SEPANG (Nov 2): Malaysia Aviation Group Bhd (MAG), the parent company of Malaysia Airlines Bhd, is on track to achieve its first full-year net profit since the airline group was privatised in 2014. This is driven by strong demand in the marketplace, elevated yields and a lean and agile balance sheet, MAG group managing director Datuk Captain Izham Ismail said.
The turnaround comes two years after it completed a restructuring exercise in February 2021 that saw it achieve a reduction in its liabilities of over RM15 billion.
"Yes, it has been a fantastic 27 months. We have been cash-flow positive on a daily basis for the last 27 months. We are on track to achieve net income after tax (NIAT) this year," he said during an Airline Leader Interview at the two-day Centre for Aviation (CAPA) Asia Aviation Summit 2023, which begins on Thursday.
He added that the group's net gearing is at 1.09 times, while cash balance stood at RM5.2 billion as at end-October 2023.
"I am confident that with the current balance sheet and the efficiency that the organisation has transformed itself, it is fit for the future."
MAG recorded a net profit of RM1.146 billion on revenue of RM3.8 billion in 4Q2022. For the full year that ended Dec 31, 2022 (FY2022), the group recorded a net operating profit of RM556 million, and it managed to narrow its net loss for the year by 79% to RM344 million from RM1.65 billion in FY2021.
"The industry has been operating in a high yield environment for the last two years. We forecast that demand will remain elevated at least until 2Q next year. We see capacity in the Asia-Pacific region will return to 2019 levels by the end of this year.
"However, our forecast of revenue passenger kilometres (RPK) will probably recover to 2019 levels only at the end of 2024," said Izham.
He also expects airline yields to ease from the beginning of 3Q2024. Nevertheless, it will continue to be better than 2019 levels at least circa 8% to 9% for Asia-Pacific, he said.
"For MAG, we will attain 93% seat capacity of 2019 levels by the end of this year."
According to Izham, fuel, as well as foreign exchange and interest rates, are major concerns. "But specifically for MAG, our biggest concern is interest rate as we take delivery of new aircraft, especially if they are on operating leases."
"As for fuel, we have hedged up to 22% of our fuel requirements year to date and are cautiously looking at our forward hedging. We have hedged up to 8% for 1Q2024," he added.
MAG is betting on most part of Asia, India, Australia and Europe to drive its growth, going forward. The group currently flies 60 times a week to India and will be launching routes to Amritsar, Ahmedabad and Trivandrum next week.
"Passenger traffic coming out from China has been disappointing. Unemployment rate there has increased and that's probably causing the lack of movement of its travellers out of the country," he says.
Still, he expects recovery in the Chinese market at the end of 2Q2024. "Pre-Covid-19, 17% of Malaysia Airlines' capacity were to serve China. Today, it is only 10%."
On Malaysia Airlines’ in-flight catering services, Izham said 97% of its meals have returned to normalcy, adding that it is still on track to fully restore its in-flight meal services by Nov 15 this year. About 60% of the national carrier's flights were impacted by its recent catering issue.
Malaysia Airlines ended its long-standing in-flight catering partnership with Brahim's Food Services Sdn Bhd on Aug 30, following protracted negotiations, and engaged eight new food and beverage suppliers, including Pos Aviation Sdn Bhd and MAS Awana Services Sdn Bhd, to prepare its in-flight meals starting Sept 1.