The Malaysian Insider

UPDATE 2

By Asrul Hadi Abdullah Sani

PETALING JAYA, Oct 2 — Malaysia Airlines (MAS) signalled it is on track to operational profit by next year.

It also expects to take delivery of 35 B737-800 aircraft by the end of 2010, and has an option for 20 more similar planes. Six A380 aircraft will also be delivered in 2011.

“Taking delivery of the B737-800 at the end of next year is perfect timing as the economy is expected to recover then. We will be the second airline in the world to take delivery of the new B737-800 Boeing Sky Interior,” managing director/chief executive officer Tengku Datuk Azmil Zahruddin said when presenting the company’s second business transformation plan.

He said lowering operating cost was essential in transforming MAS into a five-star value carrier.

“We will focus on three core areas; enhancing customer satisfaction, generating revenue and intensifying structural cost reduction,” he said.

Tengku Azmil stressed the importance of cost reduction because of the projected decrease in yield or revenue in the industry.

“We are watching our yields very closely but I think the big challenge that we have now, not just for us but the whole industry, is managing the yield. In a downturn that is always going to be a problem. But I am confident that when the economy comes back, yields will go up. But whether yields will go up to the levels that they were before, I tend to think they probably won’t. That is why cost reduction is important,” he said.

He also predicted cost reduction to remain in the future.

“To be honest, I think cost reduction will be a semi-permanent feature in the airline industry; I think if you are looking at the industry, where the yields are falling and long-term trends suggest that yields are very gently falling, is that unit costs must also continue the same trends,” he said.

The national carrier expects a flat growth next year and targets cost savings of RM700 million this year.

The airline projects MRO business revenue targets of RM1 billion in 2010 and RM3 billion in 2013.

“We will continue to invest in good costs. We are consciously spending on products and services such as in-flight food, safety and regulatory requirements and to generate third-party requirements and third-party revenue,” he said.

Tengku Azmil (picture) confirmed that the airline plans to increase routes to China, the Asia Pacific, the Middle East, South Asia, Asean and Australia.

“We have already cut New York from North America and are also suspending Stockholm from Europe. So that will contribute to a reduction which is offset by the growth that we are planning to do in some other areas.

“We are not adding aircraft, we are realigning the fleet and flying it to different places. Most of the routes will remain intact, we will see some new routes and increase the frequency in others,” he said.

He also expects that the industry will experience minor structural changes because “what is important before may not be important going forward.”

He said MAS also plans to own a third of its fleet in the future.

Tengku Azmil denied that MAS was planning to acquire another airline but is however “open to the idea.”