PETALING JAYA: Malaysia Airlines Bhd (MAS) has benefitted from a combination of aggressive marketing strategy and the adjustment in passenger service charges (PSC) for flights within the Asean region.
Forward bookings at MAS for the next six months are 50% more than a year ago, said its group chief executive officer Peter Bellew.
“The airline has had tremendous group booking enquiries from the Asean region, spiking by almost 400%,” he said.
Apart from an aggressive sales campaign by the airline over the past months, Bellew said the “equalisation” of the PSC has had an even better impact than expected on the airline”.
The new PSC charges come into effect on Jan 1, with uniform charges for all Asean destinations at RM35 in both the KL International Airport (KLIA) and KLIA2.
It replaces the old structure where it is RM65 for all international travels, which includes Asean, at KLIA and RM32 in KLIA2, which is positioned as an airport for low-cost carriers.
“We are seeing great forward bookings and our loads are good … this would be a great boost for us and Malaysian tourism,” he said in response to queries from StarBiz.
Although the forward bookings are encouraging, yields are depressed, a worldwide conundrum given the intense competition. The weaker ringgit will have an impact on the airline, as will the stronger US dollar, as most of its costs are in dollars.
“Yields dipped slightly in the third quarter, but this is something affecting most airlines. We expect this to improve in the fourth quarter,” Bellew said.
“We do expect heightened competition with over-capacity in the market, with both players (AirAsia Bhd and Malindo Air) bringing in extra aircraft into Malaysia. This would be good for the customers, but would put pressure on the airlines,” he added.
MAS’ yields for the third quarter ended Sept 30, 2016 was 21.75 sen, down from 22.5 sen in the second quarter, despite passenger revenues for the third quarter rising 12% over the second quarter, led by aggressive sales campaigns.
The yield has a direct impact on the bottom line of the airline operations.
Traditionally, the fourth quarter is the best quarter for airlines, but the ringgit’s weakness has been intense after Nov 8.
Bellew said the weaker ringgit would have an impact on airline operations and would be made worse by the keen competition in the Malaysian market.
“The volatility of the dollar is a major concern, given that most of our costs are in US dollars. However, the lower cost of fuel, which we have hedged as much as possible, will balance out the rise of the US dollar,” he said.
“We will have to be extra diligent and focused on costs in 2017, but we remain cautiously optimistic.”
MAS had hedged about 60% to 70% of jet fuel requirements for 2017 at US$65 a barrel.
“We have been working hard on fuel management and efficiency, implementing initiatives that will ensure optimised consumption of fuel both in the air and on the ground.
“These include improved flight speeds, weight on the aircraft and the uploading of fuel. This is one of the many initiatives we are working on. Any savings will always be passed on to our customers,” said Bellew, without elaborating.
He expects unit costs to fall by a further 3% in financial year 2017.
Bellew joined the airline as its chief operating officer a year ago, and was appointed group CEO in July. He is also group CEO of MAS’ parent, Malaysia Aviation Group Bhd.
Asked how the three months have been, Bellew said the company has made good progress and the aggressive sales and marketing campaigns had resonated with customers.
“Passengers vote with their feet and our forward bookings in the next six months, up by 50% from a year ago, show that we are on the right track”.
“I am an impatient man and I do wish things could have moved faster. There is still a long way to go but with the progress we have seen in the quarter, I remain optimistic,” he said.
MAS, which was taken private by Khazanah Nasional last year after years of chalking up losses, is expected to record a lower loss this year. However, the restructuring efforts that has gone into the airline since being taken private is expected to turn the airline profitable next year.
Last week, he shared the airline’s quarterly statistical performance for the three months ended Sept 30, 2016.
Passenger loads improved system-wide from 69% in the second quarter to 79% in the third quarter. It was 74% in the third quarter of 2015. However no profit and loss numbers were dislosed.
Bellew hopes to bump up passenger loads to 80% next year. From January to September, the airline carried 10.1 million passengers, and for full-year 2016, he is looking at 14 million, and over 15 million for 2017.
The airline’s market share on its only long-haul route to London, which suffers from intense competition, has seen a 15% increase to 59% in September from 49% in May.
Passenger revenue was 12% higher in the third quarter over the previous quarter, and a reduced net operating level loss of 7% compared to the second quarter.
However, on-time performance was significantly lower at 68% in the third quarter from 82% in the second quarter due to several internal and external factors.