‘MALAYSIA AIRLINES MAY NOT NEED EXTRA FUNDS’
National carrier to do its best to break even next year, says CEO
MALAYSIA Airlines Bhd may not require additional financial assistance from the government other than the RM6 billion under the Malaysia Airlines Recovery Plan.
Group chief executive officer Captain Izham Ismail said it had recorded double-digit compound annual growth rate for three years since the establishment of the new company in 2015.
“We are working hard so as not to have to ask for capital injection. As an organisation, we will do our best to break even next year. We have seen cash flow strengthening since I took over the airline last year,” he told NST Business recently.
Izham said the airline had sufficient credit lines, largely unused, to provide liquidity support for its day-to-day working capital requirements.
“We haven’t utilised our credit lines with the bank. We want to generate enough operating cash flow to sustain an operation with 13,000 employees.”
Izham said the national carrier would not break even in the financial year ending December 31 but was rather confident of halving last year’s loss of RM812 million.
He said the airline was also susceptible to factors beyond its control.
“For example, the closure of the European airspace due to volcanic ash in 2010 and the severe acute respiratory syndrome virus outbreak in 2003 had big repercussions on Asian carriers. “Similarly, if competition becomes irrational and there is no rationalisation in the marketplace, this may affect our recovery plan.”
To recap, sole shareholder Khazanah Nasional Bhd had allocated RM6 billion to support the Malaysia Airlines Recovery Plan in 2014. Of the total, Malaysian Airline System Bhd used RM1.6 billion for its de-listing exercise in late 2014.
Another RM1.6 billion was spent on restructuring and retrenchment.
“Next year will continue to pose challenges in the marketplace, coupled with foreign exchange (forex) and fuel volatilities. We have to be agile, nimble and fast in many aspects. We can’t anticipate uncertainties but we can put buffers around them.”
Izham said Malaysia Airlines was cushioned to a certain extent from fuel volatility as it hedged about 70 per cent of fuel for a 12month rolling period.
Malaysia Airlines slipped into the red for three years in financial years 2015 to 2017, recording a net loss of RM1.13 billion, RM439 million and RM812 million, respectively.
Izham said the airline embarked on its turnaround plan in 2015, with the aim to halve the loss year-on-year and break even this year and next year.
“We closed 2016 ahead of budget. However, last year and to a certain extent this year, the volatility and unfavourable fuel and forex environment had an adverse effect on our bottom line.
“We started off this year with a clear vision to break even. During the first quarter, we were doing well and meeting our targets. In the second quarter, it was a bit shaky as we were facing pilot shortages,” he said, adding that this would be a global issue for the airline industry in the next 10 years.
He said Asia Pacific would receive about 40 per cent of new aircraft manufactured by Airbus and Boeing.
This will require about 257,000 pilots by 2038, of which 180,000 will be new pilots.
Malaysia Airlines recently recruited 144 new Malaysian and expatriate pilots.
The airline has 81 planes servicing 58 destinations, backed by about 1,000 pilots.
Izham said Malaysia Airlines had one of the lowest cost bases among its peer network airlines on a cost per available seat kilometre basis.
“We have also seen material gains in productivity with a more competitively-sized workforce, which is further complemented by a commitment towards talent development, particularly local talent,” he said.