Malaysia Airlines Eyes Record Earnings in 2007, Predicts Drop in Fares
AP | Oct. 31, 2007
Malaysia Airlines said on Oct. 31 that it aims to post record earnings this year after a business revamp, and expects to cut fares by up to 7 percent in the next few years.
The government-owned airline embarked on a restructuring plan following losses in 2005 and 2006 arising from high oil prices and an industry downturn.
Chief Executive Idris Jala said the company is recovering after strong earnings in the first half of this year, and is on track to achieve net profit of between 300 million ringgit (US$86 million) and 700 million ringgit (US$200 million) for the full year through December despite higher oil prices.
"We now have over 3 billion ringgit (US$857 million) cash in our war chest. This year, we strongly aspire to achieve the highest net profit in the company's history," he told a news conference.
Jala said the carrier would unveil a new business plan in January to help it sustain growth and further cut costs by up to 1 billion ringgit (US$286 million), or around 10 percent of its operating cost, over the next five years.
This includes increasing Internet sales, which now comprise only around 4 percent of tickets sold, implementing electronic ticketing and reducing procurement costs, he said.
"We aim to be a five-star airline with low cost, but with no compromise on quality or safety," he said. "Our focus is to put Malaysia Airlines strongly on the path of profitable growth for 2008 and beyond."
Jala said the initiatives would help the airline prepare to lower fares over the next few years as competition intensifies with some 800 new airplanes expected to roll into the Asia-Pacific, India and Middle East regions this year and next.
"I believe fares will become highly competitive. In short, they will drop," he said. "Globally I would say (our fares will drop) between 5 and 7 percent in the next few years."
He declined to say when fares will be cut and on what routes.
Earlier this year, the airline said its net profit for the January-June half-year was 246 million ringgit (US$70 million), rebounding from a loss of 498 million ringgit (US$142 million) in the same period last year.
Rocketing oil prices remain a challenge as fuel accounts for 30 percent of the airline's operating cost, but measures have been put in place to improve fuel efficiency and hedging fuel cost, Jala said.
He said the government's recent decision to allow budget carriers ply the lucrative Kuala Lumpur-Singapore route may affect its earnings but didn't give details.