Twin Tragedies Hurt Malaysia Airlines' Revenues

Malaysia Airlines' net loss widened to 307 million ringgit (US$97.4 million) million in the three months that ended June 30, according to Khazanah Nasional Bhd., which noted that the loss was somewhat cushioned by foreign-exchange gains of 52 million ringgit.

Operating revenue fell 7% to 3.34 billion ringgit as travellers stopped flying the airline after the disappearance of Flight 370 on March 8 while en route to Beijing from Kuala Lumpur with 239 people on board. Then on July 17, the airline's Flight 17 was brought down by a surface-to-air missile, killing 298 passengers and crew.

Malaysia Airlines' seat load factor, a measure of the proportion of planes filled, fell 9.5 percentage points to 68.9 in May after Flight 370 was lost but was improving in June, reports the Wall Street Journal.

In the second quarter, capacity rose 9% on year but traffic stayed the same, pushing the airline's load factor 6.7 percentage points lower to 73.7% compared with 80.4% in the prior year's quarter, the airline said. The airline carried 4.2 million passengers during the recent quarter.

Spending on fuel, which accounts for more than 40% of the airline's costs, increased 10% on year to 1.53 billion ringgit due to a rise in fuel prices and a weaker local currency against the U.S. dollar.

"We operate in a harsh business environment of stiff competition from regional and global carriers and high operational costs," says Ahmad Jauhari Yahya, group chief executive of Malaysia Airlines. "Coupled with the impact of the two tragedies, which have damaged our brand, the need to restructure the company was accelerated."

Khazanah, which owns nearly 70% of Malaysia Airlines, on Friday announced it will cut 6,000 workers, 30 percent of its current workforce of 20,000, as part of an overhaul.

The overhaul includes the establishment of a new company that will take over the existing Malaysia Airlines business and its reduced staff.

The overhaul and new investment in the carrier will cost about 6 billion Malaysian ringgit ($1.9 billion).

Khazanah had announced on Aug. 8 that it plans to take Malaysian Airline System private as part of efforts to revive the flag carrier. The delisting process is expected to be completed by the end of the year.

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