MAS announces US$199 million first quarter loss

It warned of tough prospects this year as airlines are forced to cut fares to boost sales.

The flag carrier posted a net loss of 695 million ringgit (US$199 million) for January to March, compared to a profit of 120 million ringgit a year earlier. The decline was blamed on derivative losses — mostly losses on its fuel hedging contracts — of 557 million ringgit, it said in a statement.

Revenue fell 28 percent to 2.7 billion ringgit (US$771 million) as the percentage of seats filled fell sharply while yields - which measures income per seat - dwindled further, it said.

Managing Director Idris Jala said the airline has cut passenger capacity by 11 percent in the first quarter and may further reduce capacity to cut cost in line with falling demand.

Its operating loss for the quarter was 138 million ringgit (US$39 million).

“This is the first operational loss for Malaysia Airlines since the third quarter of 2006 as it faced a triple squeeze: overcapacity, extreme fuel volatility and a global slump,” he told reporters.

But he said the airline's fundamentals remained strong, with a cash balance of 3.8 billion ringgit (US$1.1 billion).

The airline said air travel demand was expected to remain soft. It warned that the “outlook remains challenging as yield pressures continue to mount as airlines proceed to reduce fares and fuel surcharges to encourage consumers to travel.”

The flag carrier said it has decided to maintain its fuel hedges as oil prices rallied past US$70 a barrel recently. It has hedged 47 percent of its fuel requirement this year, 60 percent of its needs for 2010 and 40 percent for 2011 at a price of around US$100 a barrel, Jala said.

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