MAS may raise RM4b for 2012 capex: OSK

Malaysia Airlines' (MAS) air route cuts may provide opportunities for
other carriers to enlarge their market, with AirAsia gaining the most,
says a leading research house.

OSK Research said termination of
some long-haul flights and redeployment to short haul only confined to
the national carrier's "protected" Shanghai, Beijing and Sydney routes,
for which there was limited competition.

It said termination of
the KL-Bandung route has benefited AirAsia, the only carrier flying to
the route, while the Langkawi-Penang-Singapore route allows the budget
airline and Singapore's Silk Air to improve yields.

In addition,
the termination of other long-haul routes to destinations like the
United States and Dubai has created space for Singapore Airlines and the
Emirates to expand their market share, it said in a research note
today.

The research house said the termination of MAS' long-haul
flights to Rome, Buenos Aires (via Cape Town), Dubai/Damman and
Johannesburg would likely see two of its aircraft redeployed to Beijing
and Taipei routes.

"The KL-Beijing frequency will double from 7x
to 14x weekly while the KL-Taipei flights will be increased from 7x
weekly to 10x weekly.

"It appears that MAS is redeploying
significant capacity to its protected KL-Beijing route, for which China
Air and Air Zimbabwe are currently the only competitors," it said.

With
more capacity being deployed to this sector, OSK Research said the
airfares may potentially come down although on a net basis.

It
said overall yields would improve as MAS' China routes achieved better
load factors compared with its previously loss-making long-haul routes
elsewhere.

On funding, OSK Research said MAS has yet to secure its 2012 aircraft purchase totalling RM6 billion.

"We
anticipate that MAS will raise as much as RM4 billion for this year's
capital expenditure needs, which would effectively cause its net gearing
to bloat from 213 per cent last year to 461 per cent this year," it
said.

Its massive leverage would be a "double-edged sword" should MAS' turnaround plan crumbled, added the research house.
-- Bernama