SEPANG: National carrier Malaysia Airlines Bhd (MAB) will no longer cut its network capacity this year, after its final flights to Europe last month and as it bids farewell to Dubai next week.
The airline will now focus on expanding its network to emerging markets in the region instead as it sets its eyes on being profitable by 2018.
“The good news is that the capacity cuts are behind us. We will not cut our routes further. We now have to regain altitude and we have to become profitable. That is our plan in two years’ time,” MAB’s newly appointed chief executive Christoph Mueller said in an interview yesterday.
He also said the airline plans to expand its network to countries that are currently undergoing economic developments as well as those that Malaysia will establish new trade relationships with.
However, Mueller declined to give any hint on the exact destinations the carrier is planning to fly to.
MAB has announced a series of route cuts as part of its rationalisation plan since 2012.
Previously, when it was known as Malaysian Airline Systems Bhd (MAS), the airline had axed Buenos Aires, Cape Town, Johannesburg and Rome in 2012 and Los Angeles in 2014 under the watch of the previous head Ahmad Jauhari Yahya.
MAS also crossed Kunming, Krabi, Frankfurt, Kochi, Brisbane, Istanbul and Male out of its network last year.
The recent network cuts made by MAB include Amsterdam, Paris and Dubai as part of its codeshare deal with Dubai-based Emirates Airline.
The move will see MAB relying on the Emirates’ codeshare to destinations in Europe, the United States, Africa and the Middle East.
In return, Emirates will bank on MAB’s extensive network in Asia Pacific, Asean and domestic routes in Malaysia.
Besides introducing new destinations, MAB will also focus on cutting its operational expenditure by reducing its unit cost as the airline plans to weather out of its current financial struggles.
“We will lower our absolute cost base and we also want to increase our production in this three to four years’ time.
“So both factors together will result in 20 per cent unit cost decrease,” Mueller said.
He added that MAB would also review its jet fuel hedging strategy in a meeting with its board of directors in three weeks as part of the airline’s cost-cutting measures.
Although the current Brent crude oil price is at its lowest, Mueller viewed that fuel hedging comes at a cost and the airline is currently very restricted on its cash.
“We will decide whether we will be active in the fuel hedging market in our upcoming meeting… Hedging is very often perceived as speculative argument in the airline business.
“It’s really complex but the truth about hedging is, it’s a risk management tool.”
“Oil is cheaper today than it is next week or in three weeks or in three years. But of course hedging fuel at current prices makes sense but who knows whether the fuel price will fall further,” Mueller said, adding that MAB had recently received the first tranche of its funding of RM3 billion from its shareholder Khazanah Nasional Bhd.
As at press time, the price for Brent crude oil was US$30.55 per barrel.
MAB was taken private by Malaysia’s state investment fund, Khazanah for RM1.4 billion, or 27 sen per share in end-2014.
The privatisation was part of Khazanah’s RM6 billion restructuring plan to revive the national carrier, which had continuously posted net losses since 2011, within three years.