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MAS needs cash to succeed with turnaround plan

June 23, 2012

KUALA LUMPUR: The question many people ask now is whether Malaysia Airlines (MAS) can undertake a turnaround within its targeted timeframe.

If its latest turnaround plan goes according to plan and achieves the desired results, it is possible for the airline to return to the black, but this will require a lot of cash, according to MIDF Research analyst, Imran Yassin Md Yusof.

“MAS needs cash in order to move forward to rebuild its brand name and consolidate its financial structure to ensure it remains competitive among other regional players,” he said.

Privatisation of MAS is another way to restore the position of the national carrier, he said, adding, that now is the best time to do so as its share price is cheap.

MAS on Thursday announced its target to return to profitability by 2014, which was an extension of a year from its turnaround plan announced in December last year.

Imran Yassin said further stability in the global economy would help theturnaround plan.

Despite its financial woes, he said MAS was still relevant as its plays a major role in spurring growth in related activities such as aircraft maintenance, repair and operations businesses, leasing aircraft as well as the tourism industry.

He said that its top management needs to further bolster efforts to save the airline by focusing on its niche business.

He said MAS as a full services carrier should focus on attracting more passengers for its business and first class seats, which generate a higher yield compared to the economy class, which are more price sensitive.

“When we compare MAS with its peers, the cost structure is just about the same. However, in terms of revenue, MAS does not match them, and this is one main reason why it is still lagging behind,” he added.

MAS, he said, also lags in terms of services and products. Citing an example, he said Emirates Airlines offers a very competitive fare,but at the same time the product offering was better than MAS, like flight entertainment with 100 television channels.

Comparing MAS and AirAsia, he said their business strategy is different and therefore any comparison is unfair.

“Although in terms of flights, some costs are about the same, their target market and pricing strategy are different,” he added.

Nevertheless, Imran Yassin said MAS can still learn from AirAsia which has performed well in areas such as cost control, mitigating high fuel costs as  well as ways to attract customers.

He said the collaboration between MAS and Malaysia Airports Holdings Bhd (MAHB) should also be strengthened to offer extra services to the business and first class passengers.

“They will not care much about the pricing if we can offer them extra when compared with others.
“MAS therefore needs to work closely with MAHB to upgrade its services and to offer extra  services, especially for transit passengers at the airport,” headded.

On the idea of privatising MAS, he said this can be another way to save and help the airline.

By privatising MAS to any Malaysian conglomerate, it would be possible to do what is necessary for the turnaround and rebuild the airline out of the public eye, he added.

He also believes that now is the best time for any MAS privatisation,following the current lower share price.

“In terms of ringgit and sen, the price of privatisation now can be cheaper,rather than later,” he said.

Imran Yassin added that if MAS makes a recovery, the share would likely move up to between RM2 to RM3 per share.   On Friday, the share price of MAS closed a sen higher at RM1.14.



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