Guess a PN17 Company with a substantial cash deposits have a lot of bargaining power with the SC ......
PETALING JAYA, June 12 (Bernama) -- Malaysian Airline System Bhd (MAS) registered losses for the first quarter ended March 31, 2009 as it faced a "triple squeeze" -- overcapacity, extreme fuel volatility and global slump which hit passenger and cargo demand.
MAS registered a net loss of RM695.398 million compared to a net profit of RM120.06 million in the same quarter last year.
"It reported a first quarter 2009 operating loss of RM138 million, the first for the airline since third quarter 2006," said Managing Director and CEO Datuk Seri Idris Jala, when announcing the company's first-quarter results here Friday.
MAS also saw losses from fuel hedging amounting to RM557 million.
Revenue declined to RM2.7 billion from RM3.75 billion previously, in the face of the worst global recession in 70 years, with seat factor dropping 13.1 percentage points.
Passenger yield, however, was up four percent to 29.5 sen/revenue passenger km (RPK).
Idris said MAS, however, has strong liquidity and RM3.8 billion cash in its coffer, thanks to its across-the-board cost-cutting measures and cash conservation stance.
"Cost savings over the last three years amounted to RM2 billion.
"To-date we have proactively cut capacity by 11 percent in 2009 and we have put in place stringent controls over costs and investments," he said.
Total expenditure for the quarter decreased by 20 percent, mainly due to a RM730 million reduction in the total fuel bill as a result of lower price and consumption, he said.
He said MAS expected to save RM700 million to RM1 billion this year with among others, a freeze on recruitment as well as budget cut of seven percent across-the-board in 2009.
"There is also a freeze on all discretionary training and travelling and it is not taking any delivery of new aircraft until end-2010," he said.
Besides this, MAS has adopted an aggressive sales approach, especially via Internet, he said, adding that its focus in 2009 was to continue its competitive fares initiatives to stimulate demand.
Shareholder equity, however, shed by RM459 million which meant that technically, MAS met the definition of Practice Note 17 company but it has obtained exemption from Bursa Malaysia with its strong cash balance, he said.
He said effective 2009 financial year, MAS has adopted the new accounting standard, FRS 139, which would be mandatory in Malaysia effective Jan 1, 2010.
"This provides the financial community with transparency of its financial results, enabling them to evaluate MAS on a like-for-like basis as its peers.
"Many airlines have already adopted similar accounting standards," he said.
With the adoption of FRS 139, the unrealised mark to market (MTM) fuel hedges, foreign exchange and interest rates that were off the balance sheet, were recognised on the balance sheet, he said.
Idris said however, the unrealised fuel MTM were contractual fuel hedge arrangements over the next three years to 2011.
"There will be no impact on the profit and loss. The fuel MTM losses are effectively 'paper losses' and will only be realised over the next three years. The quantum realised depends on the actual oil prices," said Idris.
He said the fuel MTM was sensitive to oil price movements.
"Assuming all things remain equal, MAS could potentially see a hedging gain of RM1.1 billion in second quarter of 2009 based on the fuel price of US$66 per barrel on May 29, 2009.
"This could mean that MAS' RM695 million net losses in first quarter could be fully reversed by the RM1.1 billion potential gains," he said.
MAS has spent RM400 million to restructure some of its hedges, he said.
For 2009, it has hedged 40 percent of its fuel needs at US$103 per barrel, while for 2010 and 2011 is 60 percent and 40 percent respectively at US$100 per barrel, he said.
-- BERNAMA
Well, I hope they have a good plan with their 'war chest' .... if not we'll be footing the bill again ....
