By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL
Malaysia Airlines Bhd (MAB) is bracing for a challenging year with its business environment underpinned by fuel price volatility, currency fluctuations and heightened regional competition putting sustained pressure on yields.
Group CEO Captain Izham Ismail said the full-service national carrier, which is in the final year of its five-year turnaround plan, continues to face headwinds from overcapacity in the market.
“Overcapacity in the marketplace continues to impact airlines in the region and especially here, where we have three airlines operating out of one hub,” Izham told The Malaysian Reserve (TMR).
Izham, who is also overseeing Firefly Sdn Bhd and MASwings Sdn Bhd under the Malaysia Aviation Group (MAG), said other factors putting pressure on yields are fuel price and the US dollar exchange rates.
Jet fuel price averaged US$86.10 (RM354.13) a barrel in 2018.
The price has been fluctuating from a low of US$50 to a high of US$80 in recent months, causing uncertaintyin fuel hedging positions for carriers worldwide.
Global carriers spent US$46.7billion on fuel last year, according to the International Air Transport Association.
“The stronger US dollar against the ringgit will have an impact on the group given over 70% of its operational costs are in the US currency,” Izham noted.
He said the company remains committed to improving performance and reducing costs, while managing external factors.
A regional aviation analyst said consumers are now getting more price conscious and this could further put stress on yields of full-fledged airlines like MAB.
“Low-cost carriers will gain from tighter spending by corporates, consumers and governments at the expense of full-service players,” the analyst told TMR.
Former Khazanah Nasional Bhd MD Tan Sri Azman Mokhtar stated last year that MAB is expected to become profitable by mid-2019, some two years behind its original target of profitability by end-2017. MAB is wholly-owned by Khazanah.
Khazanah has injected RM6 billion into the financially-troubled carrier since 2014.
The turnaround plan period has seen three CEOs leaving before Izham was appointed in late 2017 to replace Peter Bellew.
The revival plan saw MAB retrenching some 6,000 employees in 2015 to reduce operational costs.
The company faces fierce competition from rivals like AirAsia Group, Malindo Air and regional peers like Vietnam’s VietJet Aviation.
Separately, Izham said MAG has shared Firefly’s concerns about issues surrounding Singapore’s Seletar Airport with the Ministry of Transport (MoT).
Malaysia and Singapore have agreed to resolve the issue on instrument landing system and Malaysia is suspending the permanent restricted area over Pasir Gudang, Johor, airspace for at least a month.