Mas Airline

In: Business and Management

Submitted By aishahjalani
Words 1383
Pages 6
Bluer skies ahead for Malaysia Airlines
A QUESTION OF BUSINESS
By P. GUNASEGARAM

Its huge losses belie a much brighter future if the right steps are taken
AT first glance, one can be excused for surmising that Malaysia Airlines is in deep trouble – actually it’s not. In fact a careful examination of the figures shows that it is very close to a turnaround and it needs only to tweak its revenue management to get it to show profits.
For all airlines, the final quarter of last year was a difficult one, the main reason being rising costs of jet fuel along with the rise in oil prices.
To manage that, Malaysia Airlines needed to maximise yields to recover cost increases. Yield is the amount obtained for each revenue passenger km (RPK – totalling up passengers flown multiplied by distance flown). Meantime it needed to keep the load factor up (a measure of capacity usage, RPK as a percentage of available seat km or ASK which is obtained by totalling up available seats multiplied by distance flown).
At the same time, it needed to keep a tight hold on costs, which is difficult to do when fuel costs are rising so fast. It is the airlines with tight cost control and who already have a decent yield that bear up better when fuel prices soar.
To get a handle on how Malaysia Airlines performed, let’s look at how it did for the quarter ended Dec 31 last year and then at the full year results. At first glance, the net loss for the quarter seems horrendous at RM1.277bil but of that a huge RM1.095bil was due to provisions. Provisions for aircraft delivery accounted for a huge RM602mil, for impairment in value of freight aircraft RM314mil and stock obsolescence RM179mil. These are non-recurring items.
Increase in fuel costs accounted for RM305mil, and if not for this and the one-off provisions, Malaysia Airlines would have actually recorded a net profit of about RM123mil,…...

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