Few firm details on the future direction of Malaysia Airlines emerged from the beleaguered carrier’s AGM, although there were plenty of mentions of the need for radical change.
The carrier was in trouble well before the disappearance of MH370 – as senior management acknowledged. Long-standing structural problems were exacerbated last year by a yield-destroying capacity surge to combat low-cost carriers, including new entrant Malindo.
Malaysia Airlines made a 1.174 billion Ringgit (US$364 million) net loss for the 12 months ended 31 December 2013, which Group CEO, Ahmad Jauhari Yahya described as “unsatisfactory”.
“For many years, we grappled with a set of very real external pressures characterised by an ever-shifting competitive landscape, the constant arrival of many new market players, and the increasing perception of commercial air travel as a commodity.”
He added: “These pressures, combined with internal financial, structural and institutional issues, meant that the business reset embarked upon in 2012 was not comprehensive or deep enough to deliver the desired results on earnings yields, cost efficiency or productivity.”
Yahya pointed to some bright spots, although he admitted, “they were not nearly where we need to be in order to be competitive in the future.”
The carrier saw EBITDA improve by 36% to 254.0 million Ringgit in 2013 compared to 187 million Ringgit at the end of 2012.
“While capacity, measured in Available Seat Kilometre (ASK), grew 17% utilising existing fleet and resources, costs grew by only 10% after absorbing higher costs from the weakening Ringgit against the US dollar and a one-off cost for aircraft redelivery. This has resulted in a lower CASK (Cost per ASK), which was reduced by 10% in 2013,” noted Yahya.
“Traffic went up 27% on capacity that increased only 17%, our average Seat Factor improved 6.3 percentage points to 81% compared to the previous year. We saw the highest ever Seat Load Factor at 93.5 percent.”
Yahya said: “We know that there are many options to consider. But we also know that we cannot simply go on with incremental improvements. And I have no intention of standing here in front of all of you at next year’s AGM with further news on the results of piecemeal or ineffective change. … Our only option at this point of our business evolution is radical or sweeping change.”
“To achieve a turnaround of the business, we will need the support of all employees, unions and all stakeholders; to work together towards a shared vision for unlocking the competitiveness of the company. It is important to note that some of the current work rules are not conducive for this turnaround.” – Colin Baker