Bellew: "Charges for international passengers at KLIA are at RM33 (US$8.25) more per person than they are at KLIA2." EPA
KUALA LUMPUR: Malaysia Airlines continued to see strong bookings after a tough Q1 FY17 with a 45% improvement in forward bookings for the next six months from June to November 2017 compared with a year ago.
Announcing the results of its performance, the national carrier said on Friday it was maintaining its cautious outlook for the year due to a more aggressive price war on the domestic market, a weak ringgit and increased fuel prices create a challenging cost
Despite the headwinds, Malaysia Airlines said it was still on track to be sustainably profitable by 2018.
Group CEO Peter Bellew said Malaysia Airlines passenger bookings continued to accelerate in Q1, FY17.
“The quarter was tough with higher fuel prices and adverse foreign exchange impacting our performance. “However, customers increased by 12.9% on-year to 3.57 million passengers and load factor at 79.4% versus 68.9% last year. Yields were lower due to intense competition and a price war,” he said.
Bellew added Q1 recorded a further rapid improvement in international business due to an equalisation of certain KLIA airport charges.
He said the network expansion was on track, with the second flight to Shanghai and upgauged Hong Kong flight (from the Boeing B737 to Airbus A330) showing immediate results.
“The airline is seeking more widebody aircraft on short- to medium-term leases to facilitate growth,” it said .
He also pointed out the airline’s customer service index continued to recover as product improvements were steadily introduced in the quarter.
“We have introduced the ‘Golden Rule - treat customers as you would wish to be treated yourself’. The Golden Rule will be supported by simpler customer service policies and a large investment in training in 2017.
In Q1, the airline carried 3.6 million passenger compared with 3.8 million in the fourth quarter of 2016. Its passenger load factor was 79.4% from 80.% while the passenger yield was 21.2 sen compared with 21.5 sen.
Passenger load factors remained robust for Q1 2017 with Malaysia Airlines maintaining fare discipline despite competitor fares dropping significantly.
The rapid recovery in international business continued in the quarter with a load factor of 81.1% in 2017 versus 69.6% in 2016.
Domestic business load factor also improved by 9.5% in the quarter.
“The airline is expecting the ongoing price war in Malaysia to suppress average fares for the remainder of 2017,” it said.
“A heightened focus in 2017 will be on further reducing cost, especially given the adverse impact on foreign exchange and challenging competitive environment, as well as on improving customer experience.
“The quarter saw an accelerated cost management approach to generate more savings specifically in areas such process re-engineering, fuel efficiency initiatives and in the renegotiation of supply contracts, which will contribute to the group’s long term profitability and sustainability. This is especially critical in light of material change in market conditions.
“The group maintains a cautious outlook in fiscal year 2017. A more aggressive price war on the domestic market has happened earlier than initially predicted, ahead of the anticipated large increase in aircraft from competitors in Q2 and Q3 of 2017.
“A weak Ringgit and increased fuel prices create a challenging cost environment. Advance bookings are far stronger in 2017 than 2016, but the airline is seeing yield pressure across all routes as low fares are available from many legacy carriers as well as the traditional low cost carriers.
“For Malaysia Airlines, the market is diverging with consistent growth and improvement on international services, but a loss of market share domestically where fares are increasingly low. The group will continue to be prudent in controlling capacity and will allocate the group’s aircraft where we see the best potential returns. The airline is still on track to be profitable in 2018,” it said.
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