KUALA LUMPUR (Oct 30): Malaysia Aviation Group Bhd’s (MAG) borrowings are expected to remain elevated as the parent of national carrier Malaysia Airlines Bhd presses ahead with an aircraft fleet renewal programme largely funded through leases, although savings on fuel and maintenance costs from newer aircraft should help cushion the financial impact, according to MARC Ratings Bhd.
The airline group’s total borrowings rose to RM10.9 billion at end-2025 from RM8 billion a year earlier, largely reflecting higher lease liabilities following additions to its aircraft and engine fleet.
"Operating leases and delivery financing are expected to moderate upfront funding requirements, although the fleet renewal programme will increase recurring financial commitments over the longer term," said MARC Ratings in a statement on Friday.
The rating agency noted that MAG’s financial profile remains constrained by substantial lease-related borrowings and negative shareholders’ funds, although the latter has narrowed in recent years as operating and financial performance improved.
Shareholders’ funds stood at negative RM2.6 billion at end-2025, largely reflecting historical accumulated losses. However, MARC Ratings highlighted the improvement in the group’s standalone financial position and its ability to generate sustained positive operating cash flow in recent years.
Net operating cash flow stood at RM970 million in 2025, down from RM1.2 billion in the previous year, mainly due to higher aircraft maintenance and redelivery-related payments. The group’s fleet renewal programme is expected to require cumulative capital expenditure of RM26 billion through 2030, including RM22.3 billion for aircraft acquisitions and related pre-delivery payments, the rating agency said.
MARC Ratings has assigned preliminary MARC-1IS and AAAIS ratings to MAG’s proposed Islamic Commercial Papers and Islamic Medium-Term Notes programmes, which have a combined aggregate limit of RM1 billion. Both ratings carry a stable outlook.
The ratings reflect MAG’s strategic importance as the parent of Malaysia Airlines and the country’s only integrated aviation group, as well as the likelihood of extraordinary support from its sole shareholder, Khazanah Nasional Bhd, if needed.
Khazanah injected about RM500 million of equity into the group in 2025, despite its return to profitability. MAG reported a net profit of RM137 million for the financial year ended Dec 31, 2025 (FY2025), more than double the RM54 million recorded in FY2024.
MARC Ratings said MAG had made significant progress since its 2021 restructuring, supported by the recovery in passenger traffic, improved operating performance and sustained positive cash flow generation.
Available seat kilometres, a measure of airline capacity, rose 15.5% year-on-year to 53.2 billion in 2025, exceeding the pre-Covid-19 pandemic level of 48.7 billion. Passenger load factor, which measures how much of an airline’s available capacity is filled by passengers, improved to 81.1%, from 80.4% in 2024 and 75% in 2019.
MAG accounted for 17% of Malaysia’s passenger traffic. While improved unit costs have supported continued profitability, pressure on passenger yields and unit revenue remains, MARC Ratings said.