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Can MAS afford to buy more planes? Economists say yes

 | September 13, 2017

Independent economist Hoo Ke Ping says while other Asian airlines are bleeding red ink, MAS actually registered financial growth this year.

hoo-ke-pingPETALING JAYA: Prime Minister Najib Razak, who is on an official visit to the United States, has announced that Malaysia Airlines (MAS) will buy more airplanes from the US, but the question is: can the national carrier afford it?

After all, not too long ago, MAS underwent a massive restructuring exercise that involved laying off thousands of employees, as well as cancelling foreign routes.

In June this year, MAS CEO Peter Bellew told the New Straits Times that the airline was looking at the possibility of axing more routes, particularly to Australia and New Zealand.

However, the recent troubles at MAS appeared to be far from Najib’s mind when he met US President Donald Trump.

Flanked by top advisers in the Cabinet Room in the White House, Najib told Trump that MAS would buy 25 Boeing 737 jets and eight 787 Dreamliners, and would probably add another 25 737s in the near future — a deal he said that would be worth more than US$10 billion (RM42 billion) within five years.

Sunway University Business School economics professor Yeah Kim Leng believed the plan to buy Boeing planes was a good move.

He said the commitment to such a massive purchase would show other countries that the embattled national airline was on track to recover.

“Besides, the capital expenditure on the part of the airline is just a commitment.

“It’s something that can be negotiated later on if, say, the airline didn’t have the money for it,” he said to FMT.

Independent economist Hoo Ke Ping pointed that while other Asian airlines were bleeding red ink, MAS actually registered financial growth for this year.

“MAS is earning again. And if you inject the RM1.5 billion of the subsidy previously allocated for Proton into the airline, MAS can fly even farther.

“This is the best time for MAS to start buying new planes and the options are between Airbus and Boeing.

“They have chosen Boeing, which is good, as it will strengthen the ties between Malaysia and the US,” he said.

The plane purchase was on top of other commitments the prime minister pledged during his visit.

He also said the Employees Provident Fund (EPF) planned to invest US$3 billion to US$4 billion on US infrastructure development, in addition to the US$7 billion the fund had already invested there.

Bellew, in a statement issued last week, said MAS’ passenger revenue for the second quarter of this year rose 8%, amid heightened competition and adverse forex movement.

This was achieved on the back of a 1.8% higher capacity, he said.


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