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Malaysia Aviation Group rolls out 5-year business plan, expects to break even by 2023

• 04-05- 2021 08:16 PM

KUALA LUMPUR: Malaysia Aviation Group (MAG) expects to break even financially and be cash positive by 2023 through its newly launched Long Term Business Plan 2.0 (LTBP 2.0).

Group chief executive officer Captain Izham Ismail said the target would be achieved amid a subdued market, with recovery expected to take place only in 2022/2023.

“I’m hopeful if the market turns around, we will break even much earlier, but the trajectory that we are looking at is an extended ‘L-shape’ recovery that is very likely (to happen) in 2023,” he said during the virtual media briefing on MAG’s LTBP 2.0 today.

The LTBP 2.0 is a five-year plan (2021-2025) to transform MAG from a pureplay aviation business to Asia’s leading travel and aviation services group.

Izham said the airline group aims to have a more diversified portfolio that delivers and caters to different needs of its customers, adding that digital and travel solutions businesses will play a more pivotal role in driving MAG’s growth.

Rather than putting all of its eggs in one basket, the portfolio diversification will enable the group to withstand any future economic shocks, he said.

“We want to be known as leaders in providing best-in-class customised experiences and innovative solutions.

“We don’t just sell seats. We sell end-to-end travel experiences to our customers, right from the first to the last mile,” he said.

MAG’s LTBP 2.0 is supported by five strategic pillars – becoming a premium Asia Pacific carrier, recapturing domestic and Asean business, deepening commercial partnerships, diversifying revenue and making digital the cornerstone for its business.

After strengthening its balance sheet, the aviation group is now focusing on the next key financial matrix, which includes having cash flow stability.

Izham said the success of its restructuring exercise, which involves about 75 creditors, has enabled MAG to secure over RM15 billion savings in liabilities in terms of aircraft leasing, maintenance contracts, payment deferrals and moratoriums among others, while reducing its balance sheet cost by 57%.

He added that the shareholders have committed to a cash injection of RM3.6 billion to support the group’s working capital requirement for 2021 to 2025.

Despite having a better cost structure compared with its peers, he said, revenue is a challenge for MAG as it operates in a predominantly low-yield domestic market – one of the lowest in the region.

He said the industry needs a reform to become sustainable as conditions are expected to worsen post-Covid-19.

Under LTBP 2.0, MAG plans to increase its annual non-flight revenue to RM4 billion from the current RM2.5 billion a year.

In terms of network, Izham said he expects overall capacity to fully recover by 2022, adding that the entire network will be optimised by removing loss-making routes, while simultaneously introducing a new service model for the domestic and Asean short-haul markets.

He said MAG will expand its fleet size to 83 aircraft by 2025 from the current 69, with more Boeing B738 aircraft for the regional and Asia-Pacific market.

The group plans to have new widebody aircraft in 2024 to replace the ageing Airbus A332 aircraft for its Europe as well as Australia and New Zealand expansion, Izham said, adding that the group intends to retire the A380 aircraft in the next coming months and is exploring ways to dispose of the carrier. – Bernama

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Malaysia Airlines parent rejigs leadership team, group structure

By Alfred Chua 2023-02-09T01:04:00+00:00

Malaysia Aviation Group (MAG) – the parent company of Malaysia Airlines – has reshuffled its senior leadership team and operating structure, as it hopes to break even by this year. 

The move, announced 8 February, will see the formation of three “profit centres”: airlines, aviation services, as well as loyalty and travel services. 

Source: Wikimedia Commons

A Malaysia Airlines Airbus A350-900 wearing the special Negaraku livery.

MAG says the new operating structure “will enable [it] to deliver its Long-Term Business Plan 2.0 in a more cohesive and unified manner”. It says there will be “greater emphasis” on transparency and accountability, with a clearer financial reporting structure, and envisages each division helping to “diversify the group’s revenue streams beyond its airlines business”. 

The group rolled out the second edition of its long-term business plan after successfully restructuring in 2021. Since then, it has gone some way in slashing costs and eliminating its debt, while growing its revenue streams. 

MAG chief Izham Ismail says: “While [MAG’s] existing structure has enabled us to be future-proof, we continue implementing a strong and flexible organisational structure that will set the group up for long-term success.” 

The units will be headed by respective CEOs, supporting the group-level leadership team. Izham, who was also Malaysia Airlines chief, will continue in his present role, together six other members of the MAG leadership team. 

MAG’s airlines portfolio will be headed by Ahmad Luqman Mohd Azmi, who was the group’s operations chief for about five years. Ahmad Luqman was also Malaysia Airlines’ cargo head, with over 20 years in the air cargo sector. 

The airlines portfolio will cover mainline operator Malaysia Airlines, low-cost unit Firefly, regional unit MASWings, as well as its religious charter arm Amal. 

Meanwhile, the aviation services portfolio will comprise cargo, ground handling, training, as well as MRO operations. Mohd Nadziruddin Mohd Basri, the current CEO of MAG ground services arm Aero Darat Services, will be promoted to helm the division. He will be supported the operating chiefs of the respective services units. 

The loyalty and travel services will be headed by Philip See, who was the head of Firefly. He will assume the new role while concurrently retaining his position as group chief sustainability officer in MAG. 

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Malaysia Airlines' parent unveils new structure

KUALA LUMPUR: Malaysia Aviation Group (MAG) has unveiled a new organisational structure that it says will help deliver its Long-Term Business Plan 2.0 in a more cohesive and unified manner.

The new structure sees MAG operating as a full-fledged operating company (op-co), while its subsidiaries are grouped into three dedicated profit centres namely airlines, loyalty and travel solutions, and aviation services.

"With the new organisational structure, the MAG senior leadership team has also been enhanced for better reporting across the Group and business verticals," it said on Wednesday.

"The new set up allows MAG to have a more dynamic reporting structure under each profit centre," MAG group chief executive officer Captain Izham Ismail said.

"While the existing structure has enabled us to be futureproof, we continue implementing a strong and flexible organisational structure that will set the Group up for long-term success," he added.

The leadership team at the op-co level will continue to lead the group, supported by the CEOs in the respective profit centres.

The airlines business portfolio will oversee MAG's global, domestic and segmented airlines comprising Malaysia Airlines, Firefly, MASwings and AMAL.

Ahmad Luqman Mohd Azmi will take on the role of CEO of airlines, supported by chief operating officers (COO) of the respective subsidiaries: Captain Nasaruddin A. Bakar for Malaysia Airlines; Captain Hamdan Che Ismail for Firefly; Suresh Singam for MASwings; and Muhammad Najmi Mansor for AMAL.

The travel solutions and loyalty portfolio will complement MAG's strength and expertise in the airline and aviation service businesses. This includes Journify, MHholidays, Firefly Holidays, and Enrich.

Philip See will oversee the portfolio as CEO of loyalty and travel solutions, double hatting the role of group chief sustainability officer.

The portfolio covering cargo, ground handling, training and maintenance, repair and overhaul (MRO) consists of MABkargo, AeroDarat Services, MAB Academy and MAB Engineering.

It will be overseen by Mohd Nadziruddin Mohd Basri as the CEO of aviation services , supported by the CEO of MABkargo Mark Jason Thomas and COOs of other subsidiaries: Ibrahim Salleh for AeroDarat Services; Aida Salfaraz for MAB Academy (following the retirement of Captain Kamarudin Kamilin in February 2023) and Eke Nazri Rahim for MAB Engineering.

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Malaysia Aviation Group eyes financial breakeven by 2023

Tuesday, 04 May 2021

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MAG group CEO Capt Izham Ismail said if the market turns around faster, they would break even much earlier.

KUALA LUMPUR: Malaysia Aviation Group (MAG) is banking on its Long Term Business Plan 2.0 to break even its finances and turn cash flow positive by 2023 in what it calls a “downside scenario”.

Group chief executive officer Capt Izham Ismail said if the market turns around faster, they would break even much earlier.

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Huge turnaround: malaysia airlines goes from $173 million loss to $125 million profit.

It was one of the best-ever quarter performances posted in the past two decades.

Kuala Lumpur-based Malaysia Airlines expects to achieve full operational recovery in China and North Asia this year. Indeed, the airline expects capacity across its network to reach pre-pandemic levels by the close of 2023. The expectation comes after its parent company, the Malaysia Aviation Group, marked one of its best-ever quarterly financial performances in the past two decades.

A robust return to high profitability

The Malaysia Aviation Group posted a significant financial turnaround , with last year's operating profit of approximately RM556 million ($125 million) effectively reversing the RM767 million ($173 million) operating loss reported in 2021. The return to profitability was also despite higher fuel prices, labor costs, and a weaker currency.

Although flight capacity levels last year were much lower compared to pre-pandemic times, the Malaysia Aviation Group still attributes the profits to robust demand, higher yield across passenger and cargo business segments, and effective cost management with cash flow optimization.

Improvements across all other business segments also contributed to the full-year profits. Malaysia Airlines' total revenue tripled compared to 2021, underpinned by more robust demand in the international sector for both commercial passenger travel and cargo freight, despite the slight softening of global freight demand.

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An exceptional rebound for Malaysia Airlines

While the Malaysia Aviation Group did not release any specifics, it did share that last year, the flag carrier carried approximately 9.9 million passengers compared to the 1.7 million transported in 2021. The passenger load factor also improved from 46% to 75%.

Capacities to specific destinations were also increased. An example is Malaysia Airlines addition of a second daily non-stop flight between Kuala Lumpur International Airport and Doha Hamad International Airport in conjunction with Qatar Airways . Expanding like this allows Malaysia Airlines to grow its network further and connect to more destinations in North America, Europe, and Africa.

The oneworld alliance member is currently operating at an estimated 85% of pre-pandemic capacity and is optimistic of returning to total capacity in China and North Asia by the end of this June. It expects overall full capacity levels across its entire network to return by the end of this year.

Firefly still lags quite far behind

While most of the Malaysia Aviation Group saw exceptional turnarounds, the same unfortunately could not be said for its low-cost unit Firefly . The airline remained unprofitable for the entirety of last year amid weaker yield and demand for both ATR and jet operations. However, the Group isn't too worried about the low-cost carrier lagging behind.

The lack of worry is because, in line with the Malaysia Aviation Group's Long-Term Business Plan 2.0 aimed at continuing the growth of Firefly's jet operations, Malaysia Airlines will transfer all its intra-East Malaysia routes to the low-cost carrier from May 16th. This means the flag carrier will only operate flights between East Malaysia and Peninsular Malaysia and domestic flights within the Malaysian peninsula.

Firefly will deploy its Boeing 737-800s for these transferred domestic routes, and daily flight services will be offered. Compared to Malaysia Airlines' previous schedules of two to five weekly flights on similar aircraft, the daily flights provided by the low-cost carrier signal quite the capacity increase that would hopefully boost its revenue numbers.

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Bottom line

After quite a turbulent few years, it's great to see most of the Malaysia Aviation Group, specifically Malaysia Airlines, reversing old losses and swinging to profit. And though it may now lag behind, this year could be when low-cost unit Firefly turnarounds too.

With an optimistic outlook for this year, the Group is also eagerly looking for opportunities to induce demand in Malaysia. It is also looking forward to taking delivery of four out of 25 Boeing 737 MAX 8s from the third quarter of this year, further highlighting how exciting 2023 will be for the Group.

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Malaysia airlines says it expects domestic aviation to recover by end-2022.

KUALA LUMPUR, Aug 26 — The domestic aviation industry is expected to return to the pre-pandemic level by the end of next year.

However, the international market will likely take a much longer time to fully recover, said Malaysia Airlines group chief operations officer Ahmad Luqman Mohd Azmi.

“The restart will begin in the fourth quarter this year and (the local aviation industry) will be back to the pre-pandemic level roughly in 2022 if the situation improves.

“We are looking at mid-2023 or early-2024 for full recovery (for the international market),” he told a virtual media briefing, organised by Malaysia Airlines and the Civil Aviation Authority of Malaysia today.

The national carrier is currently serving approximately 1,000 passengers per day compared to the pre-pandemic level of 38,000 passengers per day in 2019, and handling 1,700 pieces of baggage daily versus 36,000 pieces previously.

Meanwhile, Ahmad Luqman said the airline is set to implement its Long Term Business Plan 2.0, taking into consideration some recovery scenarios.

With regards to plans for Firefly’s resumption of jet operations, he said the official restart would be in the early first quarter of next year, subject to the recovery in the domestic market.

He said Malaysia Airlines is still operating its long-haul flights to destinations such as the United Kingdom, Australia, South Korea, Japan, China and several Asean cities, albeit on a reduced frequency. — Bernama

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In it for the long haul: Izham Ismail

Seven years ago, after the worst year in its 75-year history, the national airline carrier of Malaysia underwent a full reset. “The old company, known as Malaysia Airline System, migrated to a new organisation called Malaysia Aviation Berhad (MAB) ,” explains registered pilot Izham Ismail who was the airline’s Director of Operations at the time and experienced firsthand the aftershocks that followed.

And then COVID-19 hit. The airline wasn’t immune to the impact of the pandemic. “The closure of international borders led to a 96 per cent, or thereabouts, reduction in our flight capacity which heavily impacted our financials,” he admits.

Realising that the crisis wasn’t going to end anytime soon, Izham decided to look for the opportunity within the situation. “COVID-19 became a ground zero for us. It was a chance for us to reset our balance sheet,” he explains.

Over four months of intense negotiations with its creditors, with the team working 20-hour days, the airline was able to complete a full restructure – the first Asian carrier to do so during the COVID era. “The exercise was so successful that we were able to remove MYR15 billion (US$3.6 billion) of liability,” he reveals.

Approaching the negotiating table with “transparency” was key to the success of the exercise, Izham says. “Of all our 75 creditors, everybody knew what was on the table. There was no secrecy,” he shares. Instead, what was achieved was trust – as well as a unanimous agreement when the proposal was presented to the courts in the UK. “The game-changer was that the creditors really believed in our long-term business plan.”

The airline’s LTBP 1.0 has been replaced by version 2.0, which is centred upon five core pillars: enhancing its position as a premium carrier in Asia–Pacific; recapturing the low-cost domestic market with the launch of sister airline Firefly at the start of 2021; deepening partnerships with both airlines and non-airlines; diversifying its revenue stream through avenues such as cargo and travel-related products; and transforming into a digital organisation, something Izham believes will be a “cornerstone for our business moving forward”.

Izham doesn’t predict a return to pre-pandemic levels for the airline industry until late 2023, or even mid-2024, but despite the current climate he says morale is up. Part of this was due to not one single employee losing their job; instead, members of management agreed to take pay cuts of up to 60 per cent, which enabled the team to survive the worst of the crisis intact.

Malaysia Airlines launches 737 Max 8 operations

Malaysia Aviation Group (MAG), the parent company of oneworld alliance carrier Malaysia Airlines, earlier this week commemorated the arrival of its first Boeing 737 Max 8 aircraft with a launch ceremony held at MAG’s engineering complex at Kuala Lumpur airport.

The national carrier thus far has placed orders for 25 737 Max 8s, all on lease from US-based Air Lease Corp (ALC).

The 25 new Max 8s will be delivered gradually through 2026.

The first Malaysia Airlines Max 8 aircraft is currently plying the Kuala Lumpur-Kota Kinabalu route for crew familiarization.

The maiden Max 8 will service destinations across domestic Malaysia, before expanding to other destinations across ASEAN as more 737 Max 8s arrive.

“With the induction of our new Boeing 737-8, it will allow us to enhance customer experience, improve operational and fuel efficiency, and meet our future network growth requirements to support our vision for the national carrier.

The inclusion of the 737-8 in our fleet holds more significance than just refreshing our ageing aircraft. It acts as a meaningful bridge, connecting our history with a new era, aligning with our Long-Term Business Plan 2.0 goals as we work towards becoming Asia’s leading travel and aviation services group,” said Tan Sri Wan Zulkiflee Wan Ariffin, group chairman of MAG.

Similar to Malaysia Airlines’ refreshed 737-800 aircraft, the 737 Max 8 will seat 12 passengers in business class and 162 in economy class.

As part of its fleet modernisation plan, MAG is currently refurbishing 39 of its 47 737-800 aircraft.

Malaysia Airlines recently also acquired an additional long-haul A350-900 aircraft to support its growth, and the carrier will be receiving 20 Airbus A330neo aircraft from September 2024.

MAG currently operates 102 aircraft spread across Malaysia Airlines, Firefly, MASwings and MASkargo.

malaysiaairlines.com

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This article first appeared in The Edge Malaysia Weekly on July 15, 2019 - July 21, 2019

MALAYSIA Airlines Bhd’s new long-term business plan (LTBP), which is still awaiting approval from the Khazanah Nasional Bhd board of directors, would see the national carrier achieve financial break-even by 2022 and generate enough income to cover the cost of capital for its operations two years later.

This was revealed by group CEO Izham Ismail in a circular sent to staff on July 11, which was sighted by The Edge. However, he did not say when the airline could turn a profit under the proposed business plan.

“The LTBP, which was created after months of extensive research by this management, is all-encompassing and is able to take the company through,” says Izham in the circular.

Still positioning Malaysia Airlines as a premium airline, the LTBP consists of four pillars, which include right-sizing the airline’s fleet of Airbus and Boeing aircraft and network expansion that is focused on Asia-Pacific.

The airline’s fleet currently comprises 21 A330-200s, six A380 superjumbos, 48 B737-800s and six A350-900s. It is due to take delivery of twenty-five 737 MAX jets from July next year,  but the national carrier has been in negotiations with Boeing with regard to this order following the worldwide grounding of the troubled aircraft.

The three other pillars involve providing a premium customer experience, having a partnership strategy and diversifying the national carrier’s revenue.

Singapore Airlines Ltd and Japan Airlines Co Ltd recently signed separate memoranda of understanding with Malaysia Airlines to work together through strategic partnerships.

“Whether or not they will be strategic investors is another matter. What is most important is the current work we do to achieve the goals of these partnerships and to fulfil our end of the promise,” says Izham.

He urged the staff to be positive and cooperative over this move, noting that partnerships are the way forward for many airlines around the world.

Izham says that, on its part, parent Malaysia Aviation Group Bhd (MAG) has launched a collective effort to reduce losses through increased revenue and cost rationalisation initiatives. “We have been actively exploring various strategic opportunities as well as collaborative networks that would bring economic benefits.”

On the sidelines of an event held in Seoul, South Korea, last month, Izham had told Malaysian journalists that the LTBP had already received the nod from the board of MAG in February.

The LTBP is set to replace the current RM6 billion, five-year turnaround plan that ends later this year. However, the new business plan presents more questions than answers about the government’s ability to steer the airline back to profitability after five failed attempts.

Under the 12-point Malaysia Airlines recovery plan, which was conceived in 2014, the airline was to have broken even last year, achieve profitability and be listed this year.

Meanwhile, Malaysia Airlines has attracted four suitors, including Tan Sri Syed Azman Syed Ibrahim of The Weststar Group and a group of businessmen led by AirAsia Group Bhd co-founder and former chairman Datuk Pahamin Ab Rajab. This follows remarks by Prime Minister Tun Dr Mahathir Mohamad, who is the chairman of Khazanah Nasional, in March that the government was considering whether to shut down, sell or refinance the loss-making national airline.

It is understood that shutting down the airline is no longer an option, but the airline’s potential investors  have been told to preserve its national identity, that their proposal should not involve layoffs and that the government will retain a golden share in the entity.

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