KUALA LUMPUR (April 17): Malaysia Aviation Group Bhd (MAG), the parent of national carrier Malaysia Airlines Bhd, warned that the global supply chain pressures from the new US tariffs could raise its operating costs by up to 25%.
The airline group is monitoring its costs, particularly in aircraft components, as some are subject to tariffs when shipped from other countries to the US, group managing director Datuk Captain Izham Ismail said in a press conference during the group’s 2024 results presentation.
“Naturally, there will be cost pressure, the cost of sales will go up, and naturally, businesses will pass on the cost to customers,” Izham said. “I [am being as] candid as possible.”
The US has paused the implementation of a sweeping set of tariffs for 90 days, while imposing a 10% tariff on all countries and individualised reciprocal higher tariffs on nations with which the US has the largest trade deficits.
China, Malaysia’s biggest trading partner, alone faces up to a 245% tariff on imports to the US.
While MAG will continue to advocate for efficient cost management at its companies, there are fears of lingering supply chain issues, Izham flagged.
Global carriers, including Malaysia Airlines, are grappling with supply chain disruption that has delayed deliveries of new aircraft. Maintenance activities have also been affected by shortages of qualified parts and rising demand for repairs.
“With costs of sales going up, fares have to go up. Our concern is the willingness to pay by customers to travel — it becomes an issue,” he said.
Still, MAG does not intend to seek fresh capital from its largest shareholder Khazanah Nasional Bhd, Izham said. “We don't want capital injection. Our guiding principle is to operate MAG to be commercially sustainable,” he noted.
To date, MAG had only drawn down RM1.3 billion from a total of RM3.6 billion pledged by Khazanah in 2021, leaving large reserves to manage economic volatility if needed, Izham said, adding that the group can still count on Khazanah for support during severe macroeconomic disruptions.
MAG's cash balance stood at RM3 billion as at end-December 2024.