Malaysia Airlines (MAS) slumped to a net loss of ringgit (M$) 375 million ($118 million) for the quarter ended 30 September as increased competition in the Malaysian market impacted yields and a weakening of the ringgit translated into higher costs.
This poor performance is a reversal from the net profit of M$37.1 million the Oneworld carrier posted in the same period last year.
During the quarter, operating revenue rose 13% to M$3.78 billion as the carrier put in an additional 20% capacity and achieved a 37% increase in passenger traffic. The "intensifying competition" with new competitors putting additional capacity into the market, however, put pressure on pricing, impacting yields, says MAS.
Operating expenses also rose 16% to M$3.85 billion mainly due to the high fuel costs and non-fuel variables which rose in line with capacity increase, high airport charges and the weakening of the ringgit against the US dollar.
MAS says it also intensified its advertising and promotional activities during the period as part of a long-term strategy to strengthen its presence in key markets amid intense competition.
The quarter's results also translated into a net loss of RM830 million for the first nine months of the year, widening losses of M$484 million recorded for the same period last year. Its cash flow position, however, remains positive at M$5.32 billion.
“We are extremely disappointed with these results, which emphasise the need to maintain our focus on cost control and drive improved efficiency and performance across all divisions. Our cost reduction exercise will be intensified and accelerated to remain competitive, covering all aspect of the business operations,” says group chief executive Ahmad Jauhari Yahya.
He adds that the carrier's load factor has, however, grown 10 percentage points from a year ago to 85%, and that the market has reacted well to its new aircraft, increased capacity, new destinations and increased frequency.
"The airline sector has always been extremely competitive and the ASEAN region is no exception, with many airlines investing heavily in new aircraft and new products and services. This has resulted in a significant increase in capacity and many airlines are competing aggressively for market share," says Ahmad.
MAS has, to date, taken delivery of 16 new aircraft in 2013, as part of its ongoing fleet renewal programme. The Airbus A380s have replaced the fuel-thirsty Boeing 747s, while 737-800s are replacing the ageing 737-400s.