Ailing Malaysia Airlines Braces for More Turbulence

 - July 18, 2019, 9:01 AM
A Malaysia Airlines Boeing 737-800 takes off from Guangzhou Baiyun International Airport in China. (Photo: Flickr: Creative Commons (BY-SA) by byeangel)

The finances of cash-strapped Malaysia Airlines Berhad (MAB) continue to falter despite its receipt of $1.46 billion worth of bailouts over the last four years under a major restructuring. Conditions appear to indicate still more turbulence ahead.

MAB chief executive Izham Ismail said that profit projections for 2019 based on market conditions prevailing during the 2015 Malaysia Airlines Recovery Plan (MRP) have proved irrelevant. The situation worsened over the last four years, he noted, aggravated by depreciation of the local currency and escalating fuel prices. The flag carrier also cited the highly competitive environment given the relentless overcapacity in the region driven by the price-sensitive leisure market.

With already a scaled-down network and a group workforce of 13,000—down from 20,500 in 2014—the airline does not see a need for more cuts, however.

Izham said that while MAB wants to ensure it delivers a strong schedule, it also wants to build a diverse Asia-Pacific network with a simplified fleet structure and implement a gradual growth strategy across markets. He also stressed the importance of continued government support.

Due to the global grounding of the Boeing 737 Max 8, MAB has initiated discussions with Boeing and local aviation regulators on plans for the flag carrier’s Max program; however, Izham said it is still too early to make a decision on how to proceed. In July 2016, MAB placed an order for 25 Max 8s and reserved options on another 25. A year later at the Paris Air Show, the airline converted an order for 10 Max 8s to orders for the same number of Max 10s.

Delivery schedules call for the Max 8s to arrive from December 2020 through 2022 to replace the airline’s Boeing 737NGs as their leases expire.

MAB operates a fleet of 80 aircraft: six Airbus A380s, six A350-900s, 15 A330-300s, six A330-200s, and 53 737-800s. The widebody fleet sees an average daily utilization of 14 hours while the 737-800s clock 11 hours a day.

Prime Minister Mahathir Mohamed said the government would to sell the airline to an interested party for the right price. Meanwhile, it has received proposals from four local companies to manage the airline, one from Kuala Lumpur-based helicopter operator Weststar Aviation.

Speaking with AIN after the closing of the recent Technical and Vocational Education Training conference in Kuala Lumpur, Mahathir stressed that new management must retain the brand and commit to no “retrenchment.” Mahathir said the government must study the proposals carefully given that management of Malaysia Airlines has changed several times over the years but none have delivered the desired results. On why the flag carrier has continued to perform poorly, the prime minister cited stiff competition in the market, mainly from low-cost carriers.

Under five restructuring exercises since 2000, various management teams have axed a total of 35 international destinations. London remains its only European point.

MAB posted a loss of $198 million in 2018 and projects another loss in 2019.