ROUTE TO SUCCESS
MALAYSIA Airlines Bhd has the financial capacity to buy 16 aircraft in a deal signed with Boeing as the carrier is not only backed by Khazanah Nasional Bhd but also on track to be profitable again, say analysts.
MALAYSIA Airlines Bhd has financial capacity, backed by a solid shareholder in Khazanah Nasional Bhd, to purchase 16 planes from American aircraft maker Boeing, said analysts.
Analysts said the acquisition is a good move as Malaysia Airlines is on track to be profitable again and gearing for further growth.
“Although Malaysia Airlines has not revealed its financial details, we assume Khazanah can help the airline with regards to financing,” Maybank Investment Bank Bhd aviation analyst Mohshin Aziz told NST Business yesterday.
Malaysia Airlines signed a memorandum of understanding (MoU) with Boeing on Tuesday in Washington during Prime Minister Datuk Seri Najib Razak’s visit to the United States.
The deal comprises eight 787-9 Dreamliners, by converting eight of Malaysia Airlines’ existing order of Boeing 737 MAX aircraft, and eight additional purchase rights of the 737 MAX 8s.
It includes Boeing’s Global Fleet Care Service to maintain the national carrier’s current and future Boeing aircraft.
Najib said Malaysia planned to increase the number of Boeing aircraft to be purchased by Malaysia Airlines.
“We are committed to buy 25 737 MAX 10 planes, plus eight 787 Dreamliners. And there is a strong probability that we will add 25 more 737 MAX 10s in the near future.
“So within five years, the deal will be worth beyond US$10 billion (RM42 billion). We will also persuade AirAsia to purchase GE engines,” he said after meeting US President Donald Trump.
Mohshin said it was important for Malaysia Airlines to add widebody aircraft to its fleet, thus improving its services for medium to long-haul flights.
“The wide-body aircraft are the tools that can go the distance,” he said, adding that some of Malaysia Airlines’ existing aircraft are getting old and there’s a need to replace them to ensure efficiency.
On the company’s profitability, Mohshin said it would mainly be dependent on the market demand and global fuel prices, adding that the aviation market was performing well.
“The industry on a whole has been efficient. AirAsia, AirAsia X, Malindo and Malaysia Airlines have managed the supply and demand well,” he added.
Hong Leong Investment Bank Bhd aviation analyst Daniel Wong concurred that Malaysia Airlines would be able to finance the purchases, citing that the government had previously given its commitment to assist the national airline.
Wong said the acquisition was practical for the airline to renew its old fleet, citing that Malaysia Airlines relies heavily on A380s, which have been designated for Haj and Umrah flights.
“Malaysia Airlines needs more efficient aircraft to service its domestic and international routes,” said Wong.
On potential European routes expansion, he believes Malaysia Airlines will still be concentrating on London, unless the demand starts to improve in other regions.
“At the moment, we believe the new aircraft will be designated for routes in London, China and North Asia and Australia,” he said.
In a Boeing statement yesterday, Malaysia Airlines chief executive officer Peter Bellew said the new widebody aircraft are key to making Malaysia Airlines a premium airline.
“The extraordinary range of the 787-9 gives an ability to operate to any point in Europe and some US destinations in the future from Kuala Lumpur,” he added.
Bellew said the MoU with Boeing would allow the two companies to build a world-class MRO for the 737 MAX, 787 and 737NG based in Malaysia’s existing facilities in Kuala Lumpur.
Malaysia Airlines now operates more than 50 Next-Generation 737s and has an additional 25 737 MAXs on order, including 10 for the new 737 MAX 10.
“Boeing offers the best widebody and single-aisle airplanes and we are delighted that Malaysia Airlines continues to put its trust and confidence in Boeing with this MoU,” said Kevin McAllister, president and chief executive officer, Boeing Commercial Airplanes.