Malaysia Airlines is warning that it is unlikely to break even in 2019 amid capacity and cost pressures, despite improvements to its first quarter operating performance.
In a quarterly trading update today, the airline's group chief executive Izham Ismail says he expects 2019 to "remain extremely challenging".
"The competitive environment is expected to continue to tighten in 2019, driven by overcapacity in the region," he says. "This is largely driven by the price-sensitive leisure market which directly impacts yield.
"While the airline has hedged against fuel and foreign exchange, we will continue to be impacted by such external volatilities - including the ongoing trade war between the US and China - and do not foresee to break even this year."
During the January-March quarter, Malaysia Airlines posted a 2% increase in its revenue driven of an "aggressive sales initiatives on the back of a much softer market". This also helped to lift passenger numbers by 5% to 3.38 million. Passenger yields remained flat at MYR0.23 ($0.06), while overall load factors dipped 0.2 points to 75.2%.
Initiatives such as offering prepaid baggage and seat selection have also helped to raise its ancillary revenue by 23%. No other details were shared by the privately-owned carrier.
During the first quarter period, parent company Malaysia Aviation Group (MAG) submitted a turnaround plan to its shareholder, Malaysian sovereign wealth fund Khazanah Nasional, as a follow-up to its previous five-year recovery plan. MAG told FlightGlobal that the recovery plan had fulfilled the original aim of "resetting" Malaysia Airlines.
It also formally launched its pilgrim-based Airbus A380 operation Amal, where it has already been transporting passengers to Jeddah and Madinah since October 2018. This was followed by the resumption of Kuala Lumpur-Kochi service on 31 March after a four year suspension.
In its outlook, the Oneworld alliance member expects its forward booking to appear "much stronger" as compared to last year, by building on its sales channels and existing products. It also expects to grow revenue "beyond traditional ticket sales," including deeper collaborations with partners.