MAS still faces turbulent weather

Analysts say the national carrier needs to be more imaginative to improve operational efficiency.

By Sathish Govind, FMT

KUALA LUMPUR: While Malaysian Airline System Bhd’s (MAS) recent return to the black could be taken as the first baby steps for the troubled airline, analysts see the road to sustained profitability for the national carrier is still a long and winding one.

Analysts say MAS needs to be more aggressive in cost-cutting and more imaginative in ratcheting up operational efficiency before it can even begin to dream of regaining its place and stature of old.

MAS announced on Nov 27 that it had returned to its first net profit of RM37 million for the July-September period after six consecutive quarters of losses.

It also announced plans to raise RM3.1 billion via rights issue and reduce its par value per share from RM1 to 90 sen.

Operation-wise, MAS made a small profit of RM3.9 million versus a net loss of RM191 million for the corresponding period in 2011. Revenue was lower at RM3.4 billion from RM3.5 billion previously due to decreased passenger traffic.

The airline also reported earnings per share of 1.11 sen versus a loss per share of 14.29 sen. No dividend was declared for the quarter. A research note from Maybank Investment Bank Bhd said the recent results suggest that its cost-cutting initiatives are beginning to bite.

However, the researcher believes MAS’ strategy of picking up routes from the bargain bin – South Africa, Argentina, Pakistan and Dubai – is misguided as these routes are not profitable and “added to the overall bottom line of the company”.

The airline’s reorganising of its flight frequency timetable and finding bumping up capacity, however, has helped reduce unnecessary increases in costs.

In announcing the quarterly result, MAS group CEO Ahmad Jauhari Yahya is rightfully pleased that the airline’s “revenue initiatives have begun to gain traction in the market” and that the management is beginning to see the results of their hard work.

An OSK Research Sdn Bhd analyst said even though the cost-cutting has achieved a short-term result, MAS needs to address structural issues that will determine long-term profitability.

He said it needs to take an aggressive approach in its cost-cutting strategies and shore up its revenue.

“Its yields have not improved considerably and could further receive pressure from low-cost carriers and other foreign full service carriers in the international segment,” he said.