PETALING JAYA: The financial performance of Malaysia Airlines (MAS) in the fourth quarter has given analysts confidence that the airline is operationally starting to make a turnaround and its business turnaround plan 2 is working.
The airline carried 3.4 million passengers in the fourth quarter, the most since the first quarter of 2008, but analysts note that MAS’ increased load factor was coming at the expense of yields.
With an increased load factor, however, there was potential for MAS to have higher operating profit for its financial year ending Dec 31 (FY10). MAS is targeting an operating profit of RM100mil to RM325mil for this year.
TA Securities said excluding fuel surcharge and administration fees, revenue per available seat km (RASK) dropped by 6.3% on a yearly basis to 14.9sen/RASK. Yield also dropped by 24.7% to 18.6 sen.
“The lower yield gains were mainly ascribable to heavy promotions whereby MAS offered deep-discounted fares due to stiff competition from other airlines,” it said.
An analyst from MIDF Research has revised his FY10 forecast slightly upwards to take into account an increasing market, better efficiencies and increasing yields.
“Management has stated that it is looking at growing its network in the Asia-Pacific Economic Cooperation (APEC) region, South Asia and the Middle East,” he said.
According to the International Air Transport Association (IATA), intra-APEC region is currently the world’s largest aviation market, eclipsing the intra-North America market (647 million travellers versus 638 million travellers).
MAS made a respectable comeback in the fourth quarter ended Dec 31, posting a net profit of RM609.7mil compared with RM46.2mil a year earlier. It also rebounded from a loss of RM298.9mil in the third quarter.
MAS’ full-year fuel expenditure declined by 86.8%, underpinned by lower consumption and lower average fuel price.
The airline experienced a strong rebound in the cargo segment. Fourth quarter revenue jumped 46.8% on a quarterly basis to RM530mil on the back of 16.5% increase in capacity as well as about 29.2% rebound in cargo yield.
Its strong quarterly profit was attributable to a derivative gain of RM581.7mil during the quarter. This is due to the adoption of the FRS139 accounting system.
It reported an operating profit of RM3.8mil for the quarter. Revenue stood at RM3.3bil while earnings per share (EPS) jumped to 36.49 sen from 2.76 sen previously.
An analyst from Kenanga Research said the thin operating profit in the fourth quarter showed that the recovery remained fragile. “With yield remaining under pressure, a thin operating margin could be vulnerable to higher fuel consumption should additional routes be re-established in the first quarter of 2010.”
Nevertheless, given the better economic outlook in FY10, the analyst is conservatively forecasting a slight yield improvement in the second half of 2010.
TA Securities said the group reported mark-to-market (MTM) hedging gains of RM1.2bil in the FY09 due to adoption of FRS139.
Excluding FRS139, MAS would have registered a net loss of RM2.3bil on the back of 24.8% decline in revenue to RM11.3bil compared with FY08.
“Note however, that the hedging gains are effectively paper gains. MAS will continue to report MTM gains or losses in the ensuing quarters, depending on the movement in the fuel forward curve,” said an analyst from TA Securities.
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