MAS buckles up for bumpy ride

WHILE airlines worldwide grapple with heavy losses from escalating fuel prices, with some even on the brink of bankruptcy, Malaysia Airlines (MAS) is buckling up for the bumpy ride but, at the same time, planning for brighter skies ahead.

"In the short term, we are looking at some capacity cuts, but we are also building the base for growth and expansion in the medium to long term," executive director and chief financial officer Datuk Tengku Azmil Zahruddin said.

Beginning late next month or early September, MAS will start reducing frequencies on some routes or deploy smaller aircraft to optimise capacity. Where previously it flew to Los Angeles seven times a week, for example, this might be cut down to five, he said.

In total, MAS is looking at a reduction of 1.75 billion available seat kilometres (ASK) this year. It will involve certain regional flights as well as the Americas, North Asia, Australia/New Zealand, Europe and South Asia.

Briefing the Malaysian media during the Farnborough International Airshow in the UK recently, Tengku Azmil said MAS was also taking steps to grow its network in anticipation of a turnaround in the air travel sector.

It wants to better match aircraft to network, operate more cost-efficient planes and simplify its fleet to only one model each for narrow-body, wide-body and ultra-large wide-body aircraft.

"From our perspective, now is the right time to look at it. At Farnborough, we are seeing fewer orders than in previous years. And because demand is dropping, this is the time to get a more decent deal from aircraft manufacturers," Tengku Azmil added.

At the airshow, MAS signed a US$2.6 billion (RM8.5 billion) deal to buy 25 next-generation Boeing 737-800s. Delivery will start in September 2010. It has options for another 20 narrow-body planes.

Through Penerbangan Malaysia Bhd (PMB), MAS will also take delivery of six wide-body A380-800s from 2011. This year, MAS subsidiaries Firefly and MASwings will start receiving up to 15 ATR turboprop aircraft.

"For the ultra wide-body model, discussions are being held with both Airbus and Boeing. There is no fixed timeline for orders to be placed, but we're targeting for the end of 2008.

"This will be the last piece of our fleet plan

"We've been quite busy in terms of ordering new aircraft. This is a period of renewal for us, based on medium- to long-term growth plans, irrespective of what it looks like in the short term," Tengku Azmil said.

While waiting for the new planes to arrive, MAS is refreshing its existing fleet for domestic and regional routes.

This involves 41 A330s and B737s and includes refurbishing seats and installing larger video screens.

Tengku Azmil believes that by the time the new planes arrive, the economy will have begun to turn around, with Asean, China and India showing the highest growth potential.

"We are fortunate to be in proximity to these growth areas and the strategic timing of aircraft delivery means we will be ready to capitalise on this growth," he said.

Over time, MAS will likely move towards a mix of direct ownership and lease of aircraft, beginning with the ATRs, Tengku Azmil added.

At present, all its aircraft are leased from PMB.