KUALA LUMPUR: The key focus for national carrier Malaysia Airlines Bhd (MAB) is drive revenue growth, with the expectation to halve its 2017 loss of RM812 million this year.
Group chief executive officer Captain Izham Ismail, in its first interview with NST Business, said the airline had shown improved performance in the first half this year.
He clarified last year’s loss was impacted by foreign exchange volatility, escalating fuel prices and shortage of pilots.
Izham was responding to claims by former Malaysian Airline Systems Bhd (MAS) chief executive officer and managing director Tan Sri Dr Abdul Aziz Abdul Rahman on the failure of the airline’s turnaround plan, the grounding of its four superjumbo A380s as well as its maintenance, repair and overhaul (MRO) facility.
Abdul Aziz has called on the government to set up a group of experts to review MAB’s operations as the RM6 billion restructuring plan was deemed a failure.
MAB’s sole shareholder, Khazanah Nasional Bhd, had allocated RM6 billion to support the overall implementation of the Malaysia Airlines Recovery Plan (MRP). Out of that amount, about RM3 billion was for capitalisation of the new airline group, MAB.
“The injection from Khazanah was in tranches in line with the approved business plan and the said capital was earmarked for specific utilisation to achieve our targets,” he said.
Izham said the airline had recorded a double-digit compound annual growth rate growth of 21 per cent for the past three years.
He said the focus was to generate sufficient operating cash flows, to sustain its operations with 13,000 employees.
The airline also has sufficient credit lines, which are largely unutilised to provide a liquidity support for its day-to-day working capital requirements.
“Our board of directors understand the business clearly. They are experts in many areas and they work closely with me and the team to deliver specific objectives,” he said.
On the A380s, Izham said only one aircraft was undergoing C3 heavy maintenance checks while the rest were deployed for MAB’s Haj and Umrah charters with nearly every day flights.
Both services are under MAB’s division, Project Amal.
“We also use the A380 during peak seasons on high demand routes such as London, Tokyo, Sydney and Incheon.
Malaysia Airlines was the eighth airline to take delivery of the A380 in 2012, receiving the upgraded version of the double-decker plane.
Izham said the aviation landscape has evolved since 10-20 years ago and would continue to do so with greater intensity, as airlines margins are being squeezed dragged by the increased unit cost and excess capacity in the market.
“We must be cognisant. What was in play 10-20 years ago, is not in play today anymore. Airlines customers are now connected and very sensitive to products and services, including on time performance, and pricing,” he said.
On the MRO facility, Izham said there were formulated strategies to bring it back by 2023. However, he reckoned that the company will require a big investment for this aspiration.
MAB is currently left with two hangars in Kuala Lumpur International Aiport (KLIA) for MRO facility after letting go of the other four hangars as part of the airline’s sustainability initiative to stabilise itself by managing its overhead cost.
“We cannot win all. We have got to select our priorities. We decided to move everything to KLIA in order to contain and manage our cost. By doing that we had to give up the hangar space in Subang,” he said, adding that many MRO players had emerged in the market.
Izham said MAB’s primary focus was to stabilise the airline and take into consideration the hefty investment in MRO facility and hangar.
“Currently, the capacity of MAB’s two hangars have reached 98 per cent utilisation. We still continue to enjoy certification and approval by Federal Aviation Administration and European Aviation Safety Agency capabilities,” he said.
Izham said it was not possible for MAB to provide MRO facilities for other airlines, citing that the current timing was not right as the company’s hangars capacities are fully utilised internally.
“Currently, we have A330-200, A330-200F, A330-300, A380, and ATR-73 aircraft type for our MRO facilities. Today, we are capable to execute MRO for other airlines from ATR, B738, A330 and A380 but the limitation is the hangar capacity (space).
“MRO services for other airlines are not our key focus now as it will require extensive capital expenditure,” he said, adding that MAB is on track building its MRO facility by 2023.