KUALA LUMPUR (May 4): Malaysia Airlines Bhd's parent Malaysia Aviation Group (MAG) aims to break even by 2023 through its Long Term Business Plan 2.0 as the group contends with the Covid-19 pandemic’s impact on the global aviation sector, MAG group chief executive officer Captain Izham Ismail said today.
Izham said the domestic travel market needs reform to be sustainable as conditions are expected to worsen post-Covid-19 pandemic.
“Airlines' average fares have not been tracking inflation year-on-year and this has created an unsustainable situation for the domestic market.
“The seats are [in] oversupply [situation], resulting [in] price wars which have created a race to the bottom for all players,” he said during a virtual press conference on MAG's business update.
He said airfares for the domestic market are not driven purely by cost, but also by overcapacity in the market.
Izham said MAG will continue to serve the domestic travel market and that MAG hopes policymakers will reform the market while balancing customers’ needs.
Khazanah Nasional Bhd — Malaysia's sovereign wealth fund — via MAG owns 100% of Malaysia Airlines.
Khazanah said in a statement on March 4 it continues to provide full support and close cooperation in the comprehensive efforts to ensure the national carrier's sustainability post-Covid-19 pandemic.
"On Feb 22, 2021, the High Court of Justice of England and Wales sanctioned a scheme of agreement between MAG's leasing entity, MAB Leasing Ltd, and the majority of MAG's aircraft operating lessors, following unanimous support from the lessors.
"This represents an important component of the wider restructuring exercise which will achieve a reduction in MAG's liabilities of over RM15 billion. Moving forward, MAG will focus on working closely with the government and stakeholders on restarting air travel and promoting industry recovery, as well as continuing cash conservation while capturing demand recovery as part of its internal restructuring," Khazanah said.
Today, Izham said MAG believes the aviation industry will benefit from government interventions which will ensure longer-term sustainability of Malaysia Airlines.
Citing examples, he said Malaysia has spearheaded bilateral discussions on travel corridors with suitable countries to help resuscitate air travel which has been contending with the impact of global Covid-19 pandemic-driven movement restriction policies to curb the outbreak.
He said MAG is looking forward to the pent-up demand in the travel market, besides factors including Covid-19 vaccination progress and government interventions involving reciprocal green lanes between countries to rebuild consumer confidence in the travel market as pandemic concerns linger.
“The biggest challenge now is top line and revenue, under the very weak market environment that we are facing.
“[One of the restructuring’s objectives] is to ensure that MAG has sufficient cash balance over the next five years, especially for the next 12 to 18 months [during which] the market is expected to remain unstable and, to a certain extent, unpredictable.
“That [volatility] has made our forward-planning and forecasting a challenge,” Izham said.