Loss-making Malaysia Airlines (MAS) unveiled a business plan on 7 December to bring the group back to the black by 2013.
The plan includes a slew of harsh measures including suspending loss-making routes, focusing on cost cutting and aggressive marketing to win back customers. These moves are expected to bring in revenue of up to ringgit (M$) 1.508 billion for the group.
The group also announced that it will be launching a premium regional carrier by the second half of 2012 which will, in the long term, fly all the domestic and regional routes serviced by MAS now.
At a press conference on 7 December, the airline said it has reported a cumulative loss of M$1.247 billion for the first three quarters of 2011 and that it does not expect to make a profit for the full year.
It added that should the group maintain its current business model, the airline will go bankrupt by the middle of 2012.
"Malaysia Airlines needs to make hard and unpopular decisions simply to survive in order for it to have the possibility to thrive and realise the airline's vision," said group CEO Ahmad Jauhari Yahya.
"The market environment remains very challenging for Malaysia Airlines, given the increased competition from low-cost and full-service carriers, overcapacity in the Asian aviation sector, high fuel cost and the volatile global economy," he added.
Ahmad Jauhari also admitted that the airline has lost focus on its full-service offering, resulting in a drop in quality standards, passenger load and lower pricing compared with other airlines in the region.
The airline's average fleet age of 13 years also did not help business, he said.
To improve the profitability of its network, the airline will suspend loss-making services to and from Cape Town, Johannesburg and Buenos Aires, among others.
"Successful turnarounds of other airlines such as JAL or Garuda have been based on agressive network cuts. The cutting of MAS's available seat kilometres by approximately 12% next year is expected to save between M$220 million [and] M$302 million," said Ahmad Jauhari.
MAS will be deploying 23 new aircraft in 2012 and will improve its revenue management and tactical sales to optimise yields and bring in profits of up to M$477 million while winning back customers.
The carrer also aims to bring about savings of up to M$392 million by reducing fixed costs and improving procurement and productivity.
Besides all these cost-cutting measures, the airline will also now focus on its core business and spin off its anciliary businesses in aerospace engineering, pilot training, cargo and ground handling. This is expected to bring in a profit of up to M$337 million for the airline.
The carrier, which will become a full member of the Oneworld alliance by the second half of 2012, also plans to leverage on alliances and partnerships with member airlines to expand its network.
"We are also exploring the possibility of joint ventures with partners in order to serve multiple markets together, while reducing the financial risks of going [it] alone," said Ahmad Jauhari.
MAS added that it has also started discussions with AirAsia and AirAsia X, as part of its collaboration, to improve efficiency through joint procurement and consolidation of key activities.
Source: Air Transport Intelligence news
