MAS won't risk turnaround plan by rural service take over

Malaysia Airlines (MAS) will consider taking back the loss-making rural air service in Sabah and Sarawak if it does not jeopardise the national carrier's turnaround plan, said managing director Idris Jala.

Speaking after the company's EGM yesterday, he said the airline was “totally” committed to its business turnaround plan, and hinted the airline's first-quarter result “is looking good”.

“We are not going to do something that would jeopardise the plan,” added Jala, who was tasked to revive the carrier that has been financially stressed since the 1997/98 economic crisis.

Last week, Fly Asian Xpress Sdn Bhd (FAX), which offers the rural air service in Sabah and Sarawak, submitted a proposal to the Transport Ministry, urging the Government to have one, instead of two, turbo-prop operator in the country.

The proposal came after MAS launched its turbo-prop operator, FireFly Sdn Bhd, early this month.

Jala speaking to the press

FAX shareholder Datuk Tony Fernandes, who is also chief executive officer of AirAsia Bhd, had earlier said FAX was ready to hand back the rural air service to the authorities so that it could concentrate on international long-haul flights.

FAX director and shareholder, Raja Mohd Azmi Raja Razali, also stated that the turbo-prop operator's hands were tied, thus it could not operate in a commercially viable manner.

According to Jala, MAS had not received any official word from the Government on the matter.

The group, he noted, would have to study the terms and details, including Government subsidies, before making a decision.

“Any decision that we make will be consistent with our plan to turn around the company and to continue to make it profitable,” he said.

MAS returned to the black in the second half of its financial year ended Dec 31, 2006 (FY06). Its net loss shrunk to RM136.4mil from RM1.14bil in FY05. The loss per share narrowed to 10.89 from 91.28 sen.

In view of the improved performance, some analysts are expecting FY07 to be profitable.

According to Bloomberg, the market consensus forecast for the airline's earnings per share is 29.6 sen in FY07 and 58.4 sen the following year.

At a separate event yesterday, Airbus chief operating officer, customers, John Leahy said MAS would be compensated for the delay in the delivery of the Airbus A380 super-jumbo aircraft ordered in 2003.

“Absolutely, there will be some compensation for MAS,” Leahy said.

He said the aircraft maker had “sorted out” the delay issue with Singapore Airlines, Qantas and Korean Air and was now trying to finalise things with MAS.

Leahy said Airbus was in talks with the national carrier on the delivery date and compensation. He expects the matter to be resolved over the next couple of months.

Penerbangan Malaysia Bhd signed an agreement in December 2003 to buy six A380-800s, to be leased to MAS.

The first two aircraft were supposed to be delivered early 2007 and a third later this year.

The other three planes were due to be handed over in the second half next year.

Source : STAR
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