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Malaysia Airlines announces new round of cost-cutting

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Thomson Financial News

Malaysia Airlines announces new round of cost-cutting

06.23.08, 7:13 AM ET

 

KUALA LUMPUR (Thomson Financial) - Malaysia Airlines said Monday it would reduce flight frequencies and impose a hiring freeze as it resorts to a new round of cost-cuts and a fuel surcharge hike to battle soaring energy prices.

 

'The oil price is rising at levels never seen by mankind,' the national carrier's managing director Idris Jala told reporters, adding that he may also cancel an option to purchase new aircraft.

 

Jala said the airline would impose a 'freeze on recruitment, defer spending, adjust fares and review routes and flights which are losing money,' in a bid to maintain its profit forecast.

 

'We are reducing about 6 percent of our capacity,' he said, adding that the airline would announce the new fuel surcharge on Friday.

 

'The focus is predominantly on cutting costs. I would not discount cutting routes if oil goes to 200 dollars a barrel,' he said.

 

Airlines worldwide including Virgin Blue, Qantas Airways and US Airways (nyse: LCC - news - people ) have cut back their growth plans and axed loss-making routes to weather spiralling fuel prices.

 

Jala said that while the airline will pursue its firm plan to buy 35 narrow-body 737-800 aircraft from U.S.-based Boeing (nyse: BA - news - people ) as part of its fleet upgrading plan, it may not exercise the option to purchase another 20 aircraft.

 

'We may not even exercise the option. We will continue to treat it as an option,' he said. The total cost of the 55 aircraft is $4.2 billion at list prices.

 

Malaysia Airlines hopes to achieve record profits under its recovery plan after it broke back into the black last year.

 

It posted an all-time record profit of 851 million ringgit for the 2007 financial year, ending a series of disastrous losses.

 

But in May it announced that its profits in the first quarter slipped 9.8 percent from a year earlier to 120 million ringgit ($37 million).

 

The carrier hopes to post profit of between 400 million and 1.0 billion ringgit this year.

 

The return to profits was the culmination of a sweeping transformation plan, which saw the airline slash staff and routes and sell non-core assets after suffering losses of 1.3 billion ringgit in the first nine months of 2005.

 

afp

 

http://www.forbes.com/afxnewslimited/feeds...afx5142133.html

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Emm sound like Business Turnaround Plan 3 will announce soon..hehe..but i realize the really today,just because the "black gold" price keep increase,look like world economic bit chaos..which airlines operator will continue survive with this condition :help: :help: :help: :help: :help: ??

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While one airline is cutting costs, the other is still expanding like crazy. Obviously they are reading different books. I wonder how it will turn out.

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While one airline is cutting costs, the other is still expanding like crazy. Obviously they are reading different books. I wonder how it will turn out.

 

Just hope the expansion is not the bubble-type, I have many friends there too.

 

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Emm this coming Friday Datuk Seri Idris Jala will announce new fuel surcharge according to route =@ =@ =@ ..better make early booking for those want fly soon :help: :help: ..have nice day B)

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Emm this coming Friday Datuk Seri Idris Jala will announce new fuel surcharge according to route =@ =@ =@ ..better make early booking for those want fly soon :help: :help: ..have nice day B)

 

I think Datuk IJ will have to think of many factors before he can simply increase the new fuel surcharge. MH's overall load has already been affected recently and any substantial increase will certainly not benefitting the airlines.

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Will we see ARN and EWR being axed from MH's network? Indicators are starting to point into that direction.

 

Something that a fellow Swedish member HPS of A.Net would like to share in this thread. Apparently a few KUL-ARN-EWR flights will be cancelled in October and November 2008. Is this a sign that this route will be axed soon? A quick history check: ARN and EWR were axed earlier in 2006 during MH's Business Turnaround Plan's full swing implementation, but the decision was called back by the Malaysian government ordering MH to reinstate back ARN and EWR to support the Visit Malaysia 2007 (and 2008) tourism campaigns. Now in this difficult time, can MH bear the responsible, if this route is actually bleeding money since day 1?

 

"The escalating price of jet fuel has severely impacted the operations of all commercial airlines, including Malaysia Airlines.

 

Crude oil price has gone up from an average of US$57/bbl in 2005 to US$137/bbl in May 2008, reflecting more than 100 percent increase. According to IATA, 24 airlines have ceased operations or have entered into bankruptcy protection in the last 5 months.

 

At Malaysia Airlines, we are continuously reviewing the commercial viability of our flight operations and have identified certain flights that need to be cancelled on ad-hoc basis. For the KUL-ARN-EWR vv route, we have cancelled the following flights:

 

MH 90 Dates: 06OCT, 13OCT, 20OCT 08 KUL ARN EWR

MH 91 Dates: 03NOV, 10NOV, 17NOV, 24NOV 08 EWR ARN KUL

 

Concurrently, we have activated a comprehensive relocation plan, applying the following principle:

 

Already ticketed passengers: no additional cost for involuntary rerouting

Non-ticketed passengers: any fare differential will be borne by passenger

 

We apologise for the inconvenience caused by the above arrangements. Should you require more information, please don’t hesitate to contact us."

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Its sad but if MAS contracts further, KLIA will be definitely on its way to become another regional airport. Losing flights to NY will be a big blow to KLIA as we've already lost MAN, ZRH, VIE. What a shame.

 

 

 

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Route should have been axed by now if bleeding money. Sod the politics. Your running an airline business not a government air taxi service.

MH should not be sending metal west and east across the Atlantic.

Just feed into the KL/DL(NW) network via AMS. The Swedes will just have to change at AMS for KUL in future.

If making money to/from AMS look to maybe add services there if demand is sufficient (the product sure beats the KL offering between AMS & KUL).

Perfect way to fill an A380 :good:

 

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i just don't get it after all these while. why do they seem to be scrapping this and scrapping that, increasing this increasing that? if it's just beyond their control (or they can't expect ANY other ways to make profit), why not just cease operation?

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Airlines' future bleak without mergers, warns MAS

Jun 27, 08 5:30pm

 

The future for global aviation is "really bleak" unless the industry takes drastic measures including mergers and substantial fare increases, Malaysia Airlines said today.

 

 

The national carrier's managing director and CEO Idris Jala said that with oil prices at unprecedented levels more airlines would be forced out of business and the majority would sink into the red.

 

"The prognosis for the industry is really bleak," he said in an open letter.

 

"Change - and I mean drastic change - is absolutely vital for our survival. That, and a willingness to reinvent the way we operate, including through mergers and acquisitions," he said.

 

Jala said the flying public must be prepared to face sharply higher prices for air travel "or be prepared to stomach even higher prices later when the number of participants become fewer and competition fizzles out".

 

"Put bluntly, if these adjustments don't take place - and quickly - the airline industry will collapse and have a ripple effect throughout the entire world economy," he said.

 

Malaysia Airlines has slashed staff and routes in a so-far-successful effort to reinvent itself and arrest a series of losses that threatened its viability.

 

Expect fares to increase by half

 

Jala said the carrier had "kept our head above water" with a modest profit in the first quarter of this year, but that increases in surcharges were unavoidable - although it would hold off on domestic routes for now.

 

"Fares may have to go up - no longer incrementally - but by as much as half, capacity cut by a quarter and costs cut even further by a tenth," he said of the global aviation industry.

 

"These have to be done in the face of customer resistance, grounding aircraft, cutting staff and squeezing out virtually all but the most essential costs," he said.

 

Jala said the industry faced a "perfect storm" with the surging oil price, a slowing global economy, overcapacity and the rapid growth of budget carriers, which are shaving margins to the bone.

 

But he said that if carriers were brave enough to introduce painful reforms, it would lay the ground for a more sustainable industry with enough operators still in business to keep fares fair.

 

"The good times will return," he said.

 

http://www.malaysiakini.com/news/85193

 

:huh: :angry:

 

 

 

 

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I think Dato Idris Jala is trying to convey something. I sense that he is actually trying to tell the governmet that it is time for the airline to be managed accordingly (based on proven business principles - like what KK Lee always mentioned) and he also seems to prefer a merger (which the government may not in agreement with at all).

 

Looking at the issue from another angle, this whole fiasco in the global airline industry is actually a good opportunity/excuse for MH to get rid of their excessive staff (which can translate into excessive salary payment and directors'/chairman's emoluments) and CONsultans (which may be appointed based on a directive from a certain someone which MH can't disobey), bleeding routes (that MH may want to axe since very long time ago but couldn't do it because of the government's refusal) and excessive capacity (that MH may want to reduce since very long time ago but couldn't do it because the government wants them to serve it on certain minimal (high numbered) frequencies).

 

The fact the the current's government is limping, where every decisions can be questioned and credibility is thinning as days go by, is also in favour for MH, in my opinion.

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The fact the the current's government is limping, where every decisions can be questioned and credibility is thinning as days go by, is also in favour for MH, in my opinion.

 

 

From our dealing in other sector, the ministers care more about their own political future than GLC’s future, and whenever there is a political appointed vacancy, there is tussle between KJ and DPM. It is more likely status quo will remain in the short term.

 

:drinks:

 

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