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Johan Z

4Q 2013 Financial Results for MH, AK and D7

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1. Statement From MAS Group CEO

  • To remove its 10 remaining B734 aircraft, which will be phased out by the middle of the year.
  • MAS will also retire two B777s by middle of the year and the remaining 13 by 2018, which will enable it to have a younger fleet with an average age of three years.
  • "We will also not be axing any more routes after Los Angeles."

Resources from http://www.btimes.com.my/Current_News/BTIMES/articles/20140219003254/Article/index_html

 

 

 

2. Maybank Investment Bank Research

  • MAS is reducing its wide-body fleet by two aircraft in 2014 and zero growth in 2015. This means that MAS will have to cut one-to-two long-haul flights from its network.

Resources from http://www.thestar.com.my/Business/Business-News/2014/02/18/MAS-forecast-to-post-core-net-loss-of-RM101bil-for-FY13/

 

 

 

Very2 interesting...!!! huhuhu

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  • "We will also not be axing any more routes after Los Angeles."

 

That's good to hear. Once they axe too many long-haul routes, they will lose the connecting traffic.

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CEO still blaming high fuelprices and forexfor its losses?? Arent all profitable airlines also paying for the same fuel price all over the world - but why is it that they still can remain profitable and even using older planes like the 772s ie SIA, BA and CX? And altho MH says its not cutting back destination after LAX, but its Not cutting back its staff too as its labour unions are too strong and political - even MH cant even suspend its cabin crew over their faults!

From a S'por press report MH have 101planes - more than half are narro single aisle planes and a staff strength of 19,400 whilst SQ have 102 big twin twin aisle planes, and CX with 140 planes with staff strength of about the same - But in terms of productivity MH staff generated half the revenue of SQ and CX the most productive at almost triple the amt generated by MH staff.

So what does that they you - simply that MH is too overburdened with staff and that their staff are only producing half that of SQ and hence that of most other major airlines.

 

Its better to shut down the whole bleeding MH now - and have a completely new privitalised and with minimal political airline from ero ground up and takes its place.

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Don't underestimate Forex losses - US$ was only about RM 2.95 a while ago but last year, RM depreciated a lot and now it is around RM 3.30-3.35. Oil is priced in US$ and if it goes up, it is a double whammy for MH. SQ is fortunate that the S$ is strong - so they are not so badly affected. Same goes for CX as HK$ is pegged to US$.

 

Yes, MH needs to do more about its staff productivity and crony contracts. These are factors they can control whereas Forex and oil prices are out of their control.

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CEO still blaming high fuelprices and forexfor its losses?? Arent all profitable airlines also paying for the same fuel price all over the world - but why is it that they still can remain profitable and even using older planes like the 772s ie SIA, BA and CX? And altho MH says its not cutting back destination after LAX, but its Not cutting back its staff too as its labour unions are too strong and political - even MH cant even suspend its cabin crew over their faults!

From a S'por press report MH have 101planes - more than half are narro single aisle planes and a staff strength of 19,400 whilst SQ have 102 big twin twin aisle planes, and CX with 140 planes with staff strength of about the same - But in terms of productivity MH staff generated half the revenue of SQ and CX the most productive at almost triple the amt generated by MH staff.

So what does that they you - simply that MH is too overburdened with staff and that their staff are only producing half that of SQ and hence that of most other major airlines.

 

Its better to shut down the whole bleeding MH now - and have a completely new privitalised and with minimal political airline from ero ground up and takes its place.

Believe everyone in the industry is aware of over staffed issue and it is inconceivable for them to kill the goose that lays golden eggs.

 

Don't underestimate Forex losses - US$ was only about RM 2.95 a while ago but last year, RM depreciated a lot and now it is around RM 3.30-3.35. Oil is priced in US$ and if it goes up, it is a double whammy for MH. SQ is fortunate that the S$ is strong - so they are not so badly affected. Same goes for CX as HK$ is pegged to US$.

 

Yes, MH needs to do more about its staff productivity and crony contracts. These are factors they can control whereas Forex and oil prices are out of their control.

Unless over half of MH revenue is in RM else depreciating RM should be a beneficiary.

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Unless over half of MH revenue is in RM else depreciating RM should be a beneficiary.

From The Star:

For the whole of 2013, MAS revenue per available seat kilometre (RASK), which is a measure of income per seat, is 23.5 sen while its cost per available seat kilometre (CASK) is 24.7 sen.

 

MH's cost is higher than revenue, so Forex and Oil Prices plays a highly significant part in its financials.

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CEO still blaming high fuelprices and forexfor its losses?? Arent all profitable airlines also paying for the same fuel price all over the world - but why is it that they still can remain profitable and even using older planes like the 772s ie SIA, BA and CX? And altho MH says its not cutting back destination after LAX, but its Not cutting back its staff too as its labour unions are too strong and political - even MH cant even suspend its cabin crew over their faults!

From a S'por press report MH have 101planes - more than half are narro single aisle planes and a staff strength of 19,400 whilst SQ have 102 big twin twin aisle planes, and CX with 140 planes with staff strength of about the same - But in terms of productivity MH staff generated half the revenue of SQ and CX the most productive at almost triple the amt generated by MH staff.

So what does that they you - simply that MH is too overburdened with staff and that their staff are only producing half that of SQ and hence that of most other major airlines.

 

Its better to shut down the whole bleeding MH now - and have a completely new privitalised and with minimal political airline from ero ground up and takes its place.

 

Do agree that MH is overstaffed to a certain extent, however by using a comparison with SQ and CX may not be accurate as those two airlines does not have a domestic network to maintain.

 

eg, SQ's ground handling is handled by SATS and as such those staff nos are not included into SQ's headcount. Most overseas stations are handled by third party ground handlers..

 

In MH's case, staff need to be employed to man local stations .. and we have many. One possible solution would be for MH to create a separate entity for ground services.. however that would be merely transferring these employees from one entity to another,.. under the same group. Not sure how much they can save from that except to make the headcount figures look better.

 

Another point is narrow body aircraft operate multiple sectors per day whereas wide bodies normally average 2/3 sectors max. An aircraft that operates 8 sectors KUL/PEN/KUL would definitely require more manpower than say a flight from SIN to LON/ HKG to FRA.

 

I think MH's problems are not that simple .. it goes far beyond the company itself. All Malaysian GLC's suffer the same problems, only that most of these GLCs are protected some what due to a monopolised market, or due to huge govt procurement contracts.. As for MH, it is probably the only GLC that is competing with the rest of the world on an equal basis...

 

Shutting down the company and starting anew will not solve the problem, if the rest of the country is still 'business as usual'. The root issues have to be addressed first..

 

My 2 sen...

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That's good to hear. Once they axe too many long-haul routes, they will lose the connecting traffic.

AJ earlier said they will be back in the black, and made many other promises....so I won't be surprised if more routes will be axed.

 

As a lost making airline, if you keep losing more money, you would need to do all possible to curtail losses....so it is very premature for him to make this sort of decisions.

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As have mentioned - "2013, MAS revenue per available seat kilometre (RASK), which is a measure of income per seat, is 23.5 sen while its cost per available seat kilometre (CASK) is 24.7 sen" which meant that MH costs already exceed its yields. Even if MH create a separate entity for its ground services like SQ, am sure this will also lose money - unlikeSQ's SATS which have been very profitable. Can MH follow the same and engage 3rd party for its overseas bases - which I believe they do too. Well if all Malaysian GLCs suffers from the same problems as MH - then something is still very wrong - as compared to SIN GLCs which are making even billions profits/returns.

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AJ earlier said they will be back in the black, and made many other promises....so I won't be surprised if more routes will be axed.

 

As a lost making airline, if you keep losing more money, you would need to do all possible to curtail losses....so it is very premature for him to make this sort of decisions.

 

I think MH international routes from secondary hub (read - BKI) would probably be affected too (again). Then, Mr. Tony will probably have very strong justified reasons to push MAHB to fulfil his demands!

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Our good friend up north also will also chalk up a net loss of about THB12 billion baht (USD$368 million) for the year, with 2014 having the same outlook.

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Our good friend up north also will also chalk up a net loss of about THB12 billion baht (USD$368 million) for the year, with 2014 having the same outlook.

 

With the state of the politics up there, I am not surprised!

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Since MH is adopting LCC like business tactics, they might want to consider another one - park some of their aircraft to reduce capacity at off peak times. Not much point in flying them if every km flown results in losses.

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web.jpg

 

AirAsia X posts pre-tax loss of RM212.98mil for FY13

 

KUALA LUMPUR: AirAsia X Bhd recorded a pre-tax loss of RM212.98 million for the financial year ended Dec 31, 2013, from a pre-tax profit of RM38.01 million in the 2012 financial year.

It said on Tuesday revenue, however, rose to RM2.31bil from RM1.97bil.
For the fourth quarter, the long-haul, low-fare affiliate of the AirAsia Group posted a pre-tax loss of RM170.39mil on the back of RM679.59mil in revenue.

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Malindo, we won't know unless there is internal leak...


Most of the D7 loss is attributable to Forex - our RM is very weak....

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Art,

If you had read the financials, D7's operational performance is actually an improvement over the previous year's. About RM 176.2m was attributed to Forex losses. it still had operating profit of RM 35m. Most of the Forex losses (RM 112.4m) took place in Q4, when the RM plunged.

 

Other non-cash flow items like depreciation increased due to a bigger fleet of aircraft. However, the klia2 delays meant that they cannot expand as fast as the increased fleet allows.

 

As far as I can see (I am still digesting the financials), D7 is still in good shape but need the RM to be stronger. With fuel and loans denominated in US$, a weak RM will hurt them badly.

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