KUALA LUMPUR: The legacy issues that have been weighing on Malaysia Aviation Group (MAG) have been given a great reset and it is now banking on its long-term plan to deliver a turnaround by 2023.
Now that its restructuring is done and dusted with RM15bil of savings in liabilities, MAG, the parent company of Malaysia Airlines Bhd, has set expectations of a financial breakeven and turn cash flow positive by 2023 with its Long Term Business Plan 2.0.
MAG planned to transform into a leading global travel and aviation services group as “pure-play aviation” business would not be sustainable.
Group chief executive officer Capt Izham Ismail (pic, below) said the group’s vision is to become a leading global travel group, focused on delivering customised end-to-end solutions.
“Our business is diversified and leverages Malaysia’s strategic advantage to develop a regional aviation hub in maintenance, repair and overhaul (MRO), cargo and logistics, ground solutions as well as aviation learning and development.
“We are disrupting the current organisation internally for us to fit for the future, ” he told a virtual media briefing on the group’s business updates yesterday.
Its non-flying revenue is expected to accelerate from about RM2bil to RM4bil by 2025.
The trajectory, according to Izham, was an extended L-shaped recovery, which pointed at a likely recovery in 2023 and MAG would break even much earlier if the market turned around.
He stressed that there were three key financial objectives to be managed – the restructuring of the balance sheet which has since been completed, the turnaround of the profit or loss and the cash flow stability.
“We anticipate the profit or loss to turnaround in the next 18 to 24 months.
“We will have to be very cautious on what we invest in the future, especially with the commitment by shareholders in providing us working capital and we must be very assertive of where we want to invest, ” said Izham, adding that the bulk of the RM3.6bil from Khazanah Nasional Bhd was for growth and investments in digital, MRO, aircraft deliveries and entry into service and others.
MAG planned to retire its entire fleet of Airbus A380 airliners.
“We are currently exploring ways to dispose of the aircraft. We are cognisant of the challenges of selling this plane but we are still looking at ways to dispose of our A380 fleet.
“At the moment, management is convinced that the A380 doesn’t fit the future plan, ” he said.
MAG has six A380s under Malaysia Airlines.
It is cognisant that its wide bodies will need to be refreshed and there will be a combination of mid-range, long-haul and super long- haul aircraft. It aims to have 83 aircraft by 2025.
The group is also committed to taking delivery of 25 Boeing 737 Max from 2024, as part of its agreement with Boeing, which is one of its creditors.
“We are exploring the possibility of taking the aircraft earlier and I hope all the issues involving the 737 Max will be resolved by then.
“I hope consumer confidence will come back into play in the technology, ” he said.
The Boeing 737 Max was grounded globally after two crashes claimed 346 lives.
The flight control system of the 737 Max was blamed for the tragedies.
Meanwhile, Izham dismissed claims that MAG has engaged Goldman Sachs as the consultant for its long-term plan.
“We were on our own except for the capital financial restructuring portion where we needed advisers.
“This is not the best time to explore the idea of strategic investors.
“Once the market recovers, we will see whether we want to explore having investors in MAG but definitely, we’ve got nothing to do with Goldman Sachs, ” he said in response to an article by an aviation consultant that the investment bank would help chart MAG’s future direction and recovery efforts.
The greatest challenge for the group is to navigate through a volatile market which may extend to the next 12 months to 18 months.
Despite the successful restructuring, the organisation continues to operate under a crisis mode.
MAG achieved RM5.7bil in cost savings and cost avoidance last year. As of the first quarter of 2021, it achieved a further RM510mil in cost savings and deferrals and it targeted RM1bil more by the year-end.
MAG anticipated the market to remain weak in 2021 and possibly up to the first quarter of 2022.
The group’s focus this year will be on rebuilding Malaysia Airline’s network with the anticipated air travel recovery, with an optimistic capacity target of 63% of pre-crisis levels by the end of the year.