On track for profit

Malaysia Airlines expects to return to the black by Q4 next year

PetaLiNg jaya: Malaysia Airlines Bhd, which is ordering more aircraft, expects to return to the black in the third or fourth quarter of next year.

The airline, which ordered eight wide-body B787-900 aircraft from Boeing recently, signed a lease for six A330 yesterday, and wants to order six more of either the B787 or A330Neo over the next six months.

The plan to add more aircraft has come under scrutiny, as Malaysia Airlines has yet to devise a strategy on how it will deploy the new aircraft, some of which are wide-body aircraft with long-haul capabilities right to the United States, even though the deliveries are only in three years’ time.

Yesterday, both the airline’s chairman, Tan Sri Md Nor Yusof, and CEO Peter Bellew defended the airline’s move to buy and lease new aircraft, saying that the airline needed the extra seats to grow, had to replace its existing fleet and address the mismatch between narrow and wide-body aircraft in a special press conference called yesterday (see page 2).

“We saw a gap in our service a year ago and this foresight has enabled us to act swiftly when this opportunity of potentially adding six very affordable wide-body aircraft arose. “The right aircraft at the right time and at the right price is key to our success, and these aircraft will enable us to create a much improved customer experience as we move towards transforming the airline into a premium five-star carrier once again,” Md Nor said.

The airline yesterday signed an agreement to lease six second-hand A330-200 as replacement for its six narrow-body Boeing 737s that will be returned to the lessors. It is leasing them from AerCap, but the aircraft were used by the now-defunct Air Berlin.

The aircraft from Air Berlin will be retrofitted and used for destinations like Mumbai, Delhi, Tokyo and others. The aircraft will have the latest Business Class seating.

As for returning to profitability, Bellew said “for some months, we are cash-flow positive, others, we are not. Had it not been for the stronger US dollar some months ago, we would have been cash-flow positive every month by now. Due to that, we will not be cash-flow positive until the second half of next year”.

“We are targeting to report profit only in the third or fourth quarter of 2018,” Bellew added.

Under the MAS Recovery Plan launched on Aug 29, 2014, the airline, now renamed Malaysia Airlines, is targeting to return to profitability this year.

Bellew said it had been a tough first half of the year with competition and currency woes, but despite that, its load increased 16.9% and passenger revenue grew by 8% in the first half.

“The story has changed for Malaysia Airlines and we are seeing higher demand for our services. We need more aircraft and the right mix of aircraft to move forward,” he said.

He said passenger loads were improving on the Japan, South Korea, Taiwan and China sectors, and seasonally on the Australian sector.

“We were down 40% on the KL-Singapore route on loads, but now that has recovered to about 70%-80%. We have also seen a larger recovery on the KL-London route,” he added.

On forward bookings, Bellew said “it is pretty strong from October to December, but it is hard to tell for January and February next year. As for yields, we have seen a 4%-5% improvement and the recovery is seen in the last eight weeks”.

Although there have been many “wins” in its transformation programme since the plan started in 2014, there are still areas that need addressing, Bellew said. His next task, apart from bringing down cost and selling more seats across the network, is for the airline to refurbish its lounges locally and regionally.

He said with its new reservation system, the airline is now able to offer seamless travel to the US, Africa and European cities via partner airlines with bookings which can be done online.

The airline has also revamped its in-flight entertainment system, doing away with 20-year-old documentaries and adding the latest movies for selection.

Asked on succession planning, Bellew, whose contract ends in June 2019, said that “I hope I don’t get deported quickly. We have five to six people. We have plenty of great people here and over the last 12 months, the airline’s reputation has improved”.

Turning to Project Hope, now renamed Project Amal, he said the Haj and Umrah flights will take off in 2019.

The airline will retire its A380 from the London route and use all six for Haj and Umrah flights. The London sector will be served by the A350 aircraft, the first two of the six it will take delivery in December this year.

Bellew said interest in Haj and Umrah flights was increasing and the airline has carried over 40,000 passengers since the beginning of the year.