By Chan Quan Min
Malaysia Airlines does not seem to be any closer to profitability having posted a net loss of RM1.2 billion for the 2013 financial year and a deepening quarterly net loss of RM342 million for the fourth-quarter last year.
Despite a 27% improvement in passenger traffic in 2013, the national carrier not only failed to turn a profit but more than doubled losses from the previous year’s results.
In a statement today, Malaysia Airlines said operating profit or earnings before interest, taxation, depreciation and amortisation (EBITDA) improved 36% year-on-year to RM254 million for the financial year ended 2013.
Despite this, the airline’s spokesperson said, net income after tax deteriorated further due to higher finance costs and unrealised foreign exchange losses. Malaysia Airlines reported a full-year net loss of RM1.2 billion for 2013. In 2012 the airline was in the red by less than half this amount or RM425 million.
“We knew 2013 would be a challenging year of intense competition which would impact yield. Knowing this, our focus was to drive revenue, revenue, revenue.
“Our efforts saw the airline’s revenue increase 11%, whilst traffic went up 27% on capacity that increased only 17%,” Malaysia Airlines CEO Ahmad Jauhari Yahya said on the national airline’s 2013 performance.
“While capacity, measured in available seat kilometres (ASK), grew 17% utilizing existing fleet and resources, costs grew by only 10% even after absorbing higher costs from the weakening ringgit against the US dollar and a one-off cost for aircraft redelivery,” Jauhari added. “This has resulted in a lower CASK (cost per ASK) in 2013.”
Amhad Jauhari Yahya
Jauhari, now more than two years into his ambitious turnaround plan for the airline said he would continue to rely on cost-cutting to steer the airline back to profitability, not seen for five years.
“With intensifying competition, we expect the pressure on yield to continue. We will intensify efforts to reduce our costs, focusing on inherent legacy costs, while increasing utilization to drive traffic and revenue,” he explained.
For the 12 months ended December 2013, Malaysia Airlines posted revenue of RM15.1 billion, up 10% from RM13.8 billion in 2012. Total expenditure for FY2013 was RM14.9 billion, also up 10% from the year before.
Jet fuel accounted for 39% of group expenditure. While jet fuel averaged slightly lower at US$128 per barrel in 2013 compared to US$133 per barrel in 2012, the weakening ringgit netted off any gains from the lower fuel price.
Non-fuel costs were up 9% in 2013 from the year before. Higher handling and landing costs for the operation of the Airbus A380, increased flight frequencies and the weakening ringgit were to blame.
Malaysia Airlines carried 17.2 million passengers in 2013, up 29% from 2012. Aircraft load factor hit historic highs, with the carrier’s highest ever load factor of 93.5% recorded Dec 20, 2013.
As of the close of the 2013 financial year, Malaysia Airlines’ cash balance stood at RM3.9 billion. Assets totaled RM21.9 billion, with net gearing at 1.9 times.
Massive capacity expansion in order to ‘remain relevant’
Malaysia Airlines acknowledged intense competition and the wanton addition of seat capacity by both new and existing competitors put downwards pressure on its pricing and affected passenger yields.
Passenger yield fell 13% year-on-year to 23 sen per RPK (revenue passenger per kilometre) in 2013.
“Within this growing market place, Malaysia Airlines had to expand capacity in order to remain relevant as a key player. In our case, we were able to achieve the higher capacity with virtually the same fleet through better utilization of our resources and improved productivity,” Jauhari said.
Malaysia Airlines saw the delivery of 21 new aircraft in 2013 as part of its fleet renewal programme, which the airline said was essential to remain competitive in the fast growing Asia-Pacific aviation market.
The region is expected to see an average annual growth rate of between 5.5% to 6% for the next 20 years, fuelled by the region’s fast growing economies, Malaysia Airlines projected.
“The full year performance of making a bigger loss in 2013 compared to 2012 demonstrates the challenges brought on by intensifying competition leading to lower yields for all players. Even in our own market, locally and regionally in Asean, we have seen much additional capacity injection,” said Jauhari
“Many airlines are investing heavily in new aircraft and new products and services. This has resulted in a significant increase in capacity and aggressive competition in fares and value proposition to attract and keep market share. It makes having to focus on major structural costs review and driving business efficiency for Malaysia Airlines even more urgent,” he added.
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