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AseanAffairs Magazine July - August 2010

New Philippines President Benigno “Noynoy” Aquino wins in a landslide election and promises to end poverty and fight corruption.

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Dr. Mohd Munir Majid, Chairman of Malaysia Airlines, shares the airline’s plans for growth.

Q: It has been a difficult time for all airlines recently. How has MAS fared? Were cost-cutting measures introduced?

 A:  The biggest challenge for Malaysia Airlines was in 2005/ 2006. For the financial period 2005 (nine months), we reported a loss of more than RM1.3 billion – the biggest in the company’s history. We were expecting to hit an even deeper loss of RM1.7 billion for the full year 2006. Our financial position was so precarious that we had only a few months until April 2006 before we ran out of cash.

When the board appointed Idris Jala as CEO in December 2005, we worked on turning around the airline. We were focused on getting things right: increasing revenue/ yields, fixing the network, improving productivity and reducing cost. By the fourth quarter 2007, we reported the highest ever profit for Malaysia Airlines in its 60-year history, a net profit of RM851 million.

Then, we were all hit by a triple whammy – high fuel prices, the H1N1 health scare and the economic crisis. The year 2009 was the toughest ever for the industry and the airline. Today, in the aftermath of the crises, we are doing pretty well although we are not out of the woods yet. With the economic recovery which

boosted travel, we have reported two quarters of consecutive profits. For the fourth quarter, 2009, we reported a small operating profit of RM3.8 million. For first quarter 2010, we announced an operating profit of RM290 million which included compensation for the delayed delivery of the A380s. In fact, our first quarter

2010 traffic increased by 29 percent, outperforming the Asia Pacific’s traffic growth of 12 percent as recorded by the Association of Asia Pacific Airlines.


Q: WWhat are your projections for how MAS will end the year?

A:  We have a corporate scorecard, and our net profit target for 2010 is between RM100 to RM300 million. With such a strong increase in demand in Asia Pacific which is our core network, we expect to achieve our net profit target, again let me add, barring any unforeseen circumstances.

Q: What are the future growth plans for MAS such as new routes?

A: We are setting our sights on growth with the 5-year Business Transformation Plan (2008-2012). With the recovery in traffic and the strong passenger growth in Asia Pacific, we will grow our network modestly in 2010. This year, we have started flights to Dammam, Saudi Arabia and Bandung, Indonesia. There might be a couple more new destinations. In 2011/12, we are looking at positive growth for the network.

The growth ties in with our fleet renewal plans. We have ordered up to 55 B738-800s, 25 A330s and 6 A380s which will be delivered from 2010 until 2015. By 2015, we will have one of the youngest and most environmentally friendly fleets in the region.

We will take delivery of three Boeing 737-800s this year. The longer range Boeing 737-800s will replace the Boeing737-400s and this opens up opportunities for us to serve new routes which are not financially feasible with the current A330-300s. We can serve North Asia, China, the Korean peninsula, Japan and India with the Boeing 737-800s, and can explore other new destinations in China and India.

The Airbus 380s will be deployed for Sydney, London and possibly Amsterdam. We are planning to fit the Airbus 380s with premium economy. There are some 500 seats in the Airbus 380, which makes it ideal to introduce this new class. There is a growing demand for premium economy class and airlines such as Qantas and British Airways have introduced this quite successfully. Our aim is to win back those who are currently flying with other carriers, as well as encourage the economy class passengers to upgrade.

In addition, we are reviewing our aircraft requirement to fill the gap between the Airbus 330 and Airbus 380 in terms of capacity and range. We are evaluating between the Boeing 787 Dreamliner and the Airbus 350. We are also studying the new Boeing 777-300ER which could replace the Boeing 747.  ..........

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