By Chan Quan Min
The disappearance of Malaysia Airlines flight MH370 in March 2014 has had an adverse impact on the airline’s financials with a reported net loss of RM307 million for the second quarter ended June.
Together with earlier losses of RM443 million in the first quarter, the national carrier’s first half losses now stand at RM750 million or 65% more than the same six-month period last year.
“We expected the impact of MH370 on the performance in the second quarter. Given that, our team put in much hard work and effort to regain market confidence and rebuild sales.
“Tragically, just as we were beginning to see signs of recovery in all regions, we were dealt the blow of MH17,” said Malaysia Airlines CEO Ahmad Jauhari Yahya.
In the aftermath of the MH370 disaster, specifically the second quarter months of April, May and June, revenue from operations fell 5% year-on-year. Malaysia Airlines says the decline was “a result of lower yield and seat factor.”
Ahmad Jauhari Yahya
Cost saving measures and productivity improvements have been unable to boost financial performance, Malaysia Airlines admitted in a statement today.
“We operate in a harsh business environment of stiff competition from regional and global carriers and high operational costs. Coupled with the impact of the two tragedies which have damaged our brand, the need to restructure the company was accelerated.
“The full financial impact of the double tragedies of MH370 and MH17 is expected to hit Malaysia Airlines in the second half of the year,” said Ahmad Jauhari, also known as AJ to his staff.
A deliberate advertising blackout period lasting all of March and April due to the tragedy of MH370 cost the airline “substantial potential revenue” from the popular Matta travel fair, Malaysia Airlines said. However, marketing activities “picked up” again in May and June.
The market responded well to the Malaysia Airlines Travel Fair held in May with the airline reporting an increase in sales of 29%.
Second quarter flight capacity was 9% higher year-on-year, in line with Ahmad Jauhari’s strategy of “sweating assets” or increasing aircraft utilisation.
Despite this, passenger traffic numbers did not budge and stayed at 4.2 million for the full three-month period, resulting in a lower average load factor of just 74% compared to 80% in the same quarter last year.
Fuel expenditure during the second quarter was 10% higher year-on-year, matching that of capacity expansion.
As at mid-August, Malaysia Airlines reported a fleet comprising 127 aircraft. Of this, only 88 aircraft are in active use, which includes 54 Boeing 737-800, 15 Airbus A330-300 and 6 Airbus A380. The average aircraft age is 5.3 years.
Prime Minister Najib Abdul Razak on August 8 said state investment fund Khazanah Nasional would put Malaysia Airlines through a corporate restructuring in the coming months that will likely “involve painful steps and sacrifices from all parties.”
Earlier that day, Khazanah announced a RM1.38 billion corporate exercise to buy out minority shareholders and de-list the airline from the stock exchange.
Khazanah is expected to reveal details of the corporate restructuring plan in an announcement as early as tomorrow. The plan is speculated to call for a downsizing of Malaysia Airlines operations that could involve job cuts of up to a quarter of the workforce.
Malaysia Airlines crew have not been adequately informed of the job cuts, KiniBiz understands. “I am really in the dark with what’s happening,” a purser serving 20 years with the airline said.
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