MAG to achieve breakeven by 2023

It aims to become Asia’s leading travel and aviation services group with 3 segments dubbed ‘pro t centres’

by RAHIMI YUNUS / Pic by TMR FILE PIX

MALAYSIA Aviation Group (MAG) has laid out plans to become a travel and aviation group with a diversi ed portfolio beyond its ying businesses post-Covid-19 and achieve breakeven by 2023.

The loss-making carrier’s Long-term Business Plan 2.0 (2021-2025) will see the group no longer in a pure-play aviation business it is today.

MAG aims to become “Asia’s leading travel and aviation services group” with three business segments, dubbed “profit centres”, namely flying businesses, travel solutions and aviation services.

MAG targets to grow its non-flying businesses revenue from RM2.5 billion a year now to RM4 billion by 2025.

“We are cognisant MAB should not be competing with low-cost carriers. We need to be good at what we are operating in the premium and value segment,” MAG group CEO Captain Izham Ismail said in a virtual media briefing yesterday.

Izham said the term “premium” for Malaysia Airlines Bhd (MAB) is not what is offered by “luxury airlines” like Qatar Airways or Emirates.

Instead, he said “premium” for MAB means adding products and value around its fares, such as MHholidays and Enrich, and competing qualitatively — hence, the diversified travel and aviation group model.

“For the longest time since 2010, MAB has been competing at the same price point with our low-cost competitors in this region, not only domestically, and it had dragged MAB’s profit and loss (P&L) severely.

“In 2019, we went in the opposite direction. We didn’t compete in fares. We surrounded our fares with products, flexibility. That is where we are coming in now, the premium market, providing products to our consumers and bundling it with other products that we have,” Izham said.

Financially, he said MAG is looking at achieving breakeven and becoming cashflow positive by 2023, based on a downside scenario with an extended L-shaped recovery in the aviation industry.

He said MAG is pursuing three vital financial objectives: Balance sheet restructuring, turnaround in P&L and cashflow stability.

He said the MAB balance sheet restructuring has been completed.

He further said the P&L turnaround needs more time and may take the group 18 to 24 months to achieve.

Khazanah Nasional Bhd-owned MAG is envisioned to record a 10.8% compound annual growth rate (CAGR) in Ebitda and 6.8% CAGR in non-flying revenue throughout the business transformation plan period.

On the matter of its fleet, Izham said MAG will be taking delivery of all its 25 orders of Boeing 737 Max over the next three to four years.

The delivery will start from the second half of 2023 or 2024, and is part of the restructuring deal reached with the aircraft manufacturer.

The 737 Max had been grounded globally due to technical problems and some airlines have cancelled orders. The single-aisle aircraft has returned to service.

Izham said management intends to propose to retire its Airbus A380 fleet and explore options to dispose of the six A380s in total.

He admitted that it would be a challenge to put the aeroplanes on the market. The carrier would launch a widebody campaign, mainly driven by ageing A330, with interests in mid-range, long-and super long-haul aircraft.

He said the widebody campaign will start in 2023 and is set to enter service in 2025 or 2026.

MAG requires 83 aircraft comprising 54 narrow-body and 29 wide-body aircraft by 2025 to focus on an Asia Pacific-focused network, Izham said.

Regardless, MAG would keep new destinations in Europe on its radar, mainly through a partnership with other airlines or joint ventures.

“The industry is very unsure of adding capacity because it could hit cost bigtime, and the crisis gets more profound for the organisation. It’s really a balancing act.

“I would rather steer this organisation on a pessimistic view by adding capacity based on demand,” he said.

Firefly Airlines, MAB’s sister airline, will serve short-to medium-haul routes and might venture into second-tier airports with its jet operations.

Izham said policymakers and regulators need to look into the overcapacity issue in the domestic market and address it as the country’s agenda.