KUALA LUMPUR: Malaysia Aviation Group (MAG) will reinforce its cost discipline as United States (US) tariffs are anticipated to drive up the cost of aircraft components by between five per cent and 14 per cent.
Group chief strategy and transformation officer Bryan Foong Chee Yeong said rising costs and supply chain disruptions may pressure profitability.
"Besides, increased volatility in fuel and foreign exchange rates has also led to an uncertain cost base. Potential recessionary fears are softening demand for air travel and logistics," he said during the MAG 2024 Annual Performance media briefing today.
Foong also pointed out that greater uncertainty in the supply chain is causing disruptions and delays in airlines securing aircraft, parts and components required to support operations.
To mitigate these challenges, he said MAG has instructed its teams to adopt more disciplined cost management practices.
"We will manage our costs more efficiently moving forward. We will continue to focus on international flows, which we have successfully strengthened over the past two or three years, to drive better volumes and high contribution from international markets.
"We will also continue to invest in our product to enhance the passenger experience on board and our services on the ground, as well as remain dynamic and agile in managing our capacity to cope with changes in the industry," he said.
Summarising the outlook for 2025, Foong said MAG expects another challenging year for aviation, compounded by the impact of tariffs and broader global uncertainty.
Meanwhile, group managing director Datuk Captain Izham Ismail highlighted the knock-on effect of tariffs on the airline’s cost base and ultimately on consumers.
"In the current situation, we hope that policymakers globally will make the best decisions for all," he said.
He added that in a worst-case scenario, a cost increase of up to 25 per cent could result in higher fares, potentially impacting customer willingness to pay.
"Take aircraft components, for example - high-pressure turbine blades manufactured by CFM International in Mexico. They must first be shipped to North America, where tariffs are applied. CFM passes on the cost to us, and naturally, our sales costs rise.
"That cost pressure eventually cascades down to customers," he explained.
Despite the headwinds, MAG reiterated its commitment to long-term transformation, with a focus on agility, investment in passenger experience, and network growth, while remaining alert to external risks including geopolitical instability, cybersecurity threats, and talent shortages. - Bernama
