Thursday December 8, 2011
CEO sets in motion business plan to bring airline to profitability by 2013
By B.K. SIDHU
bksidhu@thestar.com.my
PETALING JAYA: Malaysia Airlines (MAS) will cut unprofitable routes, spin off its ancillary units, explore joint ventures with other airlines and launch a regional carrier by second half of next year in a bid to return to profitability by 2013.
The airline, which will focus on offering premium air services, targets a net loss of RM165mil for 2012. However, by 2016 it hopes to report a net profit of RM900mil.
About 40% of MAS' network is unprofitable but beginning next year it would cut capacity by 12% and save about RM302mil by suspending flights to Dubai, Cape Town, Johannesburg, Buenos Aires and some European cities.
Ahmad Jauhari: ‘We are very deep in crisis. Our cumulative losses until the third quarter amounted to RM1.25bil and we do not see any improvements in the fourth quarter.’
It would focus on serving the premium market in Asia where there is growth despite the intense competition from low-cost and premium carriers that are also adding capacity in the region.
“We are very deep in crisis. Our cumulative losses until the third quarter amounted to RM1.25bil and we do not see any improvements in the fourth quarter. MAS needs to make hard and unpopular decisions simply to survive. We hope this plan will set the course straight,” MAS groupchief executive officer Ahmad Jauhari Yahya told a press conference yesterday. The new business plan that he unveiled yesterday focused on reversing the airlines' fortunes and outlined steps to sustain its performance.
He cited the loss of focus of the premium segment, declining product quality, an ageing fleet as reasons why MAS was in a loss-making situation. The airline's overall ranking in the industry had also dropped but with the new business plan, there would be greater focus to win the customers back.
Ahmad Jauhari said the series of actions that the airline would take next year was expected to generate an improvement of between RM1.1bil and RM1.5bil in the profit impact for the group.
On the new premium carrier - not Sapphire he said it would begin operations in the second half of 2012 with a fleet of 45 B737-800 aircraft. It would fly to cities in South-East Asia and Greater China while MAS would continue to serve long-haul flights. It planned to add frequency to cities like Manila, Jakarta and Tokyo.
This is the fourth time in a decade that MAS is being restructured, though the theme this time is be a leaner airline, but some analysts attending the briefing were unimpressed.
“It seems their consultants did the work for them and we are disheartened by the fact that the management only aspiresfor RM900mil net profit when benchmarked against first-tier airline, they should be aiming for RM2bil to RM3bil,” said an analyst.
A Maybank Investment analyst added: “It is a strategic mistake to set up a new airline when they could service the short-haul routes using the MAS brand name. Why the need to gamble when there is no guarantee of immediate success? However, what is convincing is that they are suspending flights to unprofitable destinations.”
MAS has also begun discussions with AirAsia and AirAsia X to cooperate on fuel-purchasing, maintenance, training and ground-handling, which could save the national carrier RM100mil annually.
On the rationale to spin the ancillary units engineering, pilot training/safety academy, cargo and ground services Ahmad Jauhari said it was to allow strategic investors to take a stake in them so that the units could grow.
The airline will take delivery of 23 new aircraft including five A380 in 2012 and that would help the airline save RM392mil in cost since the new aircraft are more fuel efficient.
The airline also needed to raise RM12bil to pay for the new aircraft it had ordered till 2014 and it might finance them via debt and Islamic bonds but MAS deputy CEO Mohd Rashdan said the airline would not opt for a cash call.
MAS has cash reserves of RM1bil now but it expects return of aircraft deposits to help it ride through next year.
“We would not deny we are in talks with Qantas as these days you have to work with other airlines but the discussions are still at an exploratory stage,” he said, adding that: “We are exploring the possibility of joint ventures with (other) partners in order to serve multiple markets together, while reducing the financial risks of going alone.”
The airline will also join the oneworld air alliance by September 2012.
Asked if the MAS workforce was behind him in the push for better fortunes, Ahmad said: “They understand the gravity (of the problem) and are horrified by the losses, but they also understand that painful actions are necessary.”
Asked if there would be job cuts, Ahmad said it depended on all the spin-offs but a (voluntary separation scheme) was the last option.
There is also apprehension towards the comprehensive collaboration framework from with AirAsia.
Asked if the CCF was really necessary, he said “it makes it easier with the CCF.''
No comments:
Post a Comment