Malaysia Airlines No Longer Cutting Routes

12th Feb 2016

Malaysia Airlines Bhd (MAB) is done with cutting routes, at least for this year and will now focus on the emerging regional markets and expanding its network there.

Airline’s Chief Executive Christoph Mueller said:

The good news is that the capacity cuts are behind us. We will not cut our routes further. We now have to regain altitude and we have to become profitable. That is our pan in two years’ time.

Mueller also explained that MAB is looking to add more routes to countries that Malaysia will establish close trade relationships with, but refused to say which countries these might be.

The national airline has axed routes to Amsterdam, Paris and Dubai, all as a part of its codeshare with Emirates Airlines. MAB will now rely on Emirates codeshare when it comes to flying to the United States, Europe, Middle East and Africa. On the other hand, MAB will bring Asean, Asia Pacific and domestic routes to the codeshare.

Furthermore, MAB is also preparing to lower its operational expenses by reducing unit costs. Mueller said the following about this:

We will lower our absolute cost base and we also want to increase our production in this three to four years’ time. SO both factors together will result in 20 per cent unit cost decrease.

MAB CEO also said the company will review its jet fuel hedging strategy in the next board of directors meeting:

We will decide whether we will be active in the fuel hedging market in our upcoming meeting. Hedging is very often perceived as speculative argument in the airline business. It’s really complex, but the truth about hedging is it’s a risk management tool.

He also added:

Oil is cheaper today than it is next week or in three weeks or in three years. But of course hedging fuel at current prices makes sense but who knows whether the fuel price will fall farther.

 Currently, the price of Brent crude oil per barrel is $30.55.

Malaysia Airlines Bhd has continuously suffered net losses since 2011. In 2014, two of its aircraft, MH17 and MH370 crashed, one for yet undetermined reasons and the other after being struck by a Buk missile over Ukraine. A total of 536 people died in the two accidents.

The airline has been bought by the Khazanah investment fun for RM1.4 billion in 2014.

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