Paul Lewis/SINGAPORE
MALAYSIA AIRLINES (MAS) managed to deliver its long-awaited profit recovery for the 1994/5 financial year, but the improvement failed to live up to expectations following a lack-lustre second half.
The group turned in profits of M$139 million ($56.6 million) for its full year to the end of March, recovering most of the ground lost in 1993/4, when profits had dwindled to only M$16 million.
Financial analysts are unimpressed with the extent of the turnaround, however. After a strong showing in the first half of the year, financial markets had been projecting group profits in the region of M$190-215 million.
MAS Chairman, Tajudin Ramli also admits that airline services failed to make money, with the improved results stemming largely from ancillary operations, such as in-flight catering and airport services.
"These results are very, very disappointing," says Terence Chan, analyst at securities house Kleinwort Benson. He blames the performance on "excessive capacity growth", which added around M$200 million in extra costs.
MAS took delivery of 15 aircraft in 1994/5, including its first five Airbus A330s, helping to push financing charges up by M$143 million. That was offset partially by $123 million in compensation for the late delivery of the first A330. The group had been forced to fill the gap by leasing McDonnell Douglas MD-11s from World Airways, a company in which Tajudin's Malaysian Helicopter Services (MHS) has a 25% stake.
The airline did manage to reduce the number of under-utilised aircraft, by leasing out some its fleet to joint venture partners, including Royal Air Cambodge and Air Maldives.
Four Boeing 737-400s have also been leased to Jet Airways of India and Myanmar Airways International.
As a result, capacity growth was broadly in line with a 19.3% rise in traffic across the system. Passenger-load factors edged up to 69.8%, while cargo averaged 67.3%.
Analysts warn that the airline's capacity expansion, combined with mounting competition form other international carriers, will continue to depress yields.
On domestic routes MAS is obliged by the Malaysian Government to maintain domestic services, most of which are uneconomical and are losing money due to regulated pricing. Revenue from domestic routes grew by only 1.2% in 1994, while sales from international services rose by 12%.
Tajudin has refused to comment on speculation that MAS wants to hive off many of its unprofitable domestic services to Pelangi Air, 18% of which is owned by MHS.
Source: Flight International
