MAS keen on sale of aircraft

  • Business
  • Wednesday, 08 Mar 2006 

PETALING JAYA: About 30 aircraft are expected to be put up for sale if Malaysia Airlines (MAS) can persuade its parent Penerbangan Malaysia Bhd (PMB) to dispose of the planes to raise cash that it needs to fund its operations. 

Sources said MAS was looking to dispose of 12 or 13 B747-400, several B737-400, Fokkers and even some Twin-Otters. The final list would be drawn when MAS has finalised its network rationalisation and fleet requirement plan, which sources said might be completed by mid-year. 

“One thing for sure is the B747 would not fit into MAS’ new network plan. But MAS likes the B777 and A330 aircraft,’’ a source said. 

PMB has thirty-five B737 and sixteen B747 planes. It also has 10 Fokkers and five Twin-Otters and is in negotiations to dispose of one Fokker. Talk of the B737 sale has been circulating for some time now but nothing has materialised. 

A source said that this time around MAS was more serious because it needed to source for funds and maintain a fleet that was cost effective and met its requirements. 

PMB has yet to decide on the request as talks between the airline and PMB were halted days before MAS managing director Idris Jala presented his business turnaround plan for the airline on Feb 27. 

“They have not got back to the negotiating table but would do so in due time,’’ said an industry source. 

Such a move would help the airline raise about RM759mil as it will get 80% of the proceeds from any aircraft sale as spelt out in an agreement crafted during the widespread asset unbundling exercise years ago. 

The remaining 20% will go to PMB, which is 100% owned by Khazanah Nasional Bhd, the Government’s investment arm. PMB has 69% stake in MAS. 

Although MAS also leases aircraft from other parties, it is leasing about 90 aircraft from PMB. 

About 50% of the PMB aircraft are unencumbered and about 30 of them would be put up for sale if needed, the sources said. 

MAS, in its business turnaround plan, said the average age of its fleet was seven to eight years and this had seen a 10% rise in the “number of annual heavy maintenance visits since 2001.’’ 

Hopefully, with the sale, MAS can rid itself of the older planes that are said to be less fuel-efficient and lease some of the latest versions that are highly fuel-efficient. Fuel is a major component of its cost and, with rising jet fuel prices, the airline is looking at ways of trimming costs. 

MAS, which is turning into a leisure/business carrier, said its future fleet would comprise smaller and more fuel-efficient aircraft. It also intends to focus on regular services to destinations that it would choose to serve. 

That may be MAS’ story, but is PMB gung-ho over the sale when it is also aspiring to become a regional leasor? No, according to some sources but, at the same time, PMB is very keen to help MAS ride through turbulent times and is seriously looking at the request. 

“PMB wants to evaluate the case as there are pros and cons to it. If PMB sells these planes, it has to lease some of the latest versions for MAS as the sale will come with a leaseback option,’’ a source said. 

AirAsia Bhd said last week it was “prepared to buy some MAS aircraft’’ and was looking at four to nine B737 planes. 

Besides the aircraft sale, MAS is also looking to dispose of some of the extra engines that it had ordered years ago. In total, MAS should make about RM800mil to RM1bil from aircraft and engine sales, Jala said when he unveiled the business turnaround plan. 

 MAS :  [Stock Watch]  [News]

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