By P. Gunasegaram
Malaysia Airlines (MAS) is optimistic for the future although its only option right now is radical or sweeping change, its CEO Ahmad Jauhari Yahya said at the company’s annual general meeting (AGM).
Ahmad Jauhari Yahya
“We know that there are many options to consider. But we also know that we cannot simply go on with incremental improvements. And I have no intention of standing here in front of all of you at next year’s AGM with further news on the results of piecemeal or ineffective change.
Our only option at this point of our business evolution is radical or sweeping change,” he said.
Ahmad Jauhari outlined several reasons why he was optimistic although radical change was required. They include:
- MAS has a world-class product. being one of only seven airlines in the world to achieve the Skytrax 5-star rating, the highest quality ranking for a commercial airline. Also MAS took the ‘Asia’s Leading Airline’ recognition at the World Travel Awards in 2013.
- MAS now has one of the newest fleets in the industry, with the ongoing fleet renewal programme reducing the average fleet age to just under five years.
- The service is “truly world-class”, having received more than 100 awards in the last 10 years, including World’s Best Cabin Crew eight times since 2000.
- MAS has a “world-class engineering arm” used extensively by the rest of the industry.
- And over its 41-year history, it has enjoyed an excellent safety record, thanks in part to this world-class engineering arm.
“These four world-class assets: our product, our service, our engineering capabilities and our safety track-record, are real and tangible assets. To be competitive in the future, we have to unlock and unleash the full value of these great assets,” he said.
Ahmad Jauhari said the foundations for the resurgence of Malaysia Airlines are very much there and all options are being explored to make that delivery feasible, taking into account the “diverse views of different market audiences and participants”.
“Of course, we are acutely aware of the need for clarity about Malaysia Airlines’ future. But with so much at stake for the airline’s reputation and for the country whose name it carries, the solution cannot be a partial or an ill-conceived exercise.
“Fundamentally, it is about the rebuilding of the airline, so that it can meet the expectations of all those with whom we work and are associated. As a result, we cannot allow the short-term drive out the long-term and sacrifice the right outcome to the quest for a quick, short-term fix.
“However, while finalising a detailed plan, which we will naturally bring to all shareholders, we are pro-actively addressing critical parts of the operations on revenue and cost. To achieve a turnaround of the business, we will need the support of all employees, unions and all stakeholders; to work together towards a shared vision for unlocking the competitiveness of the company. It is important to note that some of the current work rules are not conducive for this turnaround,” he said.
MAS recorded an even larger financial loss in 2013 compared to the previous year. Ahmad Jauhari attributed this to higher depreciation, a weakening ringgit and falling yields.
“While we are not alone in our suffering – all carriers around the globe have been impacted – the overall result was a RM1.174 billion net loss for the 12 months ended 31 December 2013, which as I said earlier, is unsatisfactory.
“There were also costs incurred in 2013 whose benefit will accrue in future years, including costs incurred for our fleet rejuvenation and investment to strengthen our brand position.”
Amidst the challenges there were some bright spots, he said. Passenger revenue was up by 10% in 2013 by an additional RM1.09 billion through an aggressive volume push, with seat load factors increasing from 74% in 2012 to 81% in 2013 on an airline capacity (available seat kilomtere) increase of 17% compared to 2012.
Globally, regionally and domestically, there has been a significant increase in capacity into many key markets important to Malaysia Airlines. However, heightened competition for market share caused significant erosion in passenger average fares and yields.
“While capacity grew 17% utilising existing fleet and resources, costs grew by only 10% after absorbing higher costs from the weakening ringgit against the US dollar and a one-off cost for aircraft redelivery. This has resulted in a lower CASK (Cost per ASK), which was reduced by 10% in 2013.”
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