This article first appeared in The Edge Financial Daily, on May 27, 2016.

KUALA LUMPUR: Malaysia Airlines Bhd (Malaysia Airlines), which has managed to deliver ahead of its financial budget for the first quarter of 2016, is bracing for a weaker second quarter due to the expected softer demand during the Ramadan period.

It is also expecting to still record a loss this year, according to the airline in a statement yesterday. Nevertheless, it updated that it has made good progress on its turnaround plan to be sustainably profitable by 2018.

Though revenue was down 21.7% with available seat kilometres decreasing 30.2%, its average yield per passenger rose a strong 23.4% against the same quarter last year, it said.

Overall load factor was softer at 68.9%, but with an upward trend, it noted.

Meanwhile, costs declined 32.9% year-on-year (y-o-y) due to the airline’s saving initiative, with a lower-than-budgeted fuel price and fuel savings contributing significantly to its improved cost position.

The headcount reduction and improved work efficiency also resulted in payroll savings before exceptional items of 40.5% y-o-y.

“I am delighted at the continued improvements shown by Malaysia Airlines in this first year of the biggest and fastest transformation in our history. By moving swiftly and making tough decisions early, we have reshaped the business for a strong, sustainable future. Our financial progress achieved this quarter shows that we are firmly on the right trajectory,” said group chief executive officer Christoph Mueller.

Earlier this month, Mueller informed staff that the airline had reported its first quarterly profit in years — albeit a modest RM14 million — for the period between January and March, and a group-wide profit of RM51 million before exceptional costs.

During the period, it also saw a recorded positive operational cash flow before exceptional items like sign-on bonuses and other restructuring costs, its statement yesterday showed.

Meanwhile, punctuality of flights improved steadily, reaching a year-to-date level of 83% at the end of the quarter. This follows disappointing performances in December 2015 and January 2016.

On-time performance on domestic flights year-to-date was also encouraging, at 90%.

“Improved technical dispatch reliability across all fleet and increased ground-handling productivity at Kuala Lumpur International Airport were the main contributors to our improved performance overall,” the statement read.

Increased punctuality, combined with a 50% reduction in mishandled luggage, saw customer complaints decline by 37%, the lowest level since 2012.

Malaysia Airlines also noted signs of improvement in the Chinese and North Asian market environment.

In light of this, it has commissioned two additional A350-900 aircraft to be introduced in late 2017, adding to the original four on order, to reach a critical fleet size that will allow for scheduled maintenance and future network expansion.

Preparations for the introduction of the new aircraft are now ahead of schedule, with initial pilot and engineering training well under way.

Meanwhile, Prime Minister Datuk Seri Najib Razak, who is also Finance Minister, updated that the airline continues to review and renegotiate supply contracts with suppliers to meet the target of 2,000 contracts recommended by outgoing Mueller, as part of efforts to turn the airline around.

Over 4,000 contracts had been identified to undergo such a review, he said in a written reply in Parliament to Kelana Jaya member of parliament Wong Chen, who had asked Najib if the government was committed to reducing the total suppliers to 2,000.

Mueller was hired to return the airline to profit after twin disasters in 2014 eroded the confidence and goodwill towards the airline. But he will be leaving the job in September, two years earlier than his contract stipulated, due to personal reasons.