Tuesday, July 01, 2008

MAS chief issues dire warning

Malaysia Airlines has become the latest airline to predict dire times for the world’s airlines.

Managing director and CEO Idris Jala wrote in an open letter last week that MAs is prepared to "take the lead" in increasing fuel surcharges and raising fares.

Fuel surcharges are set to rise between 25% and 80%.

"Change, and I mean drastic change, is absolutely vital for our survival. That, and a willingness to reinvent the way we operate, including through mergers and acquisitions," Jala said.

He said MAS "kept our head above water" with a first-quarter profit of MYR120.5 million (US$37 million) but that it will "face more pressure in the near future."

The MAS chief warned that more airlines are going to be “forced out of business, while the majority of us are going to bleed red ink yet again”.

The bottom line, he said, is the general public everywhere “must be prepared to face sharply higher prices for air travel now”, or be prepared to “stomach even higher prices later when the number of participants become fewer and competition fizzles out in favour of consolidation”.

Jala said MAS would be "focused on cutting costs right down to the bone"--including cutting capacity--and would "continue to innovate" to lower costs and increase revenue through programmes like its Everyday Low Fares initiative.

Commenting on the state of the industry in Asia-Pacific, Andrew Herdman, AAPA director general said, “For the first five months of the year, international passenger traffic registered growth of 3.5% in RPK terms, slightly slower than the 4.2% growth seen in 2007."

He added,“Airlines are being severely pressured by the relentless increase in oil prices, and expectations of slower economic growth.

"Fuel hedging programmes may soften some of the immediate impact, but the painful reality is that the doubling of oil prices over the past year is making travel significantly more expensive. Weakening consumer confidence could further dampen the outlook for the rest of the year.”

Source : TravelMole
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