6 December 2016

By B.K. Sidhu, The Star

Malaysia Airlines Bhd (MAS) has benefitted from a combination of an aggressive marketing strategy and the adjustment in passenger service charges (PSC) for flights within the ASEAN (Association of Southeast Asian Nations) region.

Forward bookings at MAS for the next six months are 50 percent more than a year ago, said Chief Executive Officer Peter Bellew.

“The airline has had tremendous group booking enquiries from the ASEAN region, spiking by almost 400 percent,” he said.

Apart from an aggressive sales campaign by the airline over the past months, Bellew said the “equalization” of the PSC has had an even better impact than expected on the airline.”

Great Boost for Malaysian Tourism

The new PSC charges come into effect on Jan. 1, with uniform charges for all ASEAN destinations at RM35 in both the Kuala Lumpur 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 U.S. 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 were 21.75 sen, down from 22.5 sen in the second quarter, despite passenger revenues for the third quarter rising 12 percent 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 U.S. dollars. However, the lower cost of fuel, which we have hedged as much as possible, will balance out the rise of the U.S. 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 percent to 70 percent 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 optimized 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 percent in financial year 2017.

Good Progress and Aggressive Sales

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 percent 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.

Original Source: www.chinapost.com.tw

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