RM6b MAB reset fund fully deployed

National carrier now on track to break even by 1H19, says CEO

By P PREM KUMAR / Pic By MUHD AMIN NAHARUL

Khazanah Nasional Bhd has fully injected the RM6 billion that was budgeted for its 12-point recovery plan for Malaysia Airlines Bhd (MAB), which was initiated in 2014 to revive and transform the then financially-bleeding national flag carrier.

Of the total, some RM3 billion meant for the capitalisation of the airline in the Malaysia Airlines Recovery Plan (MRP) has been fully injected into MAB.

The restructuring fund also comprises RM1.4 billion for the delisting of Malaysia Airline System Bhd (MAS) via a selective capital reduction exercise, as well as another RM1.6 billion for restructuring and retrenchment cost.

“Out of that amount, approximately RM3 billion was for capitalisation of the new airline group. This capitalisation has already been fully injected into the airline,” MAB group CEO Capt Izham Ismail (picture) told The Malaysian Reserve (TMR).

He said the airline is now on track to break even by the first half of 2019 (1H19), as stated in the revised MRP.

“Taken on aggregate, cumulatively between financial years 2016 and 2017, the company’s performance remains within the range of MRP targets,” he said in his response to queries by TMR via email.

Khazanah, which owns 100% of MAB, had initially targeted breakeven by the end of 2017. The target, however, has been revised unofficially several times, with the latest being 1H19.

Izham said this year, on a year-on-year basis, MAB has seen an improvement in its performance. However, ringgit volatility and escalating fuel prices, being the prevalent challenges to MAB’s financials, are now coupled with impact to its revenue per available seat kilometre due to a serious shortage of commercial pilots. Izham said the pilot shortage has led to operational constraints and impacted growth, especially for its narrow-body B737-800 fleet.

“The airline has also put in place an extensive pilot training programme, implemented in August 2017, alongside recruitment drives.

“Our new cadet pilots are gradually coming online. We expect the situation to stabilise by the fourth quarter of this year,” he said, adding that MAB is now open to hiring more cabin staff.

The airline currently has 13,000 employees, but can scale up to 14,000 under the MRP.

To counter the challenges, MAB has adopted specific initiatives to uplift its revenue and further optimise cost for the year — which resulted in improved performance for 1H18, compared to the same period last year.

Izham said the key initiatives centred on driving revenue, underpinned by continuous improvement in customer experience, product quality and operational excellence, while maintaining a productive and competitive cost base.

“In addition, the airline is also leveraging on technology and digitalisation to minimise fuel volatility effects,” he said.

Izham said MAB recently introduced SkyBreathe, an innovative fuel saving solution by OpenAirlines.

The system analyses flight data recorders to assess a flight’s efficiency, which allows the airline to implement the appropriate best practices for fuel savings.

According to Izham, MAB currently has one of the lowest cost bases among its peers comprising other full-service network airlines on a cost per available seat kilometre basis.

“The effort to further optimise cost by improving efficiencies and productivity, without sacrificing our product, will continue.”

To enhance operations, Izham said the airline group has made steady progress in the restructuring and turn-around of its engineering unit, focusing on process improvements and supply chain management.

While this has resulted in improvements in the company’s on-time performance, Izham said more work need to be done, especially in the area of baggage and disruption management.

To recap, two aircraft calamities in 2014 — MH370 and MH17 — had blemished the national carrier’s reputation as sales were heavily beaten.

In 1H14 alone, MAS (now defunct) reported a loss of RM750 million, 65% lower compared to the previous corresponding period.

However, even before the tragedies struck, the troubled national carrier had already plunged into the red as high costs, falling sales and the struggle to compete against emerging low-cost carriers saw the airline posting a cumulative net loss of RM8.4 billion between 2001 and June 2014.

In August 2014, Khazanah introduced a RM6 billion, 12-point recovery plan to hoist the carrier back into profitability within three years of its eventual delisting later that year.

Since then, the airline has taken several stern measures which include the successive appointments of three new CEOs, a name change, consolidation of its operations from Sultan Abdul Aziz Shah Airport to Kuala Lumpur International Airport and the retrenchment of 6,000 employees.