Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on September 10, 2018 - September 16, 2018

MALAYSIA Airlines group CEO Izham Ismail says the national carrier does not intend to draw down the balance of the RM6 billion allocation for the Malaysia Airlines Recovery Plan (MRP), going forward.

This is contrary to talk that the allocation is insufficient and that more money needs to be pumped into the airline.

“Half of the amount had gone to the old company. Less than half came to the new company. We have utilised some of it, but I told my team that we won’t draw down any more money from Khazanah.

“Rather, we will try to make our cash flow stronger. We also make sure we have available credit lines. We haven’t utilised our lines of credit for the last six to seven months,” he explains.

According to Izham, Malaysia Airlines has been able generate enough operating cash flow to sustain its operations.

In a February 2016 interview, former CEO Christoph Mueller told The Edge that about half of the RM6 billion had been spent, partly on redundancy cost due to the termination of 6,000 of its workforce of 20,000.

Malaysia Airlines’ debt-to-capital ratio stood at 0.81 times in FY2016, compared with 1.08 times in FY2015. The airline has yet to file its FY2017 financial statements with the Companies Commission of Malaysia (SSM).

 

No plans to spin off units

A spin-off or sale of its ancillary units in order to return Malaysia Airlines to profitability is not in the plan, Izham says.

“The subsidiaries, such as FlyFirefly Sdn Bhd, MASwings Sdn Bhd and MASkargo Sdn Bhd, still play good supporting roles in Malaysia Aviation Group (MAG),” he tells The Edge.

In 2006, Malaysia Airlines, then known as Malaysian Airline System Bhd, came under flak when it sold some of its few remaining assets, including its headquarters in Jalan Sultan Ismail, Kuala Lumpur, to Permodalan Nasional Bhd for RM130 million, and Four Seasons Resort in Langkawi to Kingdom Langkawi BV for RM435 million. Critics said then that the airline was going after “low-hanging fruit” without any concrete plan to ensure the sustainability of its business.

Izham says loss-making Firefly is making progress on turning around. “Its revenue improved by 50% year on year in the first half of 2018. Firefly is a different product. It is a city hopper. We code-share with Firefly on its flights and I believe it is a product MAG should keep and is relevant to the market out of Subang airport.”

A search on SSM’s website shows that Firefly narrowed its net loss to RM36.65 million for the financial year ended Dec 31, 2017 (FY2017), from RM249.56 million in FY2015. However, revenue fell 9.1% to RM301.9 million in FY2017 from RM332.16 million in FY2015. There was no filing of FY2016 financial statements.

“MASwings is MAG’s obligation to the government to ensure flight connectivity between the smaller towns in Sabah and Sarawak to Peninsular Malaysia. MASwings should remain,” says Izham.

“As for MASkargo, with the emerging turnaround of cargo movement, it should continue operations as it is. It currently derives some 60% of its revenue from the belly space on Malaysia Airlines’ passenger flights and the rest from its three Airbus A330 freighters.

“MASkargo’s budget performance is ahead of target. It contributes 15% to Malaysia Airlines’ revenue and is an important part of our business,” he adds.

The unit returned to the black in FY2015 with a net profit of RM214.3 million, compared with a net loss of RM214.78 million in FY2014. This was despite a 34.5% decline in revenue to RM1.27 billion from RM1.94 billion.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share