MALAYSIA/AVIATION MAS aims for higher profit under new plan

February 2, 2008

MALAYSIA/AVIATION
MAS aims for higher profit under new plan

Malaysia Airline System Bhd (MAS) (KLSE:3786) Thursday launched its five-year Business Transformation Plan (BTP 2) which will position it well to chalk up higher profits of up to RM2-RM3 billion (US$618.03 million-US$927.04 million) per annum by 2012, managing director, Idris Jala said.

He said that there are five steps that would propel the company into achieving sustainable profitability.

A major step would be for MAS to continue to maintain five-star quality products and services, lower costs, competitive fares, increase customers and revenue as well as grow its network and build capacity.

"Our cost challenge is to reduce our system-wide unit costs by 20 per cent from the current 17.5 sen-ASK down to 14 sen-ASK, which enables us to achieve a break even load factor of 60-65 per cent," he said in a statement issued in conjunction with the launching of MAS BTP 2, here Thursday.

"Only with the break even load factor of 60-65 per cent can MAS grow its network," he said.

Another would be MAS's revenue management practices including the opening of storefronts such as allowing more agents to sell MAS tickets, the realigment of fares and tighter iventory control, all of which are expected to generate an annual revenue increment of RM550 million to RM700 million.

MAS will also have project MOSAIC (MAS Overall Strategic Alliance Integration Concept), expecting the maximum value from the airline's hub and spoke network bill over the period of 2005-2007.

Project MOSAIC is projected to provide incremental revenue of between RM70 and RM100 million.

"We are very excited about the project, we are currently exploring breaking new ground. We will announce this when details are finalised," Idris Jala said.

He said that the BTP2 was necessary in view of the challenges brought on by price reductions with the expected increase in capacity as well as all-time high crude oil prices. "Unless we take drastic action, MAS will hit a wall and sail badly.

"We try to forecast on what will happen to our financial results based on a number of reasonable business assumptions and revenue scenario. Experience demostrates that along with the declining industry profitability and without business transformation, MAS tends to lose between RM650 million to as high as RM1 billion in 2012. "This will place us squarely back to where we started in 2005," he said.

Asked whether he will continue his contract until 2012, he said, "It is still early days for me talk about the contract. It runs until the end of this year.

Courtesy Bernama

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