Malaysia Airlines Bhd (MAB) embarked on an urgent restructuring exercise to maintain its relevance and survival after being forced to revise its long-term business plan (LTBP) by the Covid-19 pandemic.
The measure includes reworking the national carrier’s network and fleet plans to enable it to cope with not only the uncertain and volatile aviation landscape, but also the likely-softer traffic demand for the foreseeable future.
“This plan, which requires a comprehensive restructuring of the MAG business and capital structure, is highly dependent on the individual contributions of all relevant stakeholders in supporting the group to emerge out of this crisis as a well-capitalised and financially healthy airline group,” MAB said in a statement today.
It also confirmed having reached out to its lessors, creditors and key suppliers regarding the restructuring exercise, which is expected to be completed over the next few months.
However, if such an outcome was not possible, the group would have no choice but to take more drastic measures.
When MAB and all its sister companies under the Malaysia Aviation Group (MAG) launched the LTBP in early 2019, the group achieved better overall net income after tax (NIAT) compared to 2018, which is 18% ahead of target whilst group revenue grew by 7% year-on-year (y-o-y).
It said the improved NIAT performance was despite higher fuel prices, increase in forex and impact of MFRS16 (accounting standard for leases).
MAB passenger revenue per available seat-kilometre (RASK) increased by 3% and yield increased by 5% on the back of a 5% increase in available seat kilometre (ASK) y-o-y.
The airline achieved record-breaking RASK results in second half of 2019, with the highest RASK ever recorded in three years.
MAB said it also made significant improvements operationally, exceeding its on-time performance target of 80% to achieve 83%, the best ever since 2015, while mishandled baggage had steadily improved to 5.6 bags per 1,000 passengers, the best ever in the last five years.
Its customer service index improved to 78%, the best in the last four years, while net promoter score climbed to +14 compared to -22 in the last three years.
The group was set to continue the good momentum in 2020 but Covid-19 caused an unprecedented lockdown across the globe, forcing airlines to halt operations and ground almost all their fleet for most of March to June this year.
At the height of the Covid-19 crisis, MAG continued to serve the nation and customers by maintaining some domestic and minimal international connectivity, mostly to facilitate essential movements, mounting of rescue and repatriation flights, and ensuring global supply chains were maintained via its cargo operations.
The negative financial impact prompted the group to cut costs and conserve cash, including introducing extensive salary cuts for the entire management team and pilots, introducing no-pay leave, seeking payment deferrals, renegotiating contracts, amongst others, in order to survive and protect as many jobs as possible.
MAB expects the pandemic, showing little sign of improvement; resurgence in some markets without visibility of a vaccine that needs to be widely distributed and tight border restrictions remaining in place for key markets, to hamper international leisure and business travel demand in the next couple of years.
“As a national carrier, it is MAG’s intention to ensure some level of continuous connectivity for its passengers and to minimise impact on the livelihood of direct and indirect workforce and industries dependent on its operations,” it said.
Being an economic enabler to the country, it said MAG was cognisant that any action taken would have a greater impact to the broader aviation industry and to the nation.
“Hence it is committed to ensure that its restructuring exercise is duly implemented in a fair manner through any form of mechanism that is appropriate,” it added. – Oct 2, 2020
