Malaysia Airlines has revealed that the disappearance of MH370 continues to have an effect, with the announcement of its 2014 Q2 financial results.
The national carrier reported a net loss of RM307 million (US$97 million) during the period of April to June. In addition to the carrier's earlier loss of RM443 million (US$140 million) in the first quarter, MAS total loss during the first half of 2014 is currently standing at RM750 million (US$237 million). This represents a 65 per cent larger deficit than the same period last year.
On top of this, it is not yet known what the full impact of MH17 will be on the carrier’s financial earnings, as the incident occurred in July 2014. However, early indications and comments from Malaysia Airlines Group chief executive officer, Ahmad Jauhari Yahya suggest that it will be significant.
“[As] the impact of the two tragedies [has] damaged our brand, the need to restructure the Company was accelerated. The full financial impact of the double tragedies of MH370 and MH17 is expected to hit Malaysia Airlines in the second half of the year”, said Ahmad Jauhari.
Malaysia Airlines A380
According to MAS, the financial loss can be attributed to lower yields and deteriorating seat factor following the MH370 incident. In addition, this was coupled with a two per cent increase in operation cost, principally due to escalating fuel expenditure, which rose by nearly 10 per cent over the previous corresponding period.
Passenger load factor fell to 68.9 per cent in May, but rebounded in June to return to above 80 per cent. However, it is highly probable that July’s figures may not be so rosy due to the MH17 incident.
“We expected the impact of MH370 on the performance in Quarter 2. Given that, our team put in much hard work and effort to regain market confidence and rebuild sales. Tragically, just as we were beginning to see signs of recovery in all regions, we were dealt the blow of MH17”, commented Ahmad Jauhari.
MAS has made moves to reduce costs and increase productivity, with the airline having brought forward the retirement of the older, less fuel-efficient Boeing 737-400 aircraft (see here). It’s fleet now consists of 88 aircraft, including 54 B737-800s, 15 Airbus A330s and 6 Airbus A380s – with an average fleet age of 5.28 years.
In addition, majority shareholder, Khazanah Nasional Berhad has announced its intention to take full ownership of MAS (see here). If approved, a plan will be put forth to restructure the airline group and help return it to profitability.
For more information, visit malaysiaairlines.com
Clement Huang
