Malaysia Airlines returns to the black after years of losses

PETALING JAYA: After years of reporting losses, the new-look Malaysia Airlines Bhd (MAS) has posted its first quarterly profit – a modest RM14mil – for the period between January to end-March this year.

Group-wide, the profit was RM51mil before exceptional cost.

This information on profit was spelt out by MAS’ outgoing chief executive officer Christoph Mueller in an e-mail he had sent out to the employees yesterday.

He wrote that “I am delighted to share that we have stopped the bleeding”.

A year ago, in the same quarter, the airline had reported an RM450mil loss.

Mueller told his employees that “we have seen continued improvements in this first year of the biggest and fastest transformation in our history. We have reshaped our business for a strong, sustainable future by moving quickly and making tough decisions early”.

While it is ahead of its operational targets, factors that have contributed to MAS’ profitability are low fuel prices, a smaller number of employees and capacity reduction by 30% that have led to an overall reduction in cost.

MAS has also phased out its fuel-guzzling aircraft that has helped reduced fuel cost.

Globally, airlines are making record profits due to low oil prices.

Mueller did say that “if we eliminate these exceptional items, our cashflow is positive!”

With the capacity contraction of 30% against last year, MAS’ revenue dropped by 22%, which was a strong reflection of improvement in the revenue quality, according to Mueller.

He went on to say that the operating cost further outperformed MAS’ capacity contraction, posting a 32.9% cost reduction against last year’s quarter.

“It is evident that through the route rationalisation exercise, our focus on unit cost control as well as our efforts on revenue quality have put us on the right track,” he added in the e-mail.

MAS can expect more improvements at group level in the coming quarters, as two fuel guzzlers, the B737-400 cargo planes, will be phased out.

Mueller also shared that there had been recovery in traffic from the China and Northern Asian markets after pushing for an aggressive sales strategy. Passenger loads were also higher, including that of the Business Class.

Mueller said a lot of over-capacity in certain markets had been taken out, resulting in MAS’ average revenue per passenger improving by more than 20%.

The airline’s on-time performance was 84% in the quarter, which is 2% ahead of MAS’ annual target, and loss of baggage at the KL International Airport had been reduced by half.

The airline’s complaints had also been reduced by 37% in the first quarter to the lowest ever since 2012.

The turning in of a profit may be a positive sign for the airline, but Mueller also cautioned that the “job is not done yet”.

The marginal results achievement was small, and even a small rise in jet fuel prices and a volatile ringgit could wreak havoc overnight in a market place that is ever so competitive.

That is why he suggested the need to “hard-wire” the changes made thus far and rigorously follow through on the implementation of the plan.

Mueller was hired to turn around the bleeding airline, which had reported losses of about RM1bil in the past and suffered twin disasters in 2014, which had eroded a lot of value and goodwill. Unfortunately, Mueller himself is leaving the job just over a year after he had joined, citing personal reasons for his departure in September.

This has cast doubts over the future of the airline and many worry that whatever was started may not be followed through and the regression will not see sustainability in earnings, which has been MAS’ biggest problem in the past.

Mueller has initiated over 220 projects that are at various stages of implementation to ensure the profitability of the airline.

When Mueller came onboard, the airline cut 6,000 jobs, lowered cost, reduced capacity by 30% and renegotiated supplier contracts that had been untouchable earlier. A successor has yet to be identified to take over from Mueller although the search continues.

Source : www.thestar.com.my/