MAS sticks to net profit targets

  • Business
  • Saturday, 29 Nov 2008

Competitive business model to ensure profit

KUALA LUMPUR: Malaysia Airlines (MAS) is cautiously optimistic on its fourth quarter prospects given the challenging global economy and expects its competitive model to ensure it continues to stay profitable.

Chief executive officer and managing director Datuk Seri Idris Jala said MAS would not change its net profit targets for the year.

“We can deal with competition. I have no worries on this because we are creating a model to stay truly competitive; we will not make losses next year,” he told a press conference yesterday.

Quarter-on-quarter, the key measures of an airline’s profitability – yield and revenue per available seat kilometre (RASK) grew by double digits, Idris said. “Yield was up 17% to 31.7 sen per RPK while RASK increased 11% to 22.1 sen per ASK,” he said.

RPK stands for revenue passenger kilometre and is measurement of the number of passengers multiplied by number of kilometres flown. ASK refers to available seat kilometre and measures total seats available for sale multiplied by distance.

Revenue for the quarter under review was sustained by its operating performance and non-fuel expenses which reduced significantly by 14% to RM2.2bil.

Passenger revenue was up 4% to RM2.9bil while cargo reported revenue of RM589mil, Idris said.

He said year-to-date, the airline had already managed to save up to RM900mil via its aggressive cost-saving initiatives against its 2008 target of RM1bil. It managed to cut costs amounting to RM635mil and RM738mil for 2006 and 2007 respectively.

“This is why we can now afford to offer customers cheap fares,” he said.

He said MAS had no plans to cut routes as it had already done so earlier for the non-viable routes.

On hedging, Idris said the company had always adopted a competitive hedging policy based on volume, price and instrument mix in line with competitors in the trading area. “We don’t do speculative hedging,” he said.

On whether MAS had plans to reduce its staff, Idris said the airline would continue to recruit in line with its fleet expansion plans.

Chief financial officer and executive director Tengku Datuk Azmil Zahruddin said MAS was expected to announce its dividend policy early next year.

“Once it is ready, we will announce it but it is too premature to say anything else right now,” he said.

OSK Research head Chris Eng said MAS’ results in terms of operating profit were below expectations. “However, in terms of bottomline, it is within expectations,” he told StarBiz. “Having said that, we think MAS will be a survivor in these difficult times.”

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