MAB Predicts Oil Prices to Hit $70 per Barrel, Buys up Fuel

6th Mar 2017

According to Malaysia Airline’s projections, fuel prices will reach $70 per barrel by the end of 2017. To counter this, the struggling national carrier has decided on aggressive fuel hedging.

Peter Bellew, MAB chief executive officer said the following about hedging fuel:

At the moment we are hedged about 65 per cent of the current year at about a little bit north of $60. We are quite aggressivelly hedginh 12 months ahead on a quarter-to-quarter basis and taking a fairly prudent approach to it.

As of Sunday, 5th March, crude oil futures were trading at $52.66 per barrel in Singapore. At the same time, the ringgit, has dropped more than 5% following the elections in America, but Mr. Bellew said he expects the Malaysian currency to strengthen in the next six or nine months, and improve MAB’s earnings. However, Bellew also said that weakening ringgit against the US dollar after the new US president was elected in November, is a significant concern for the airline itself.

MAB CEO also pointed out that he expects a return to “more consistent profitability” in the following year, after the flag carrier suffered an expected loss this year.

One of the things that should help Malaysia Airlines return to black is the increased demand from markets such as China. At the moment, this is the biggest and strongest market for MAB, with the greatest demand. However, as Bellew states, the airline will have to add several more widebody planes if it is to handle the influx of travellers from China to Malaysia. The carrier expects to fly five million Chinese tourists in three or five years.

When it comes to new aircraft, Bellew said the company could add six or seven to its fleet next year, and is in talks with both Boeing and Airbus for 787s and A330 neos.

Bellew also said the following about Chinese market demand:

My problem with Chinese is I don’t have enough aircraft right now to operate flights there. We are seeing no problems with our brand or reputation among Chinese nationals.

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