Malaysia Airlines posts Q2

[Andrew K 0]

27 Aug, 2007

Malaysia Airlines posts Q2 net profit of RM113 million

 

Subang (27 August 2007): Malaysia Airlines reported a net profit of RM113 million for the second quarter ended 30 June 2007, improving its performance by RM290 million from RM177 million in losses a year earlier.

 

This marks the airline’s 4th successive quarter of net profit since the launch of its Business Turnaround Plan (BTP) in February 2006, and tracks well for Malaysia Airlines to achieve its stretch profit target of RM300 to RM700 million this year.

 

Malaysia Airlines made a huge improvement with sales increasing 17% to RM3.55 billion from RM3.03 billion a year ago. Revenues rose RM519 million, with passenger revenue increasing 20% to RM2.5 billion. Yield, the average fare per passenger per kilometer flown grew 13%, while seats filled or seat factor rose 1.2 percentage points to 70%.

 

This enabled Malaysia Airlines to post an operating profit of RM48 million (before finance costs and exceptional items) from losses of RM163 million previously.

 

Both yield and seat factor grew as the airline reaped the benefits of its revenue and sales enhancement initiatives which were implemented in January this year.

 

International routes turned a profit of RM7 million (before finance costs and exceptional items) compared to losses of RM163 million a year ago while domestic operations made RM41 million (before finance costs and exceptional items).

 

Managing Director/ Chief Executive Officer, Datuk Idris Jala said, “We made good progress, turning an operating profit of RM48 million in quarter 2 which traditionally has been the airlines’ worst financial period. But to sustain the airline’s profitability, we need to make radical changes. Malaysia Airlines must transform into a 5-star airline with LCC cost.

 

“To achieve this goal, we must change – totally. Our services have to be top-class. Customer experience at all touch-points must be excellent. What we offer our customers must be different and compelling. Today, we have 312 initiatives to improve customer experience under our customer value proposition program and we have recently regained the World’s Best Cabin Staff Award. In addition, under our Malaysian Hospitality or MH program, we aim to treat passengers as guests in our homes.

 

“We must be relentless in cutting costs, and the necessary structural changes will take place in due time. We must grow new businesses. There is strong potential in our Engineering & Maintenance (E&M) division, and Firefly. Prospects for E&M are bright as the robust demand in regional air travel, and the limited expertise available, will spur the demand for our services. Firefly has obtained Government approvals to fly from Johor Baru and Kota Kinabalu, in addition to Penang and Subang. We have also submitted requests to fly to more local and regional routes.”

 

The E&M division is currently doing more than 30% third party maintenance, repair and overhaul work. By 2010, 50% of the business is expected to be third party work.

 

For the first-half ended 30 June 2007, Malaysia Airlines reported a net profit of RM246 million, a substantial improvement over its RM480 million in losses previously. Sales rose 19% to RM7.19 billion from RM6.05 billion, with passenger revenue increasing 21%. Yield increased 14%, while seat factor rose 2 percentage points to 70.5%. In recognition of the excellent performance in the first-half of the year, Malaysia Airlines recently rewarded all staff with an interim half month bonus.

 

Looking forward, Jala said, "I am upbeat about the second half of the year. It has been traditionally better as air travel peaks during this period. In addition, the Omega and Alpha projects (revenue and sales enhancement initiatives) will bear more fruit from July onwards. I am asking my team to go for record profits this year. We want 2007 to be the year where we make the highest profits in our corporate history. I have confidence in the MAS people, we are seeing the results and above all, we know what it takes to win.”

 

 

Issued by:

Media Relations, Communications Division

Malaysia Airlines, Subang

 

And....from The Star,

 

Jala keen to see MAS post record full-year profit

 

By B.K. SIDHU

 

PETALING JAYA: After four straight quarters of profits, it is Malaysia Airlines (MAS) managing director Datuk Idris Jala’s dream for the airline to report a record net profit for full year 2007 (FY07).

 

For its second quarter second quarter ended June 30, higher ticketing and asset sales helped bring in RM113mil in net profit compared with a net loss of RM177mil in the previous corresponding quarter.

 

Revenue rose 17% to RM3.5bil from RM3.03bil before.

 

Speaking to reporters after releasing the company’s results yesterday, Jala said: “There is a tremendous swing from a year ago and we are seeing yields and seat factor rising at the same time. Even if you strip out the asset sales (proceeds), there is growth.”

 

Malaysia Airlines managing director Datuk Idris Jala on Monday while speaking to reporters

 

For the first half, MAS reported RM246mil in net profit from a net loss of RM498mil in the previous corresponding period. Revenue also rose 19% to RM7.18bil from RM6.04bil.

 

MAS recorded yields of 25.9 sen (inclusive of surcharges and administrative fees) per revenue passenger kilometre for the first half versus 22.7 sen a year earlier. Seat factor improved from 68.7% to 70.5% in the period.

 

However, maintenance and staff cost in the first half had gone up to RM705mil and RM945mil respectively from a year earlier. Fuel cost was higher but was offset by lower hedging gain.

 

MAS executive director/chief financial officer Tengku Datuk Azmil Zahruddin said MAS had restructured some of its short-term loans to a mix of long- and short-term borrowings. As at end-June, MAS had RM2.6bil in its coffers compared with RM1.5bil a year earlier.

 

For FY07, Jala said he hoped the airline would report higher than the RM460mil net profit in FY03.

 

”We have understood how to run the business and are now focusing on recording the highest profit in our corporate history,” Jala said.

 

He said the target of RM50mil net profit for FY07 as per the business turnaround plan (BTP) had been stretched to between RM300mil and RM700mil as the airline had reported RM246mil in the first half and the second half was seasonally better than the first.

 

That aside, he was also wary that the threats of liberalising the marketplace by Jan 1, 2009 would have serious consequences on the airline if nothing was done to chart its future path since the BTP would only last until 2008.

 

Jala said he believed MAS needed a new business plan for it to brace for the competition and, at the same time, maintain profitability growth from 2009 and beyond. He said the thrust forward was for the airline to maintain a superior five-star service but operate on a low-cost model.

 

For now, he said, MAS' cost structure per available seat kilometre was four US cents, which is similar to Ryanair’s cost structure, but that had to be brought down so that MAS could compete effectively in a liberalised environment where competition would intensify, frequencies increased, and fares remained competitive.

 

“We have had so many discussions and ideas about MAS' future and we want to leave no stone unturned when competition sets in 2009. We consider 2009 as the Olympics for the airlines in the region and we are going to turn up for the race and have only this and next year to get ready,” Jala said.

 

He is expected to unveil a new business plan by January 2008 and Asean capital cities will open their skies to competition on Jan 1, 2009.

 

He did not discount the fact that MAS' low-cost carrier, Firefly, would use bigger-body aircraft instead of its current turboprop to fly to both local and regional destinations to compete with rivals in that sector.

 

MAS is also looking to revamp its existing fleet with wide and narrow-body aircraft but no firm decision has thus far been made on the model, type, numbers or the financing structure.

 

MAS had experienced a spate of flight delays in July due to several factors and, asked on the status of on-time performance, Jala said it was about 80% currently.

 

 

I've always thought that international routes would be the real breadwinner for MH. Looks like its EY. Looks like they might hit the 500 mil mark this year. Good on them. I didn't know that Firefly would have a base in KK either. BIMP-EAGA routes perhaps? If they decide to buy jet aircraft I'm wistfully hoping it would be Embraer. Looks pretty good. So whats next MH? 737NGs and A320 slots are pretty tight now.

Edited August 28, 2007 by Andrew K

[Andrew Ong 1]

MAS is making good progress right now .

[affendi osman 0]

REVAMP?

 

keep guessing....737NG? A320? or other type?

 

By the way, is there any updates on winter schedule?

[Naim 6]

And....from The Star,

 

Jala keen to see MAS post record full-year profit

 

By B.K. SIDHU

 

...

”We have understood how to run the business and are now focusing on recording the highest profit in our corporate history,” Jala said.

...

Jala said he believed MAS needed a new business plan for it to brace for the competition and, at the same time, maintain profitability growth from 2009 and beyond. He said the thrust forward was for the airline to maintain a superior five-star service but operate on a low-cost model.

 

For now, he said, MAS' cost structure per available seat kilometre was four US cents, which is similar to Ryanair’s cost structure, but that had to be brought down so that MAS could compete effectively in a liberalised environment where competition would intensify, frequencies increased, and fares remained competitive.

...

He did not discount the fact that MAS' low-cost carrier, Firefly, would use bigger-body aircraft instead of its current turboprop to fly to both local and regional destinations to compete with rivals in that sector.

...

 

Good stuff, MH. Four points:

 

1) At last Jala and team know how to run the business.

2) 5-star service on LCC model.

3) CASK presently at 4.0 US cents, compare that to AK's 2.37 cents. Better work harder, MH.

4) Firefly to use bigger aircraft and ply local/regional routes.

 

+++

 

[Kenn Leong 0]

What MH needs now is to join an alliance! i.e. Star or Oneworld! But i doubt its going to happen

 

Hopefully its not Skyteam

[Kee Hooi Yen 0]

International routes turned a profit of RM7 million (before finance costs and exceptional items) compared to losses of RM163 million a year ago while domestic operations made RM41 million (before finance costs and exceptional items).

 

 

Interesting to see domestic operations made more profit than international routes ! For many many years we have been told from the previous MAS management that they have to use the profit from international routes to cover the losses from domestic even though MAS monopolied the domestic routes at that time.

 

Now, MAS's domestic operation is making profit despite of the present of AK. It's all about management !

 

Well done to Jala and all the MAS staff !

[BC Tam 2]

Well done to Jala and all the MAS staff !

Agreed !

 

I am no bean counter, but what struck me was an operating profit of 48M (before finance charges, which would be quite substantial, no ?) whilst you have the 113M net profit. Does that mean money is coming in elsewhere ?

[Ivan L. 0]

“We must be relentless in cutting costs, ...

 

I hope they maintain the customer products or service, not just cutting everything. My flights with MH recently has been nothing but utter dissapointment. Unless, their pricing is really competitive, I will stay with SQ or CX.

[S V Choong 4]

Well done! RM 113 mil is a good amount for a quarter!

 

Lets hope MAS will place some orders soon..... hopefully the 787s, 777-300ER and 777-200LR.

[Sanjay Thaker 0]

Profits are also flowing in from their E&M division. Well done MH! Its interesting to see many domestic flights i've been on lately having a very high load factor even with AK around.

[KK Lee 5]

Interesting to see domestic operations made more profit than international routes ! For many many years we have been told from the previous MAS management that they have to use the profit from international routes to cover the losses from domestic even though MAS monopolied the domestic routes at that time.

 

Now, MAS's domestic operation is making profit despite of the present of AK. It's all about management !

 

Well done to Jala and all the MAS staff !

 

Yield on MH domestic sectors has always been higher and more profitable than internationals sectors. Domestic service was subsidizing internationals service for many years.

 

Previously, income from domestic, rural air service and international was bundled together. To cover up their in competency, previous management blamed the losses on domestic sectors and RAS. RAS was always subsidised by the Government one way or another.

 

If local politicians can be believed, pig can fly.

 

Edited August 29, 2007 by KK Lee

[BC Tam 2]

And....from The Star,

 

Jala keen to see MAS post record full-year profit

 

By B.K. SIDHU

 

"..... Even if you strip out the asset sales (proceeds), there is growth.”

Ah ok, just reread the originating post. Would be interesting to see the quantum of this contribution

[Sandeep G 1]

What MH needs now is to join an alliance! i.e. Star or Oneworld! But i doubt its going to happen

 

Hopefully its not Skyteam

 

Realistically, Skyteam is the only sensible choice for MAS.

 

Good show to MAS - hopefully the recent issues concerning employee productivity bonuses is addressed and the dip in productivity seen 1 month ago won't have too adverse an effect on the airlines bottom line.

[M. Sofian H. 0]

3) CASK presently at 4.0 US cents, compare that to AK's 2.37 cents. Better work harder, MH.

what mean by CASK? anybody can explain? Edited August 29, 2007 by M. Sofian H.

[Naim 6]

what mean by CASK? anybody can explain?

 

Cost per Available Seat Kilometre

 

... where even a decimal of a cent can mean life or death.

 

+++

[Mushrif A 3]

Agreed !

 

I am no bean counter, but what struck me was an operating profit of 48M (before finance charges, which would be quite substantial, no ?) whilst you have the 113M net profit. Does that mean money is coming in elsewhere ?

 

Extra is from asset sale. Four Seasons in LGK to Kingdom.

 

All details made available on MH website.

 

Interestingly, international pax services only made RM7m profit that qtr....without serious cutbacks in Y food budget (which led to Y pax getting poor quality food presentation & small portions) and the silly admin fee on top of tkt prices, int'l services could have made a loss. The saving grace is that the 2nd qtr is seasonally the weakest qtr in the calendar yr.

 

 

[Pieter C. 5]

What MH needs now is to join an alliance! i.e. Star or Oneworld! But i doubt its going to happen

Hopefully its not Skyteam

 

 

Realistically, Skyteam is the only sensible choice for MAS.

 

Agree there, Sandeep

 

K3nnis (what a funny way to be called like this; what's your real name btw ?),

 

Oneworld: already covered well in Asia with JL, CX and QF

Star Alliance: already covered well in Asia with TG, SQ, NH and NZ

Skyteam: covered by........well, if you consider KE ?

 

[Sim Lim Shen 0]

Hopefully its not Skyteam

Any reasons Skyteam is not a good choice for MH? If MH could join Skyteam, that would be great news to me.