Business

Friday August 7, 2009

Malaysia Airlines' Q2 profit highest ever despite economic crisis

By LEONG HUNG YEE


PETALING JAYA: Malaysia Airlines (MAS) reported an operating loss of RM420.8mil but exceptional derivative gains of RM1.34bil on fuel hedging resulted in the carrier reporting a net profit of RM876mil in the second quarter ended June 30.

The operating loss was largely due to lower operating revenue in line with the declining trend in global travel and cargo movements.

Its operating expenditure decreased by 20% while fuel cost was 56% lower during the quarter.

At its results briefing yesterday, chief executive officer and managing director Datuk Seri Idris Jala said the net profit achieved in the quarter was the highest ever quarterly net profit recorded by the airline.

Datuk Seri Idris Jala ... ‘The net profit was even higher than our net profit in the (full) financial year ended Dec 31, 2007.’

“The net profit was even higher than our net profit in the (full) financial year ended Dec 31, 2007,” he said, adding that it offset the net loss of RM695mil registered in the first quarter and showed a RM1.57bil improvement in the second quarter.

For the first quarter ended March 31, its net loss included a derivative loss of RM557mil following the early adoption of the Financial Reporting Standard 139 (FRS 139).

MAS had recognised fuel-hedging contracts to reflect its fair value changes due to movement in mark-to-market position and took a charge on its balance sheet of RM3.8bil starting Jan 1.

Revenue for the first six months fell to RM5.3bil from RM7.52bil in the same period last year. It recorded a net profit of RM180mil, or 10.78 sen, compared with RM160mil, or 9.58 sen, previously.

In a filing to Bursa Malaysia yesterday, MAS said if it had not adopted the FRS 139, its operating revenue would have been RM2.49bil and a net loss of RM803.7mil for the second quarter.

MAS would have posted a net loss of RM1.59bil for the first six months ended June 30 on revenue of RM5.19bil if it had not adopted the FRS 139.

To contain its expenditure, Jala said MAS would freeze salary increases next year for its employees.

Chief financial officer and executive director Tengku Datuk Azmil Zahruddin said the move to freeze salary increases could help to reduce its operating expenditure by about RM100mil.

He said the airline still had a robust balance sheet to weather the crisis but it needed to continue its effort to cut cost.

As at June 30, MAS’ cash and negotiable deposit balance stood at RM2.93bil.

The group shareholders’ equity, which turned negative RM459mil and triggered the criteria of being an affected listed issuer under PN17, had turned positive in the second quarter with RM420mil.

Jala said MAS was managing well in this crisis. “While the operating environment remains tough, the load factors have increased due to our aggressive strategies to boost sales. The sales campaign that we do is beginning to bear fruit. The campaign for the next six months will be like never before.”

Its load factors increased to 66% in the second quarter compared with 56% in the first quarter leading the carrier to capacity increase of 6% in the domestic sector.

“On the international routes, we have performed better than the industry average as we are less dependent on the front end.

“Our forecast booking numbers for the second half of the year are encouraging. With the loads on an upward trend, we will now be able to work on increasing yield,” he said, adding that its yield was 16% lower at 23 sen year-on-year.

Jala said with the strong forward booking on air tickets, MAS was hopeful of improving its performance in the second half and remain profitable for the full year. “I am always a hopeful person. We have consistently been profitable. My team will do the absolute best.”

Asked if its performance for the second quarter would be an indicator for the group to remain profitable this year, he said the carrier would do its “level best” but there was no surety.

He said green shoots were coming out but was not sure if it could be a reality.

Jala said the airline would increase the number of flights to key South-East Asian capitals, South Asia, China and expand its network with three new destinations in the Middle East.

MAS is studying plans to buy a new fleet of wide-bodied aircraft to replace its current planes but has yet to make any decision.

The airline has hedged 47% of its fuel requirement this year and 63% of its needs for 2010 at a price of about US$95 a barrel.

 
MAS :  [Stock Watch]  [News]


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