Malaysia Airlines Q1 results hurt by costlier fuel, forex

PETALING JAYA: Malaysia Airlines (MAS), which is on track to be profitable in 2018, said its first quarter performance was impacted by higher fuel prices and adverse foreign exchange.
However, it noted that passenger load factor remained robust for the first quarter of 2017 despite competitor fares dropping significantly.
The passengers carried increased 12.9% year-on-year (yoy) to 3.57 million for Q1’17, with a load factor of 79.4% versus 68.9% for Q1’16. However, the load factor was lower than the 80.9% in Q4’16. Yields were lower due to intense competition and a price war.
“Malaysia Airlines continues to see strong bookings with a 45% improvement in forward bookings for the next six months (from June to November 2017) compared to the same period 2016,” said group CEO Peter Bellew in a statement last Friday.
Looking ahead, the group is expecting the ongoing price war in Malaysia to suppress average fares for the remainder of 2017.
It is maintaining a cautious outlook for 2017 as a more aggressive price war on the domestic market has happened earlier than initially predicted, ahead of the anticipated large increase in aircraft from competitors in Q2 and Q3 of 2017.
It added that a weak ringgit and increased fuel prices also create a challenging cost environment.
Meanwhile, Malaysia Airlines noted that the rapid growth in international sales requires additional widebody aircraft in 2018 and 2019 to address profitable demand. Hence, it is exploring various options for widebodies for possible delivery in 2018 and 2019.
While advance bookings are far stronger in 2017 than 2016, the group said it is seeing yield pressure across all routes as low fares are available from many legacy carriers as well as the traditional low cost carriers.
“For Malaysia Airlines, the market is diverging with consistent growth and improvement on international services, but a loss of market share domestically where fares are increasingly low. The group will continue to be prudent in controlling capacity and will allocate the group’s aircraft where we see the best potential returns,” it explained.
In view of the challenging environment, Malaysia Airlines said a heightened focus in 2017 will be on further reducing cost, especially given the adverse impact on foreign exchange and challenging competitive environment, as well as on improving customer experience.