KUALA LUMPUR (May 26): Malaysia Airlines Bhd carried 5.3% fewer passengers in the first quarter of this year (1Q17) compared with the preceding quarter (4Q16) amid intensifying competition, said its group chief executive officer (CEO) Peter Bellew.

The national carrier carried 3.6 million in 1Q17 compared with 3.8 million in 4Q16. However, it saw a 12.9% increase year-over-year in the number of passengers carried.

In a statement today, Bellew said passenger load factor fell to 79.4% in 1Q17 from 80.9% 4Q16, while yields were also slightly lower at 21.2 sen in 1Q17 from 21.5 sen in 4Q16 due to intense competition and a price war. Available seat kilometres also dropped to 10.49 billion from 10.58 billion.

"The (first) quarter was tough with higher fuel prices and adverse foreign exchange impacting our performance," said Bellew, adding that the ongoing price war in Malaysia will suppress average fares for the remainder of 2017.

On its part, Bellew said Malaysia Airlines will continue to offer good value all-inclusive business and economy fares, "while other carriers around the world continue to add extra charges and unbundle their fares".

Nevertheless, Bellew said Malaysia Airlines continues to see strong bookings with a 45% improvement in forward bookings for the next six months (from June to November 2017) compared with the same period in 2016.

"The network expansion is on track, with the second flight to Shanghai and upgauged Hong Kong flight (from the Boeing B737 to Airbus A330) showing immediate results. The airline is seeking more wide-body aircraft on short- to medium-term leases to facilitate growth," he noted.

"The rapid growth in international sales requires additional wide-body aircraft in 2018 and 2019 to address profitable demand. The airline is exploring various options for wide-bodies for possible delivery in 2018 and 2019. There is a good value in the current market for suitable aircraft in the airlines' delivery timetable," added Bellew.

The airline currently has 54 Boeing 737-800s, 15 Airbus A330-300s and six A380s, and it will take delivery of six leased A350s starting the end of 2017.

"A firm order for 25 Boeing 737 MAX-8s is in place with delivery from the fourth quarter of 2019. The Boeing 737 MAX-8 is anticipated to be a game changer on costs for Malaysia Airlines," said Bellew.

Meanwhile, customer satisfaction did see some improvements with an overall customer service index (CSI) rating of 71% in 1Q17 compared with 68% in 1Q16.

Bellew said the airline's CSI continued to recover as product improvements were steadily introduced in 1Q17.

"We have introduced the 'Golden Rule — treat customers as you would wish to be treated yourself'. The Golden Rule will be supported by simpler customer service policies and a large investment in training in 2017.

Punctuality also improved slightly at 78% in 1Q17 from 70% in 4Q16.

Bellew said on-time performance was impacted mainly by consequential delays, external factors such as weather in Kuala Lumpur and air traffic control at international stations, and technical delays. Total mishandled baggage reduced by 17% quarter-on-quarter in 1Q17.

On the six A380s, Bellew said they currently operate to London, Jeddah and Medina but these will be hived off to a new airline company in 3Q18.

"While the new airline will be based in Kuala Lumpur, it is anticipated that a significant portion of the revenue will originate outside Southeast Asia. Recruitment of the CEO is in progress and all of the senior management is in place.

"A board of directors will be appointed shortly, and in the interim the management team will be led by Malaysia Aviation Group Bhd's chairman (Tan Sri Md Nor Md Yusof) and CEO (Bellew himself). The airline will be the world's first ultra-high capacity value airline. It will offer high quality service with low seat costs to customers worldwide," he added.