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PETALING JAYA (April 18): Malaysia Aviation Group Bhd (MAG), the parent company of national carrier Malaysia Airlines Bhd, said it is on track to break even this year, after narrowing its net loss after interest and tax by 79% year on year to RM344 million for the financial year ended Dec 31, 2022 (FY2022).
This is in line with its target to break-even financially and be cash positive by 2023 under its Long Term Business Plan (LTBP) 2.0.
“We are putting all our energy to do our best to break even this year and racing to profitability. While we know that the odds may be against us because of the market in 2023 overall, we are quite optimistic in this context for us to give it a chance,” MAG group managing director Captain Izham Ismail told a press conference to announce the group’s FY2022 results on Tuesday (April 18).
Izham said the main reasons behind its expected break-even are fuel hedge and foreign exchange (forex) gains.
The group has hedged 15% of its fuel requirements for 2023 at US$79 (RM350) per barrel for Brent crude oil. In comparison, the group had projected the crude oil price at US$128 per barrel. It has also forecast the ringgit at 4.70 against the US dollar.
“[While] I know demand [for travelling] will slowly fade away, our budget for fuel and forex is high. That is an advantage for us, if fuel [prices] and forex remain at current levels,” he said.
At the time of writing, Brent crude oil was trading at US$85 per barrel, while the ringgit was at the 4.4377 level against the US dollar, Bloomberg data showed.
Nonetheless, Izham said the local aviation industry will continue to face challenges and is not expected to to fully recover to pre-pandemic levels this year. Some key challenges are growing global economic uncertainties, rising business costs due to inflation and an increase in labour cost, intensifying competition and overcapacity as well as talent shortages.
In FY2022, MAG saw its net loss after interest and tax narrowed to RM344 million from RM1.65 billion a year earlier, with a forex loss of RM315 million.
This came after the group achieved a net profit after interest and tax of RM1.15 billion for 4QFY2022, due to an unrealised forex gain of RM300 million, from a net loss after interest and tax of RM669 million for 4QFY2021. Total revenue nearly tripled to RM10.75 billion in FY2022, from RM3.96 billion a year earlier.
MAG attributed the improved FY2022 results to robust demand for travel, higher yields across the passenger and cargo business segments, as well as effective cost management and cash flow optimisation, despite higher fuel prices and labour costs, a weaker ringgit, and lower-than-pre-pandemic flight capacity levels.