Malaysia Airlines reports improved 3Q performance

Malaysia Airlines A380. Courtesy, Airbus

Malaysia Airlines has reported a third-quarter net income after tax of MYR37 million ($12.1 million), resulting in a small operating profit of MYR4 million for the period. This reverses an operating loss of MYR192 million for the year-ago period.
The airline attributed the improvement to a route rationalization program that reduced ASKs 7%. This capacity reduction helped cut fuel costs by 9% to MYR1.3 billion for the quarter and non-fuel costs by 7%, but without an equivalent impact on the group’s total revenue, which was down just 2% to MYR3.5 billion.
In the third quarter, Malaysia Airlines carried 3.3 million passengers, down just over 1% from 3.35 million during the same period in 2011.  Seat load factor was also down at 74.5% compared to 75.9% year-over-year.
For the nine months ended Sept. 30, Malaysia Airlines has more than halved its operating loss from MYR975 million in the year-ago period to MYR405 million. Nine-month net loss after tax improved 61% to MYR484 million against a loss of MYR1.247 billion year-over-year.
Malaysia Airlines Group CEO Ahmad Jauhari Yahya said: “Revenue initiatives have started to gain traction in the market, and combined with the improved utilization of the fleet and our manpower, we are beginning to see the results of all this hard work show in our quarterly results. The combination of the route rationalization program as a key part of our recovery plan, aided by many other revenue initiatives, contributed to the group registering a small profit in the third quarter.”
Separately, Malaysia Airlines announced the plan for a capital restructuring exercise followed by a renounceable rights issue to raise up to MYR3.1 billion to improve liquidity and financial flexibility and reduce borrowings. This sent the airline’s stock tumbling more than 20% Wednesday, although it has since made a marginal recovery.
The proposed capital restructuring aims to rationalize the company’s balance sheet and reduce accumulated losses by reducing the par value of each existing ordinary share from MYR1.00 to MYR0.90 to help create a credit reserve of up to MYR8 billion.  The proposals are expected to complete by the 2013 second quarter.