Malaysia Airlines forecast to post core net loss of RM1.01bil in FY13

PETALING JAYA: Malaysia Airlines (MAS) has been forecast to post a core net loss of RM1.01bil for the financial year ended Dec 31, 2013 (FY13) while AirAsia Bhd is expected to post a core net profit of RM651mil for FY13.

MAS is expected to announce its results today, with AirAsia on Feb 26 and AirAsia X Bhd (AAX) on Feb 25. Airport operator Malaysia Airports Holdings Bhd, meanwhile, announced its full-year financial results on Jan 27.

Maybank Investment Bank Research analyst Mohshin Aziz said the national carrier’s upcoming fourth-quarter and full-financial year results’ announcement would be a “non-event”. “MAS is expected to be loss-making, and our FY13 forecast is 14% worse off than consensus.”

Nevertheless, Mohshin said the flag carrier had successfully filled up its aircraft to record levels in 2013, but that this had been largely achieved by dumping fares.

As a result, Maybank said MAS’ yields had collapsed to near-2008-09 global financial crisis levels, and the nine-month to Sept 30, 2013 core losses had risen by 51.4% year-on-year (y-o-y) despite the many positive initiatives to upgrade product and service quality.

“The anticipated poor performance stems from depressed yields, which we estimate have plunged by 17.4% y-o-y during the quarter. We estimate core losses in FY13 have expanded by 93% y-o-y to RM1.01bil.”

Meanwhile, AirAsia flew a total of 42.61 million passengers for the whole of 2013, up 25% from 34.13 million passengers in 2012.

According to the low-cost carrier’s (LCC) preliminary operating statistics released yesterday, it carried 11.8 million passengers, a whopping 28% increase, in the fourth quarter ended Dec 31, 2013, compared with 9.21 million passengers in the previous corresponding quarter.

Maybank opined that AirAsia’s upcoming results will be weak, and below consensus by 10.3%. “This will, however, be within our below-consensus forecast. We believe the results will show signs that the industry has reached a bottom and that first signs of a recovery are at hand.

“AirAsia has done a good job in fending off the additional competition by deploying modest capacity growth and tight cost controls. It has also achieved a load factor of 85% for its Malaysian operations in the fourth quarter ended Dec 31, 2013; its first in history. However, yield declines were inescapable and nine-month to Sept 30, 2013 core profit fell by 15.5% y-o-y,” Maybank said.

It added that it had also tweaked its earnings forecasts for AirAsia to take into account the latest operating statistics, fleet growth guidance by management and changes to its US dollar-against-ringgit assumptions.

“Our FY13-15 forecasts have been revised up by 5.5%, 4.5% and 5.3%,” it said, adding that it had maintained a “buy” call on the LCC with an unchanged target price of RM2.80, based on a 10.5 times FY14 price-earnings ratio, which is on par with the global LCC average.

Maybank said AAX’s fourth quarter was “exceptionally challenging and yields have declined” much more than expected on key Australian routes. “We believe 2013 earnings will slightly miss consensus by 4.8%.”

On the positives, the research house said the industry was showing the first sign of being rational with sensible capacity deployment, AAX’s launching of three new routes this year from the initial plan of five, and KLIA2’s opening will boost efficiency and enhance customer experience. These factors will help to boost yields by 2%-3% in 2014, it said.

“We look forward to 2014 with optimism, as competitive pressures are abating. MAS is reducing its wide-body fleet by two aircraft in 2014 and zero growth in 2015. This means that MAS will have to cut one-to-two long-haul flights from its network.

“AAX will have a clean run in 2014-15 faced with minimal competition, if any, whenever it expands its route network,” Maybank noted.