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Wednesday November 21, 2012

Analysts say MAS likely to return to the black earlier than forecast

By B.K. SIDHU
bksidhu@thestar.com.my


PETALING JAYA: Following several quarterly losses, indications are that Malaysia Airlines (MAS) will return to the black in its third quarter this year, posting a modest net profit of just under RM10mil, according to analysts.

And while this “return to profitability” is unlikely to nudge MAS into a full year profit for the current financial year, some analysts reckon that the “flurry of activity” within MAS can lead it to a profitable financial year ending 2013 a year ahead of what management has guided for.

Maybank Investment Bank recently stated in a report that MAS' operational costs were coming down. The report also highlighted that MAS had disposed many old aircraft and replaced them with new, more fuel-efficient aircraft.

Among the initiatives that MAS had embarked on was taking into service two Airbus A380 super-jumbo aircraft, which boasted unit cost savings of 15% to 20% compared with the Boeing 747-400.

In addition, MAS has cut 10% to 12% of its capacity on loss-making routes, which has helped to plug losses.

Sources also told StarBiz that last weekend, the MAS senior management team had met to map out the business strategy for next year. Among the topics discussed was to “sweat the assets to enhance income”, especially at the subsidiary levels.

Among the units identified, the sources added, were the cargo division, MAS Engineering and MAS Holidays.

A detailed business plan to get more revenues out of these assets is expected to be presented at the MAS' board of director's retreat in Langkawi early next month.

In filing with Bursa Malaysia yesterday, MAS said that it had executed a funding deal with special purpose vehicle called Turus Pesawat Sdn Bhd for an Islamic financing arrangement of up to RM5.311bil. Turus Pesawat is wholly-owned by the Ministry of Finance.

The financing is to be used for the purchase of eight aircraft comprising six Airbus A380-800, one Airbus A330-200F and one Airbus A330-300.

The A380 is a key element in MAS' return to profitability.

“The A380 flight load for its KL-London route is very good and the airline is upgrading it to a second daily with the A380. If it can maintain the load factor, it will be positive for MAS,” said a source.

MAS commercial director Hugh Dunleavy was recently quoted in a report by CAPA Centre for Aviation as saying that MAS would use the A380 for its daily Kuala Lumpur-Paris flight after receiving its fifth A380 early next year.

It added that for the larger South-East Asia-UK market, MAS would move up two spots, overtaking Qantas and British Airways, after it upgraded its second daily London flight to the A380.

MAS is currently the fourth largest carrier in the South-East Asia-UK market behind Singapore Airlines, Qantas and British Airways.

“Kuala Lumpur-London is a flagship route for MAS and Paris is also a high profile destination. As a result, MAS has a lot to gain from using the A380s on these routes,” CAPA said.

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