PETALING JAYA (Dec 8, 2011): Malaysia Airlines (MAS), which unveiled yesterday its highly anticipated new recovery plan, has warned that the national airline will go bankrupt by the second quarter of 2012 if it maintains its current business model.
With the airline's current cash position standing at RM1 billion, deputy CEO Mohammed Rashdan Mohd Yusof said it will turn negative when it spends RM6 billion to take delivery of 23 aircraft next year. It is slated to spend another RM6 billion in capital expenditure (capex) in 2013 and 2014.
"With new aircraft entering our fleet next year, our financing costs will increase markedly. Indeed, if we do not fundamentally reengineer our commercial function, our losses in 2012 could easily top RM2 billion," MAS group CEO Ahmad Jauhari Yahya said in an executive summary of its Business Plan 2012 released to Bursa Malaysia yesterday.
For the nine months ended Sept 30, 2011, MAS posted a net loss of RM1.25 billion from a net profit of RM8.55 million a year ago.
Earlier, Ahmad Jauhari told a news conference that MAS targets to turn a profit by 2013 under its latest business recovery plan that comes with five initiatives that include cutting loss-making routes, spinning off its ancillary units, deploying new aircraft and managing costs.
"For 2012, we expect to achieve a significantly reduced loss of an estimated RM165 million, but our 'stretch target' is for the group to achieve a modest profit of up to RM238 million.
"We plan to sustain increasing levels of profitability and aspire to generate a pre-tax profit of over RM900 million by 2016," he added.
To achieve this target, MAS will cut loss-making international routes such as Cape Town, Johannesburg, Buenos Aires and Dubai early next year. It is also mulling closing the Frankfurt and Rome routes.
"This will shrink our network by 12% next year, but will provide cost savings of RM220 million to RM302 million," said Ahmad Jauhari. It was told about 40% of its current routes are loss-making.
It will also deploy 23 new aircraft and returning 36 aging ones to bring the total operating fleet to 88 aircraft next year, managing costs, and spinning off its ancillary units such as MASkargo Sdn Bhd, aerospace engineering, pilot training and ground handling.
Ahmad Jauhari said it is looking to attract third-party specialists as strategic partners to invest in the units and is also open to selling them if the price is right.
"The series of necessary actions/initiatives for next year is expected to generate potential savings of between RM1.178 billion and RM1.508 billion in total," he added.
Meanwhile, to bridge the funding gap between its cashflow and capex for aircraft deliveries next year, MAS will look to bank borrowings, sukuk issue and the capital markets, besides proceeds from asset sales.
Ahmad Jauhari also announced that a new regional premium airline will be launched in the second half of next year, using a fleet of new Boeing 737-800.
"It will not be called 'Sapphire' (as previously reported). We will reveal the name once we get the plan fully developed," he said.
Ahmad Jauhari also announced plans to right-size the organisation, given a smaller network. However, he declined to reveal how many jobs need to be cut from the current 20,000 workforce.
On MAS' Comprehensive Collaborative Framework (CCF) with AirAsia and AirAsia X, he said the three airlines have begun discussions on joint procurement and consolidation of key activities such as fuel purchasing, MRO, training and ground services, which is expected to result in RM100 million savings a year.
Asked whether the airline is looking to increase air fares under the new business plan, Ahmad Jauhari said: "Our fares will be as competitive as other airlines."
Commenting on the MAS Business Plan 2012, Standard and Poor's aviation analyst Shukor Yusof told SunBiz he believes it is too short-term on planning.
"Over the past decade, MAS has undergone several business plans including the Widespread Asset Bundling (WAU), Business Turnaround Plan 1 and Business Transformation Plan 2 and now another one. How many business plans does MAS want?
"Downsizing also makes them more open to competition outside, with more pressure regionally especially from low-cost carriers and airlines with stronger balance sheet.
"Also, what are they going to do with the new six A380s? Where do they want to fly these aircraft (with the smaller network)?" he said, adding that he remains skeptical of the CCF signed last August.
Shukor, nevertheless, is positive about MAS' entry into oneworld alliance by the third quarter of 2012 and its plans to forge more partnerships with other airlines to extend its routes.
No comments:
Post a Comment