MAS bleeds, RM1bil loss

  • Business
  • Wednesday, 19 Feb 2014

PETALING JAYA: With a year left to go, analysts and market observers are not convinced that Malaysia Airlines (MAS) can break even by end-2014, as outlined in its turnaround plan. 

The national carrier, which had adopted a strategy to sell as many seats as possible, posted another quarter of losses in the fourth quarter ended Dec 31, 2013 (Q4’13), its fourth straight quarter in the red and the worst yearly performance since 2011’s shock net loss of RM2.5bil.

Its net loss widened to RM1.17bil last year from RM432.59mil the year before, although sales grew 9.92% to RM15.12bil versus RM13.76bil, higher than the RM14.76bil estimated by analysts.

The airline’s loss per share stood at 8.69 sen against 6.09 sen a year earlier. This was far worse than analysts’ expectations of a RM878.86mil net loss and loss per share of 5.8 sen.

MAS’ bottom line in Q4’13 plunged into a net loss of RM343.44mil from a profit of RM51.37mil in the same period in 2012. Sales rose a marginal 0.78% to RM3.9bil from RM3.87bil.

More tellingly, the flag carrier turned EBITDA (earnings before interest, taxes, depreciation, and amortisation) negative in Q4’13 from EBITDA positive in Q4’12 and Q3’13, a sign that its operations were losing money.

For the full year, however, it registered an EBITDA of RM254.19mil, up 35.71% compared with RM187.31mil in 2012.

Data compiled by Bloomberg suggests that MAS will remain under water well into the 2015 financial year, even if sales improve.

In the notes accompanying its financials, the airline said that despite a 17% boost in capacity for the year, and 6.3% better load factor to 81%, passenger yields succumbed to pressure from “intense competition” caused by new entrants both domestically and regionally.

In a bid to be “load-active, yield-passive”, MAS had engaged in an all-out price-war to fill seats, but at the expense of margins. This resulted in lower yields by 16%.

Speaking with StarBiz yesterday evening, MAS group chief executive officer Ahmad Jauhari Yahya said: “As an airline we have been improving, but a lot more needs to be done. 

"I can’t assure you that we will be profitable by this year as the turnaround is still under way, and we cannot predict fuel prices and foreign exchange rates.’’

Its focus in 2014 will be to whittle down its unit cost by 10% and maximise yields, he added.

“We have reduced our unit cost from 25.8 sen in 2012 to 24.7 sen last year. A 10% reduction this year will help improve margins." 

Ahmad Jauhari pointed out that MAS plans to retire two of its B777 aircraft and phase out its entire B734 fleet for B738. This is expected to cut fuel costs by 15%.

The carrier is also growing capacity by 20% this year via higher utilisation of its aircraft.

Ahmad Jauhari said that although MAS was pushing for increased productivity and to sell more seats, it would still suffer from pricing pressure on tickets due to stiff competition.

The airline's operating expenses for 2013 grew faster than its revenue at RM14.87bil versus RM14.55bil, respectively.

MAS said its expenses rose on the back of 10% higher fuel costs, in line with capacity, and a weaker ringgit against the US dollar.

Non-fuel costs climbed 9% on capacity-related costs, marketing, maintenance, and provisions for phased out aircraft.

Its depreciation jumped 48.96% to RM816.73mil, finance costs 85.59% to RM436.62mil and provision for phased out aircraft six times to RM88.23mil.

On the flipside, MAS posted a net gain on hedging for fuel, interest rates and foreign exchange to the tune of RM20.35mil from a loss previously. Its cash stood at RM3.8bil.

According to analysts, the management painted a bleak picture about its outlook during a conference call yesterday, warning that 2014 would be just as challenging, if not more so, than last year.

“But a breakeven this year remains an internal target for MAS,” Maybank IB Research analyst Mohshin Aziz told StarBiz.

The operating environment will continue to be tough, with costs expected to rise 3%-5% this year, he added.

Its shares ended the day unchanged at 31 sen, on trade of 9.84 million shares.

Rumours have also been circulating that Ahmad Jauhari could leave MAS. He denied this when asked.

“I am not quitting because my contract is still there. I have another year to go (before the contract expires).’’

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