

 

The national flag carrier was dented by higher fuel costs and derivative and foreign exchange losses, causing its revenue to shrink to RM10.2bil from RM9.9bil in the previous corresponding period.

 

Last August, MAS unveiled a share swap with long-time rival AirAsia Bhd, resulting in the low-cost carrier’s parent Tune Air Sdn Bhd taking a 20.5% stake in MAS, and Khazanah Nasional Bhd a 10% interest in AirAsia.

 

Both airlines also signed a comprehensive collaborative framework agreement to cooperate on areas such as maintenance, repair and overhaul, cargo handling, in-flight catering and crew training.

 

The move was swiftly followed by a round of new management appointments and axing of unprofitable routes including Johannesburg, Cape Town, Dubai, Langkawi-Penang-Singapore and four routes from Kota Kinabalu.

 

Under its turnaround plan, MAS aims to improve group profitability by RM1.1bil to RM1.5bil and break even in 2012. One of the ways it will do is by cutting a net 12% off its available seat kilometre.

 

A bank-backed analyst told StarBiz that significant losses would be unavoidable for FY11, given the weak demand in international air travel, MAS’ still high-cost structure and unrelenting stiff competition from other airlines.

 

He added that the collaboration with AirAsia had yet to receive a buy-in from its staff, which number around 21,000. “It can be tough-going to implement reforms without the full cooperation of the employees.”

 

Asked if MAS’ actions since the turnaround plan came into effect were convincing so far, the analyst said it was too early to tell, but added that he did not have high hopes for a lasting recovery based on the airlines’ history.

 

Another factor that would weigh down MAS’ earnings in 2011 is the high cost of jet fuel.

 

“The high fuel price operating environment remains stubbornly intact. The jet kerosene fuel price is consistently above US$120 per barrel since the beginning of FY11.

 

“Based on IATA’s (International Air Transport Association) estimation, the fuel price will eventually drop, albeit rather low at average cost of US$113.1 per barrel. Thus, we estimate MAS’ fuel cost to be 36% of operating expense in FY12 as opposed to the expected 40% in FY11,” MIDF Research said in a report.

 

http://biz.thestar.com.my/news/story.asp?file=/2012/2/28/business/10816523&sec=business

[Mohd Azizul Ramli 2]

Quite a badly written and edited article from The Star. This is what happened if journalists other than BK Sidhu is given the aviation related material.

 

The national flag carrier was dented by higher fuel costs and derivative and foreign exchange losses, causing its revenue to shrink to RM10.2bil from RM9.9bil in the previous corresponding period.

 

The move was swiftly followed by a round of new management appointments and axing of unprofitable routes including Johannesburg, Cape Town, Dubai, Langkawi-Penang-Singapore and four routes from Kota Kinabalu.

 

Under its turnaround plan, MAS aims to improve group profitability by RM1.1bil to RM1.5bil and break even in 2012. One of the ways it will do is by cutting a net 12% off its available seat kilometre.

 

A revenue that moved from RM 9.9 bil to RM 10.2 bil is not a shrinkage. It is a good thing. Sales is improving.

 

The queen mother of all the routes that was cut is missing - Buenos Aires. And Rome too.

 

The 12% capacity trimming has been completed (that is the route cuts mentioned earlier) and not something that will be done in the future.

 

Anyway, looking forward for the figures and reports. Should be in the range of RM 1.6 - 1.7 billion losses. Would be really really surprise if it hits RM 2 billion.

[Sri Ramani K. 0]

http://www.themalaysianinsider.com/malaysia/article/mas-losses-soar-to-rm2.5b/

 

PETALING JAYA, Feb 29 — Malaysia Airlines recorded a stunning net loss of RM2.52 billion for 2011 due to high expenses, the national flag carrier said today.

The airline reported a massive net loss of RM1.28 billion in the fourth quarter, which was about as much as the first three quarters combined.

Malaysia Airlines CEO Ahmad Jauhari Yahya said that there was a 25 per cent increase in fuel expenses and a 50 per cent increase in non-fuel expenses.

“Obviously, this was a large loss,” said Ahmad.

[BC Tam 2]

Would be really really surprise if it hits RM 2 billion.

Malaysia Airlines recorded a stunning net loss of RM2.52 billion

Well, it is often said that life is full of surprises

 

 

"Obviously, this was a large loss,” said Ahmad.

Mr statement of the obvious (for the hour at least I reckon)

[flee 5]

Bursa Malaysia Filing: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/DE0599CFF9D69172482579B300343353/$File/Bursa%20MAS%20Q4%202011%20%5Blatest%20final-BODapproval%5D.pdf

[Mushrif A 3]

Given that losses are expected anyway, was the opportunity exploited to get any major write-offs done & over with - so that the new management can start on a clean slate? (& look good in the process with increased performance in succeeding quarters, given the now low base that it is starting with)

[Mushrif A 3]

Given that losses are expected anyway, was the opportunity exploited to get any major write-offs done & over with - so that the new management can start on a clean slate? (& look good in the process with increased performance in succeeding quarters, given the now low base that it is starting with)

 

Answering my own question now having had the chance to read the announcement to the bourse;

 

" Non-fuel cost was higher by 71% or RM1,240 million due to one off provisions for impairment and obsolescence of engineering spares of RM179 million, provision for aircraft redelivery cost of RM602 million, and impairment of aircraft of RM224 million."

[flee 5]

Malaysia Airlines Records Net Loss Of RM2.52 Bln In 2011

 

PETALING JAYA, Feb 29 (Bernama) -- Malaysian Airline System Bhd (MAS) recorded a net loss of RM2.52 billion, on the back of RM13.9 billion in revenue, for the financial year ended Dec 31, 2011.

 

For the fourth quarter, the national carrier recorded RM1.28 billion in net loss, on a turnover of RM3.68 billion, said group chief executive officer Ahmad Jauhari Yahya.

 

He said the bottom-line group losses for 2011 underscored the imperative need for the airline to immediately adopt strong measures to stop the "bleeding".

 

"These includes staff redeployment, increasing productivity and efficiency, relentless cost control and making further reviews.

 

"We are also implementing an aggressive sales and marketing strategy," he told a press conference here today.

 

Ahmad Jauhari said the group's full year performance was severely impacted by a 21 per cent increase in expenditure of RM16.2 billion, from RM13.41 billion in 2010, previously.

 

He said the higher expenditure was due to a 33 per cent increase in fuel cost of RM5.85 billion and a 15 per cent increase in non-fuel expense of RM10.43 billion.

 

The rise in non-fuel expense was mainly due to provisions totalling RM1.09 billion made in the fourth quarter for stock obsolescence, redelivery of aircraft and impairment of freighter aircraft.

 

Ahmad Jauhari said the accounts for the year under review recognised provisions and escalating operational costs which, although painful, provided a holistic snapshot of the organisation and full knowledge of the company's actual position.

 

For the full year, Malaysia Airlines saw capacity (available seat per kilometre) increase seven per cent, passenger traffic up five per cent but lower seat factor reducing to 75 per cent.

 

He said revenue and average fares across all classes showed improvement throughout the year, particularly in the front-end cabins.

 

However, there was an overall drop in seat factor as the airline strived for better yields.

 

On a regional performance basis, the domestic and short-haul, intra-Asean services continued to be key markets for the company, with these segments reporting positive growth on a quarterly, as well as, on a year to-date basis, he added.

 

Meanwhile, the cargo division suffered in line with an overall slowdown of the industry, globally.

 

Revenue dropped 14 per cent, capacity decreased nine per cent while yield increased two per cent.

 

Ahmad Jauhari also said MASkargo recorded a loss before tax of RM19 million in 2011 compared with a profit of RM141 million in the previous year due to higher fuel costs and impairment of its A330 freighter fleet.

[Ashraf 0]

MH can consider themselves lucky as the actual fuel cost increase was in the last 1 month, after their FY ended. At that time jet fuel was @ USD100 per barrel, while it is USD140 per barrel last week.

 

So can you imagine how much more losses they are incurring in the first quarter this year?

[BC Tam 2]

..... and impairment of its A330 freighter fleet.

What happened ?

So soon ?

[Mohd Suhaimi Fariz 2]

What happened ?

So soon ?

 

I think it's a write down of the value of the A330F - since Airbus just introduced the A330P2F.

[sweekee 0]

Not just Malaysia Airline.Totally,I disappointed to this country full of corruption,bureaucratic,incompetence.

How can they loss 1.28billion in 90days?average 14 million loss per day.Where's the money gone?

Every time their excuse is expenditure increased in fuel cost.Come on,the other national airline around us also faces the same problem but they can make tonnes of money every year.

Now the FY13 will profitable heard likes a joke.

We love this country but we don't want leave the debt to our son and grandson

[Mohd Suhaimi Fariz 2]

How can they loss 1.28billion in 90days?average 14 million loss per day.Where's the money gone?

 

The majority of the money's gone here - "The non-cash items include RM179mil of stock obsolescence (mostly spares for the B737 aircraft), RM602mil for re-delivery of aircraft (it will return 52 of its leased aircraft and will incur some cost in making sure they are in pre-delivery condition), and RM314mil impairment of freighter aircraft (adjusting the freighters to current market value)."

 

And correct me if I'm wrong, but the freigther impairment is a paper loss rather than true loss right?

Edited March 1, 2012 by Mohd Suhaimi Fariz

[Mushrif A 3]

The majority of the money's gone here - "The non-cash items include RM179mil of stock obsolescence (mostly spares for the B737 aircraft), RM602mil for re-delivery of aircraft (it will return 52 of its leased aircraft and will incur some cost in making sure they are in pre-delivery condition), and RM314mil impairment of freighter aircraft (adjusting the freighters to current market value)."

 

And correct me if I'm wrong, but the freigther impairment is a paper loss rather than true loss right?

 

You yourself quoted "[...] non-cash items [...]", which means that's an accounting loss, not a lose arising from MH doing a cash payment/ outflow.

[Mohd Suhaimi Fariz 2]

You yourself quoted "[...] non-cash items [...]", which means that's an accounting loss, not a lose arising from MH doing a cash payment/ outflow.

 

I assume that was just for the freighter value.

 

Accounting can by very tricky - guess that's why they're paid the big bucks!

[Radzi 2]

Accountants can be very creative, and very likely profit and loss can be made as suited to the condition.

 

Otherwise losing RM14 million a day is hard to believe, even if flying with totally empty aircraft.

[flee 5]

MAS PowerPoint presso: http://malaysiaairlines.listedcompany.com/newsroom/Presentation_Q411_Final_29_Feb_12.pdf

 

MAS Press Release: http://ir.chartnexus.com/mas/doc/media/3Q11_Media.pdf

[leon t 0]

MH cannot use high fuel cost as its major reason for its ridiculously multi-billion losses - bec other regional airlines like SQ, Thai and even CX made profits and their manpower costs are much higher tham MH. And its no suprise if MH losses money but its only how much is the quantum loss; and its be a suprise if MH does make a small profit without selling its assets.

There must be some "other factors" for its huge Multi-BILLION losses - and it be worse when its A380s are in service as it will be hard to sell seats without heavy discounting and maintenance just for 6 such aircrafts.

[Mushrif A 3]

MH cannot use high fuel cost as its major reason for its ridiculously multi-billion losses - bec other regional airlines like SQ, Thai and even CX made profits and their manpower costs are much higher tham MH. And its no suprise if MH losses money but its only how much is the quantum loss; and its be a suprise if MH does make a small profit without selling its assets.

There must be some "other factors" for its huge Multi-BILLION losses - and it be worse when its A380s are in service as it will be hard to sell seats without heavy discounting and maintenance just for 6 such aircrafts.

 

(1) The one-off negatives alone are about RM1.2bn and this is not cash outflow.

(2) And yields are poor on MH compared to SQ et al, as it has poor hardware etc and MH knows very well on how to alienate premium pax. So, with high op costs, it should charge higher fares, but couldnt as real pax (meaning non-GLC staff who are not forced to fly MH) wont bite.

So those are your two major reasons.

 

I believe it is a tactical move by the new management to enable it to start on a clean slate and get rid of all bad news today, as it has been anounced months back to all & sundry that MH is faring badly. See the last biz plan.

[BC Tam 2]

Anyone care to dig out info on fuel hedging (paper) gains/losses for FY2011 ?

I remember this once contributed much towards the oscillations in fortunes during the quarters

But somehow at year end reporting, issue seem to have been quietly sidelined - more pressing matters to feed te headlines I suppose

[flee 5]

MAS writes down value of A330Fs, blames P2F programme

 

Malaysia Airlines (MAS) has been forced to write down the value of its Airbus A330-200 freighters, blaming the airframer's recent decision to launch a passenger-to-freighter conversion programme for the type.

 

The carrier's MASkargo division will take delivery of the last of four new-build freighters this year, dating from a 2010 order. It also operates a pair of Boeing 747-400 Freighters.

 

However, in its full-year results for 2011, MAS booked an impairment charge of M$314 million ($104.8 million) against the value of the aircraft, citing losses in the cargo operation and the conversion programme which it said will "depress the value of new freighters".

 

Revenue at MASkargo fell by 14% in 2011, leading to a pre-tax loss of M$19 million, compared with a M$141 million profit in 2010.

 

MAS also plans to significantly reduce the size of its fleet by 2014, taking it from the current figure of 91 aircraft down to 80.

 

This will involve the return of some 58 older airframes to lessors, with the majority of these leaving MAS's fleet in 2012, it said.

 

Fleet reductions will focus on the "older uneconomical 18- to 19-year-old aircraft", it said. According to Flightglobal's Ascend Online database, the bulk of these are 737-400s, with it operating 33 of the narrowbodies built prior to 1995. Just three of its 36 737-400s were manufactured after this date.

 

Depending on when the older types are phased out, it could leave the carrier with as few as 33 of its current fleet this year.

 

Total cost of the retirements will be M$1.03 billion, with a charge of M$602 million booked in 2011's accounts. A further write-down on the value of aircraft spares cost it an additional M$179 million.

 

Meanwhile in 2012 MAS will receive 23 new aircraft, it said. According to Ascend this includes two A330Fs, eight 737-800s, three ATR 72-500s, four A330-300s and five A380s, with one as-yet unknown, from a total backlog of 60 at the start of 2012.

 

By 2014 the average age of its fleet will have been cut to 7.7 years, it said.

 

Source: http://www.flightglo...ogramme-368956/

Edited March 1, 2012 by flee

[Josh T 0]

That is a big loss! I do agree, though, that that figure has been inflated to write off as much as they can since they've been prepping the media for a big loss anyway. Smart thinking actually...

[alberttky 0]

What does it take to turn MAS around?

 

 

IT is about time Malaysia Airlines (MAS) is sold, and some have even suggested that it be sold for a ringgit.

Those who love MAS will fight tooth and nail to keep it but the reality is, selling it may just be an option to hopefully end its woes.

A decade ago, Tan Sri Tony Fernandes and his buddy Datuk Kamarudin Meranun paid a ringgit to buy AirAsia, which had two aircraft. They also took on RM40mil of the debts.

After seven months of operations, AirAsia managed to repay all its debts and made a profit of RM19.4mil.

That is history, but today, AirAsia has over 100 aircraft, operations in Thailand and Indonesia, and these two companies are slated for a listing this year. Japan, Philippines and even the Middle East are AirAsia's playgrounds and its cost is the lowest in the world because it is run by two entrepreneurs who are constantly thinking of how to rev up profits.

That is what MAS needs, not just cuts.

MAS has been through enough shake-ups, cost cuts and route cuts to be profitable but yet it falls into the red. The question is, will all the cuts this time around save the airline?

Will MAS be profitable and how profitable can it get?

On Thursday, MAS again shocked the market with a RM2.5bil net loss for full year 2011 and some of its own employees were dumbfounded with the figure.

The loss included a RM1.09bil provision, which was a non-cash item.

If you strip out the provision, the actual loss is about RM1.4bil. The provision is an accounting treatment which some analysts refer to as “kitchen sinking.''

Whether that kind of provision is necessary is up to the new team. But by so doing, it is taking the hit all at one go, so that when things improve, it can show profit. Whatever, they should know what they are doing.

Coming back to the point of selling the airline - of course there is also the contratrian view, since the airline was privatised before and had to rescued by the Government a decade ago. So why sell again?

The issue here is about positioning and for now MAS is often referred to by players as a second tier premium carrier whilst rival Singapore Airlines (SIA) is the first tier, and best in class.

The question ahead is also about survival in a highly competitive climate where even the biggest of players are merging and forming alliances and some have gone into arming themselves with both the premium and low cost suite of services to serve different market segments.

Take the example of SIA, it has both the low cost and premium products via its units, so has Thai Airways International, ANA, Qantas and even Japan Airlines.

SIA offers short/long haul premium services, value via Silk Air, short haul low cost via Tiger Airways and soon, long haul low cost via Scoot.

The share swap between MAS and AirAsia owners does limit competition and the collaboration is supposed to help the airlines work on many areas but it is nothing like having one big company that serves all market segments like SIA.

And how many more restructuring MAS needs to ensure it does not slip off route again.

We should be open about letting entrepreneurs run the show.

For a long time, MAS and Proton were two companies with big problems and were bleeding as they were seen to be “not competitive enough.''

After much resistance, the Government has finally sold Proton to DRB-Hicom, and now it is up to DRB-Hicom to prove that Proton is worthy of the purchase.

It also stops the possible public outcry that public funds are used to rescue companies.

Like it or not, Proton and MAS has to be run like private companies and those who call the shots should consider selling MAS.

Be it Fernandes or Kamarudin, they are in the business and MAS needs the “entrepreneurial push and mentality of making money.''

In the final analysis, we need a stronger and bigger Malaysian airline, not just a premium airline. That is food for thought.

http://biz.thestar.com.my/news/story.asp?file=/2012/3/2/business/10838955&sec=business

 

MAS eyes RM6b capital expenditure

 

 

PETALING JAYA: Malaysia Airlines (MAS) is staring at a capital expenditure (capex) of RM6bil this year and RM3.5bil for 2013 because of the aircraft deliveries that have been lined up for this year and next.

This year alone it is going to take delivery of 23 aircraft five 555-seater A380 which it will deploy for the Kangaroo route (Sydney-KL-London-KL-Sydney); 13 B737-800s and five A330-300s. MAS plans to deploy its firstA380 by July this year.

Most of these aircraft were ordered during the time of Tengku Datuk Azmil Zahruddin (previous managing director of MAS) as he had the foresight that the next generation aircraft would be more fuel-efficient. These new birds will reduce the fuel bill by at least 10%.

The average fleet age of the aircraft that MAS is using for its operations currently is 12.2 years but, with these new additions, the average fleet age will fall to 7.7 years, making it an airline with one of the most modern fleets in the region.

On Wednesday, MAS' new management told analysts that it would spend RM6bil in capex for this year for 23 aircraft deliveries and was looking at several options to fund the capex.

It now has RM1.1bil in its coffers, which is less than the RM2.2bil it had a year ago, and the current cash levels are insufficient for the capex it has planned out for the year.

“We think MAS will try to do sale and leasebacks (SLB) as the market demand is still good. But SLB is highly reliant on the liquidity level in the European and US financial institutions. The second option is of course for MAS to make balance sheet purchase, but we understand the current target capital ratio for aircraft financing is 30:70 (equity:debt),” an analyst with Maybank Investment Bank said in his report.

“MAS only has RM1.1bil in cash, which is only sufficient to cover 50% of its 2012 needs. Management gives the impression that it will resist raising new equity and spur liquidity via other means but we rate the probability of an equity raising happening at 70%.''

The new MAS team is giving itself 60 days to come up with a plan to strengthen its balance sheet so that it can get the funding it needs for the planes.

Analysts are looking at its gearing level surpassing the current 4.4x as MAS seeks more funding for its capex.

After reporting a RM2.5bil net loss for the full year ending Dec 31, 2011 on Wednesday which grabbed headlines globally, analysts are worried that the first and second quarters of 2012 will also be tough for the airline given the rise in jet fuel prices.

Jet fuel is already hovering around US$135 a barrel and AmResearch in its note said “our current projections already assume jet fuel to average at circa US$130/barrel. And every US$1 increase will reduce earnings by 9%.''

MAS had a disappointing fourth quarter in 2011 where its net loss was RM231mil as opposed to a net profit of RM60mil a year earlier.

“The core operating results were poor for the the fourth quarter and while yields rose 9% year-on-year, the main drag came from a sharp drop in the load factor to 72.5%, reflecting MAS' weak pricing power,'' said AmResearch.

It is no surprise that after the disappointing results there were no “buy” calls on the stock. Of the 18 houses, only five had “hold” calls and 13 calling a “sell” on the stock according to data compiled by Bloomberg. Yesterday MAS shares shed 5 sen to close at RM1.38.

AmResearch told investors in its note to opt for AirAsia instead of MAS while Kenanga Research said it was “cautious on MAS' future financial performance'' at this juncture as it saw more downside in MAS bottomline in the near term. They have a target price of RM1.05 a share while analysts consensus compiled by Bloomberg believe the target price is RM1.20 a share.

“We think MAS will barely break even in 2012 and we lower our core net profit forecast to RM5mil from RM78mil,'' Kenanga added.

http://biz.thestar.com.my/news/story.asp?file=/2012/3/2/business/10841119&sec=business

[JuliusWong 0]

They WILL NEVER LEARN!! They basically blame everything and everyone else...from A330 P2F conversion program, the high oil prices, yadayada...but they never blame themselves for not being business savvy enough. Why bother to write down the value of A330F when it is not 100% sure Airbus will proceed with the program. (Note that Airbus pulled the plug on A320P2F program after it discovered that A320P2F will depress the value of A320 family.)

 

It is rather sad to see our national airline, one to be proud off, in deep red again and again. Their profitable year is short-lived, the management always get changed after they record a substantial amount of profit.......Perhaps they should publish a commemorative book in upcoming anniversary titled;" MAS: How we screwed continuously since 1972 and blame others." :diablo:

[BC Tam 2]

The suspicious sceptic in me feel there is more to this than innocent accounting window dressing to allow for an easier KPI run for the new management

 

Viewed in same light as the already stated intention to splinter up into long haul premium, regional premium, Firefly, MasWings, etc, one can't help but suspect things are being positioned for the profitable bits of the MH group to be cannibalized in near future - the 'social obligation' parts can be placed back on gahmen's lap

Bear in mind too that the red one already has one foot in the door - first attempt did not work out, learn from that exercise and try again And dropping those long haul routes all of a sudden despite the very rosy outlook that was painted not too long ago ?

 

Also telling is the manner the QF collaboration is being dragged on for such a long time - could it be the Australians know something we are not supposed to know ?

 

I hope to be proven wrong in time to come