MAS continues recovery with RM330mil Q3 profit

BY PAULINE S.C. NG

MALAYSIA Airlines (MAS), continuing on its flight path to recovery, has turned in a net profit of RM330.4mil for its third quarter ended Dec 31, 2002. The result was boosted mainly by exceptional gains of RM229.4mil as a result of the airline’s widespread asset unbundling (WAU) scheme and RM77mil from the sale of aircraft and engines. 

The WAU scheme basically shifts aircraft-related assets and liabilities from MAS’ balance sheet to the government, and the unbundling of the carrier’s domestic business gives revenue generated from its domestic operations to the government in return for a fee. 

For the period under review, MAS posted RM333.6mil pre-tax profit on revenue of RM2.2bil, lifting its earnings per share to 42.91 sen.  

MAS said it recorded a group operating profit of RM32.3mil for the quarter, compared with a loss of RM323.8mil for the corresponding period a year earlier. 

Analysts said the national carrier’s latest results were within expectations. 

“MAS is slowly recovering,” said a Mayban Research analyst. 

Passenger and cargo revenue increased by RM113.5mil and RM57.6mil respectively in the quarter, due mainly to higher loads and improvement in yields.  

Overall load factor grew by 6.3 percentage points to 68%, with passenger and cargo load factors at 66.9% and 72.5% respectively. 

Total expenditure decreased by RM183.5mil, due largely to lower fuel costs, depreciation, aircraft maintenance, overhaul and finance charges, but was partly offset by higher leasing charges for aircraft, commission on sales, and advertising and promotion. 

The latest quarterly result took MAS’ cumulative net profit for the nine months ended December 2002 to RM250.7mil versus a net loss of RM867.8mil in the previous corresponding period. Revenue for the nine-month period was RM6.7bil compared with RM6.2bil previously. 

A segmental breakdown showed airline operations contributing RM253.3mil in pre-tax profit, cargo services RM52mil, and “others” RM10.5mil.Catering services, however, made a loss of RM46.7mil. 

MAS warned that the operating environment would be challenging in the coming months, given geopolitical uncertainties and the threat of war in Iraq. 

“However, our continued focus on deploying capacity within the Asian region may partially cushion any adverse impact,” it said. 

MAS had made various fuel hedging transactions to cover the period Jan 1 to March 31 last year, doing so in several lots totalling 1.705 million barrels. In the process, it said, it made an estimated gain of RM21.7mil. 

But the Mayban Research analyst said that even if MAS hedged 50% of its fuel costs now, it was still likely to be hit as spot prices were currently already high. 

He also said it was still too early to judge MAS’ financial performance, as its previous results had been aided by WAU restructuring gains. As he pointed out, the December quarter is also traditionally the peak travelling season.