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Malaysia Airlines Q1 profits plunge after MH370 saga
Publication Date : 16-05-2014
Beleaguered Malaysia Airlines (MAS) yesterday reported its worst quarterly loss in over two years, as the disappearance of Flight MH370 in March prompted high passenger cancellations and added to the airline's financial woes.
Net losses for the first three months of the year are 443.4 million ringgit (US$137 million), nearly doubling from a 278.8 million ringgit loss in the corresponding quarter last year, MAS said in a filing to the stock exchange. It posted revenue of 3.6 billion ringgit in the first quarter this year, up from 3.5 billion ringgit a year ago.
MAS has been making losses for the past three years due to high staff costs and stiff competition from low-cost carriers such as AirAsia and Malindo Air, as well as Middle Eastern airlines.
Last year, the Malaysian national carrier posted full-year losses of 1.17 billion ringgit.
MAS had earlier said it would bounce back to profitability this year but it yesterday acknowledged that the plans could be derailed by MH370's disappearance, while sales later this year are expected to be lower than initial targets. The Beijing-bound MH370 mysteriously vanished in the early hours of March 8 after it failed to contact air traffic controllers less than an hour after takeoff.
Satellite data suggested that the plane had turned back from its easterly route, flew past northern Peninsular Malaysia and headed towards the southern Indian Ocean where it is believed to have gone down.
But to date, searchers have yet to find the plane wreckage.
"The incident, involving the disappearance of the B-777 Beijing-bound flight, triggered a major short-term reaction in consumer behaviour, with the airline observing high cancellation of existing bookings and reduction in long-haul bookings in favour of short-haul bookings," MAS said yesterday.
"Sales from China fell some 60 per cent in March, soon after the disappearance of the aircraft," it said.
MAS said it is currently conducting a "thorough review" of operational processes and plans to ensure the company emerges stronger following the MH370 crisis.
While the company did not say what these plans are, some aviation analysts said MAS may have to break up its operations, which include separating its profitable engineering unit from the parent company to reduce costs from a bloating staff count.
MAS employs about 19,400 staff, not far from Singapore Airlines's 23,000 and Cathay Pacific's 20,000. But in terms of productivity, MAS' employees generated half as much revenue per employee as those at Singapore Airlines and Cathay.
But over the years, the company has been reluctant to cut its staff count as employees are backed by a powerful union while its major shareholder Khazanah Nasional - a government investment arm - also does not appear to favour the idea.
Mohshin Aziz, an aviation analyst at Maybank Investment Bank, said MAS is running out of options.
"The MH370 is the strongest wake-up call yet for management to do something radically different to keep the company running," he told The Straits Times yesterday. "Cutting jobs, breaking up operations... They have to be done."
Meanwhile, the government is negotiating with its agencies, including oil and gas giant Petronas, on the assets that could be deployed in the ongoing search for the missing MH370 flight, said Acting Transport Minister Hishammuddin Hussein.
These include key deep sea search assets that could map the ocean floor to scour for unnatural objects like a plane wreckage.
Hishammuddin told a news conference yesterday that a tripartite meeting last Wednesday between Malaysia, China and Australia had worked out priorities in the next phase of the search for MH370.
The new phase will focus on deep sea search with a review of satellite data from Britain's Inmarsat to determine a smaller search area.
In a statement yesterday, the Joint Agency Coordination Centre said a US-operated autonomous underwater vehicle - called Bluefin-21 - that is searching for the plane has been damaged and needed spare parts that will be delivered on Sunday.
*US$1 = 3.23 ringgit