Tough second quarter for Malaysia Airlines

PETALING JAYA: Malaysia Airlines (MAS) said it experienced a tough second quarter (Q2) with heightened competition and adverse foreign exchange movements.

However, the national carrier said in a statement that load factor continued to be strong at 77.8% in Q2, a marginal reduction from 79.4% in the first quarter this year, while passenger revenue saw positive year-on-year growth amid the tough operating environment.

“Second quarter passenger revenue saw an increase of 8%, on the back of 1.8% higher capacity (ASK) compared to same period last year,” group CEO Peter Bellew noted.

MAS said the lean travel period during Ramadan presented challenges, but these were offset by the Hari Raya peak period.

MAS managed to increase international loads compared to Q2 2016 by a significant 16.9%, while sacrificing a reduction of only 4.5% in average fare.

Nonetheless, it continued to see a challenging environment in the domestic sector due to overcapacity and relentless competition, which led to a small reduction in domestic loads to 73% from 75.2% in Q2 2016.

“Moving forward we remain focused on improving services with a better steer on pricing. We have already seen progress on this front via a 2.6% increase in domestic average fare,” said Bellew.

Given the adverse impact on foreign exchange and a challenging competitive environment, reducing costs will remain a focus for MAS in 2017.

“The quarter saw continued cost management initiatives to generate more savings in several areas across the various divisions. This included a total of 77 operations initiatives registered and tracked for FY2017.”

To date, the programme has registered a 48% completion rate with estimated savings of nearly RM14 million for the quarter and total savings of RM16 million for the first half of 2017.

MAS, which is on track to be profitable in 2018, said it remains cautious on this year’s outlook as the aggressive price war on the domestic market is expected to continue with a weak ringgit and higher fuel prices adding to an already challenging cost environment.

While advance bookings are far stronger in 2017 than in 2016, it is seeing yield pressure across all routes as low fares are available from many legacy carriers as well as low-cost carriers.