Analysts: MAS must cut costs, boost revenue

PETALING JAYA: Malaysia Airlines (MAS) still faces headwinds as its yields remain under pressure while a high cost structure offsets its efforts to spur sales, according to analysts.
RHB Research said in a note to investors that despite the flag carrier’s strong loads in the third quarter, its yield erosion and “sticky” cost structure resulted in a core loss of RM278mil during the period.
“Its dynamic pricing strategy and high fleet utilisation helped to bolster revenue, but depressed yields capped revenue growth while its high cost structure wiped out the topline contribution.
“Moving forward, apart from growing its revenue, MAS should start to more effectively keep a lid on costs. Otherwise, we foresee it continuing to face challenges,” RHB Research said.
In the three months to September, MAS posted a larger-than-expected net loss of RM375.44mil, versus a net profit of RM37.08mil during the same period last year. Turnover rose 12.4% to RM3.91bil from RM3.47bil previously.
For the nine-month period, its net loss widened to RM830.25mil from RM483.96mil a year ago as MAS slashed air fares to protect its market share. Revenue climbed 13.5% to RM11.22bil against RM9.89bil.
Aviation analysts now believe the national airline is unlikely to return to the black by end-2014 as outlined in its turnaround plan.
MAS’ shares had tumbled since the results were announced to 31 sen yesterday, near its 52-week low of 29.5 sen.
The airline’s October operating statistics showed that its load factor dipped slightly to 78.4% from 81.1% the month before, but was still an improvement over 73.5% in October last year.
Its passenger load factor fell to 81.2% in October from 86.5% in the preceding month as revenue passenger kilometres for both domestic and international flights declined, although available seat kilometres grew in tandem with the carrier’s’ strategy to increase flight frequency.
Cargo volumes were flat in October.
“All in, the carrier’s load-active strategy led to improved loads versus the 10-month period in 2012,” RHB Research said.
The brokerage upgraded MAS to “neutral” from “sell” but maintained its fair value of 30 sen.