Malaysian flag carrier freezes aircraft orders until 2008 and starts to shrink fleet

Malaysia Airlines (MAS) plans to rationalise its fleet and hold off on ordering new aircraft until 2008 as part of a business turnaround plan aimed at stemming mounting losses.

The flag carrier, which last week reported a 1.3 billion ringgit ($350 million) loss for the final nine months of 2005, says it will reconfigure aircraft over the next 12 months “to ensure an optimal mix of classes”.

In the second phase of the turnaround plan, which will begin in nine months, MAS plans to further refine aircraft configurations and rationalise the fleet by retiring older aircraft. New aircraft will only be ordered in the third phase, which will begin in 24 months. “Our future fleet will comprise aircraft that are smaller and more fuel efficient,” MAS says.

MAS’s passenger fleet now consists of Airbus A330s, Boeing 737-400s, 747-400s and 777s, and Fokker 50s. It also has six A380s on order, which sources say will not be affected by the restructuring. But MAS’s long-delayed 737-400 and Fokker 50 replacement programmes will probably again be postponed.

MAS says it will radically restructure its highly unprofitable domestic network, if given the green light to take it over from the government, and refocus its long-haul network on hub-and-spoke connections rather than point-to-point services. MAS acknowledges most of its long-haul services are currently unprofitable.

To improve feed at its Kuala Lumpur hub, MAS plans to forge new codeshare arrangements and join a global alliance in 24 to 36 months. Over the next 12 months, MAS will overhaul pricing and revenue management. The carrier also plans to improve productivity by drafting new crew work rules, shortening turnaround times and improving aircraft utilisation.

While the business turnaround plan will be implemented over the next three years, MAS says it has already begun “undertaking a series of measures to raise 4 billion ringgit in cash” in 2006 “to tide the airline through the current cash crisis”. If these funds are not raised, it warns it would have run out of cash in April. “Today we have a cash and profit crisis. On current business assumptions, course and speed, we will surely fail unless we radically change the way we run our business,” says managing director Idris Jala, who has been working on the turnaround plan since taking over on 1 December.


Source: Flight International