ATW Daily News

MAS weathers 'perfect storm,' stays profitable

Tuesday August 19, 2008

Despite operating amid "the perfect storm" of high fuel prices and overcapacity, Malaysia Airlines yesterday reported its eighth consecutive quarterly profit, a MYR40 million ($11.9 million) figure that represented a 64.6% decline from the MYR112.8 million posted in the year-ago period.

"It's an extremely tough environment, and with overcapacity and global downturn, the situation is going to get even more challenging," MD and CEO Idris Jala warned (ATWOnline, June 30). He credited the second-quarter profit to MAS's cost and capacity cuts as well as "dynamic pricing" and innovations like its Everyday Low Fares initiative, which sells surplus seats at reduced fares. He said sales of normal fares also rose once ELF was implemented in May.

Quarterly revenue climbed 7.9% year-over-year to MYR3.65 billion and expenses were up 9.6% to MYR3.72 billion as fuel costs soared 56%. Operating profit slipped 32% to MYR62 million from MYR91.2 million in the 2007 second quarter. The airline operation posted a MYR17.8 million operating profit and its cargo arm was MYR48.4 million in the black. Unit revenue rose 7% to 19.2 sen and yield was up 11% to 28.6 sen.

Jala said the carrier is increasing its commitment to driving ancillary revenue through "travel insurance, hotel and car bookings" and "many more initiatives" including inflight connectivity, mobile check-in and payment agreements with local banks.

MAS said it is targeting a MYR400-MYR500 million full-year profit based on "into plane" fuel prices of $100 per barrel. For the first semester, net earnings of MYR160.5 million were down 34.7% from MYR245.9 million in the year-ago half. Operating profit fell 18.1% to MYR194.9 million.

by Brian Straus

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