Business

Friday June 22, 2012

MAS unveils renewed plan which involves more cost cuts

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


PETALING JAYA: Malaysia Airlines (MAS) has come up with yet another business plan that focuses on more cost cuts and initiatives to “sweat” the airline's assets to maximise revenues. In addition, the airline's expected return to profitability has been postponed from next year to 2014.

The plan, which MAS group CEO Ahmad Jauhari Yahya refers to as the “renewed business plan”, was announced yesterday but had few details.

However, a major proposed change that did emerge apart from pushing back the projected return to profitability by a year is that the latest plan does not involve housing the regional operations in a new entity. This will ease the staff unhappiness over the proposed separation of the regional and long-haul operations as outlined in the December 2011 business plan.

This latest plan was necessary for MAS to chart its future direction because the previous plan was crafted for both MAS and AirAsia Bhd to work together following a share swap between their owners. The deal has since collapsed.

Md Nor (left) and Ahmad Jauhari at the press confrence after the MAS AGM

At a press conference after a MAS AGM yesterday, Jauhari said the airline's aim was to push up revenue per seat km by 10% from 18.5 sen as at end of last year, and trim cost per available seat km by 20% or about 5 sen from 24.8 sen.

To do that, several “initiatives would need to be executed in the next six months to a year via optimising all the assets, implementing structural cost reductions for sustainabilty and leveraging on work efficiency”.

“We just have to sweat our assets more as under the previous network utilisation plan, the usage was low of our narrow and wide body aircraft. We also plan to make changes to the work practices to be more efficient and to drive productivity levels up,” Jauhari said.

Capacity cuts are not on the cards but MAS chairman Tan Sri Md Nor Yusof said that to grow revenues, there would be a need to realign capacity to match opportunities especially that within the six-hour flying radius.

MAS would focus on growing its business in the region as this is where the growth is, and Md Nor added that “we have the right mix of aircraft types that will enable us to build a better orientation towards capitalising on the region, particularly for the short-haul routes”.

Jauhari added that to “sweat” the assets, the B737 aircraft's flying hours would be extended from the current nine to 11, and MAS will look into frequency increases for some of its destinations. He, however, did not elaborate.

“The adding of the A380 (the new Airbus plane) would further help boost our fleet efficiency,'' he said. However, he said the A380 would only be used for the London sector and not for the KL-Sydney route as the aircraft was too big for the Sydney sector.

He also said the airline had appointed Duncan Bureau as head of sales and the airline had to rev up sales to bring in revenues because there was a mismatch in its cost and sales due to the airline spending more than what it made. The airline reported its worst net loss of RM2.5bil for 2011.

“We give ourselves up to 2014 basically to return to profitability, a change from our earlier target by 2013,” Jauhari said.

On cost cuts, Jauhari added that every aspect of cost, be it aircraft usage, procurement, maintenance, etc, will be looked into as part of the three-year initiative to bring cost down.

MAS has a staff base of 20,477 as per its 2011 annual report. When asked if there would be job cuts, he declined to address it, saying it was a sensitive matter but manpower costs would be dealt with.

Asked if there were plans to revive Firefly's jet operations, he said Firefly would concentrate on turboprops and maximise on point-to-point traffic.

To a question if MAS would set up low-cost airline or revive Firefly's jet operations for that purpose, he said “we are not closing our doors to (setting up a) new LCC model but we are not looking at it now. Our immediate focus is revenue growth.”

To a question if AirAsia will be using MAS maintenance, repair and overhaul (MRO) services following the collapse of the share swap agreement, Jauhari said that “we are ready to serve any customer.”

At the AGM yesterday, all the directors seeking election were voted in but Tan Sri Wan Azmi Wan Hamzah did not seek re-election as director.

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