Malaysia Airlines Witnessed in 2017 the Beginning of its Financial Recovery

Malaysia Airlines Trims Again Its Network

Malaysia Airlines Group (MAG) saw improved revenue in the three months ended December 31 and believes that it should move into the profit zone in 2018.

Five years of painful reforms and restructuring finally start to pay off for Malaysia Airlines. The national carrier of Malaysia, into the hands of Khazanah Nasional, the strategic investment fund of the Government of Malaysia entrusted to hold and manage the commercial assets of the Government and to undertake strategic investments.

The airline continues to strengthen its market share in Malaysia but as it faces strong competition on domestic routes, it now prefers to concentrate on international development. It recently scaled back its domestic route frequencies while expanding its footprint in Northeast Asia and overseas. “Southeast Asia has strong traffic growth, but overcapacity remains a challenge, pressuring yields,” its chief executive officer Izham Ismail said in a statement.

“While the economy is anticipated to be resilient, MAG anticipates that supply and capacity pressure will continue to put a stress on yields although the effect for 2018 is expected to be moderate,” he added.

In addressing the overcapacity in the region, Malaysia Airlines had expanded in China with four new routes including Nanjing and Haikou. In November, it resumed flights into Surabaya attracting Umrah and Hajj traffic.

In Europe, Malaysia Airlines commenced its inaugural Airbus A350-900 service from Kuala Lumpur to London, replacing the ageing Airbus A380 on that route. The latest to its fleet, the A350 has a total capacity of 286 seats—four in First Class, 35 in Business Class and 247 in Economy Class. The aircraft is equipped with Malaysia Airlines’ latest cabin products offering superior service in all classes of travel. The Airbus A350 will also fly from August to Auckland in New Zealand.

The airline also increased frequencies to Seoul in the last quarter of the year and announced the resumption of Brisbane. The Kuala Lumpur-Brisbane route will start from June with four weekly services on board Airbus A330-300 aircraft.

However, the airline dashed any hopes to resume this year flights to more European destinations. The carrier used to fly until 2016 to Amsterdam, Frankfurt, Istanbul and Paris next to London. It seems that the delivery of Boeing 787-9 in the second half of 2019 would however fit best European routes.

MAS strategy to target more profitable routes had yielded early results. Revenue per available seat kilometre (RASK) at Malaysia Airlines in the last quarter improved 2% to 23.6 sen, its highest passenger yield posted during the fiscal period.

“A concerted focus on yield in the second half of the year has seen an overall improvement in yield and RASK bucking the general downward trend of other regional players,” Izham said.

Despite the improvement, he said airline financial performance in 2017 had missed its turnaround target.

Izham put the blame for the under-performance to a slow first half of the year impacted by a weak pricing strategy as well as the hike in exchange rates and fuel. “Moving forward, we will continue to focus on and drive yield to cushion the group from rising fuel costs and foreign exchange volatility,” he said.

The airline is expected to be profitable next year according to a statement of its shareholder Khazanah Nasional Bhd.