Oil Price Hedging In MAS and Other Airlines
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Fuel price woes?
For the prophets of doom and gloom to quibble over:
MAS Q1 profit down 9.5% to RM120m
KUALA LUMPUR: Malaysian Airline System Bhd (MAS) reported net profit of RM120.06mil for the first quarter ended March 31, down 9.5% from RM132.71mil a year ago.
It announced Tuesday that operating profit declined to RM132.9mil from RM146.8mil a year ago due to higher operating expenses mainly from the increase in fuel cost.
Revenue was higher at RM3.75bil compared with RM3.54bil a year ago while earnings per share declined to 7.19 sen from 9.49 sen.
“The outlook for the aviation industry in 2008 is extremely challenging as fuel prices continue to escalate to record highs,” it said.
“Growing signs of a global economic slowdown, further liberalisation and increasingly excess capacity further compounded the tough business environment,” it said.
MAS said for the next quarter, the immediate focus was to manage the high fuel prices coupled with seasonal soft demand in view of the shoulder season in Europe, the United States and North Asia.
“The increased fuel surcharges and fares imposed will alter travelling patterns and frequency for both long haul leisure and business travels.
“With intensified competition coupled with huge capacity injection in 2008 especially for the Middle East and Asia, revenues are under tremendous downward pressure,” it said.
KUALA LUMPUR: Malaysian Airline System Bhd (MAS) reported net profit of RM120.06mil for the first quarter ended March 31, down 9.5% from RM132.71mil a year ago.
It announced Tuesday that operating profit declined to RM132.9mil from RM146.8mil a year ago due to higher operating expenses mainly from the increase in fuel cost.
Revenue was higher at RM3.75bil compared with RM3.54bil a year ago while earnings per share declined to 7.19 sen from 9.49 sen.
“The outlook for the aviation industry in 2008 is extremely challenging as fuel prices continue to escalate to record highs,” it said.
“Growing signs of a global economic slowdown, further liberalisation and increasingly excess capacity further compounded the tough business environment,” it said.
MAS said for the next quarter, the immediate focus was to manage the high fuel prices coupled with seasonal soft demand in view of the shoulder season in Europe, the United States and North Asia.
“The increased fuel surcharges and fares imposed will alter travelling patterns and frequency for both long haul leisure and business travels.
“With intensified competition coupled with huge capacity injection in 2008 especially for the Middle East and Asia, revenues are under tremendous downward pressure,” it said.
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Idris Jala and gang hedged a portion of their fuel costs for 2008 / 2009 at below US$100 a barrel! Oil now approaching US$150.......guess a jolly good show. Maybe the former oilman does know better!
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AirAsia Will Persevere Even If Oil Reaches $200/barrel
AirAsia, the region's biggest budget airline, can remain profitable even if world oil prices hit US$200 a barrel, Chief Executive Tony Fernandes said Monday, allaying concerns that it may be hit by rising fuel costs.
AirAsia has no plans now to raise fares or fuel surcharge, but it will stick with plans to grow its regional route network, expand onflight sales to boost income and seek lower charges from airports, he said.
"We are comfortable even with oil at US$200 (a barrel). There is a silver lining. We have taken a very different approach in that we will market ourselves out of this problem," Fernandes told reporters on the sidelines of a two-day global economic forum.
"We think that just putting your head in the sand and crying about oil and cutting routes is not the solution."
After surviving the 2003 SARS epidemic, which he described as "a lot worse" that the current oil crisis, Fernandes said AirAsia can benefit from a consolidation in the airline industry.
"The silver lining is that everyone is going to be in a lot of pain. There will be more rational competition...there will be less people wanting to open a budget airline now," he said.
He acknowledged, however that AirAsia may have to revise fares if oil prices breach US$200 a barrel.
Airlines have been struggling to contain costs this year as oil prices stay above US$130 a barrel. Scores of startup carriers have gone out of business and several major carriers have raised fuel surcharges, cut capacity and deferred plane orders or shed jobs.
Fernandes said AirAsia will launch four more new routes over the next two months.
To ease the fuel price burden, he said the company will expand its food menu and sell more in-flight products and services to its 22 million annual passengers.
"You can use your mobile phones on the plane soon, send SMS," he said.
"We are going to sell more things, more duty free (products). We will sell washing machines if we have to. There are many things we haven't done. In a crisis like this, you become more innovative," Fernandes said.
AirAsia will also benefit once the lucrative Kuala Lumpur-Singapore route, the fourth-busiest route in the region, is fully liberalized in January, he said. The carrier now only has limited flights on the route, which is dominated by national carriers Malaysia Airlines and Singapore Airline.
AirAsia reported an 86 percent jump in its January-March net profit from a year ago to 162 million ringgit (US$50 million), buoyed by higher passenger demand and large foreign exchange gains.
It said it has hedged part of its fuel requirement for April-June, which will lead to US$10 million in cost savings for the quarter. But Fernandes ruled out plans to further hedge the company's fuel requirement.
"Only a lunatic will hedge fuel — it's too volatile. We will just have to ride it until there is some stability," he said. "You have to build a business that is sustainable at whatever price and the only way... is to have topline growth and good growth."
International Herald Tribune
AirAsia has no plans now to raise fares or fuel surcharge, but it will stick with plans to grow its regional route network, expand onflight sales to boost income and seek lower charges from airports, he said.
"We are comfortable even with oil at US$200 (a barrel). There is a silver lining. We have taken a very different approach in that we will market ourselves out of this problem," Fernandes told reporters on the sidelines of a two-day global economic forum.
"We think that just putting your head in the sand and crying about oil and cutting routes is not the solution."
After surviving the 2003 SARS epidemic, which he described as "a lot worse" that the current oil crisis, Fernandes said AirAsia can benefit from a consolidation in the airline industry.
"The silver lining is that everyone is going to be in a lot of pain. There will be more rational competition...there will be less people wanting to open a budget airline now," he said.
He acknowledged, however that AirAsia may have to revise fares if oil prices breach US$200 a barrel.
Airlines have been struggling to contain costs this year as oil prices stay above US$130 a barrel. Scores of startup carriers have gone out of business and several major carriers have raised fuel surcharges, cut capacity and deferred plane orders or shed jobs.
Fernandes said AirAsia will launch four more new routes over the next two months.
To ease the fuel price burden, he said the company will expand its food menu and sell more in-flight products and services to its 22 million annual passengers.
"You can use your mobile phones on the plane soon, send SMS," he said.
"We are going to sell more things, more duty free (products). We will sell washing machines if we have to. There are many things we haven't done. In a crisis like this, you become more innovative," Fernandes said.
AirAsia will also benefit once the lucrative Kuala Lumpur-Singapore route, the fourth-busiest route in the region, is fully liberalized in January, he said. The carrier now only has limited flights on the route, which is dominated by national carriers Malaysia Airlines and Singapore Airline.
AirAsia reported an 86 percent jump in its January-March net profit from a year ago to 162 million ringgit (US$50 million), buoyed by higher passenger demand and large foreign exchange gains.
It said it has hedged part of its fuel requirement for April-June, which will lead to US$10 million in cost savings for the quarter. But Fernandes ruled out plans to further hedge the company's fuel requirement.
"Only a lunatic will hedge fuel — it's too volatile. We will just have to ride it until there is some stability," he said. "You have to build a business that is sustainable at whatever price and the only way... is to have topline growth and good growth."
International Herald Tribune
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Latest definition of On Time Performance.
KUALA LUMPUR: AirAsia will compensate passengers whose flights are delayed for more than three hours.
The budget carrier said it would give RM200 e-gift vouchers that can be used to buy their next AirAsia flight or any AirAsia product or service online. The e-voucher would be valid for three months.
Labelled as its “On Time Guarantee,” all flights from yesterday were accorded the service, which comes at no extra cost to passengers.
“We decided to put our money where our mouth was (in giving 5-star service).
Regards
E.B.
KUALA LUMPUR: AirAsia will compensate passengers whose flights are delayed for more than three hours.
The budget carrier said it would give RM200 e-gift vouchers that can be used to buy their next AirAsia flight or any AirAsia product or service online. The e-voucher would be valid for three months.
Labelled as its “On Time Guarantee,” all flights from yesterday were accorded the service, which comes at no extra cost to passengers.
“We decided to put our money where our mouth was (in giving 5-star service).
Regards
E.B.
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Better than the service that MAS is giving out now. Cold food etc, sandwiches for 2 hrs flight. And it is cold. Meals comes in box now, cold and hard. What is happening to our beloved Airline. My ear is painful listening to complains from friends and relative. Now people are paying full fare for low cost service. Pity our cabin crew.
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Malaysia boleh, MAS pun boleh succeed!
Aiyoyo......bolehland is getting interesting. MAS is cutting fat and pulling out of unprofitable routes, good show but how far will the politicos allow Idris jala to take the painful measures to a more meaningful level? Given the chance and with prudent management of the fuel crisis, MAS can surely boleh succeed!
On the flip side, bolehland is mired in skyrocketing inflation; DPM implicated in Altantuya murder, ex-Pm doing his best to screw the whole country, etc, etc, etc.....is there hope for anything better?
On the flip side, bolehland is mired in skyrocketing inflation; DPM implicated in Altantuya murder, ex-Pm doing his best to screw the whole country, etc, etc, etc.....is there hope for anything better?
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Truly Squandered Oil Wealth
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Yup, IJ is definitely on top of the game. Wonder what magic could have been performed if not for the Bush-Oil-Subprime crises mess hitting us all at the same time. And a real charmer, too. Been to a briefing, and the man fields questions off the cuff like a motivational guru! Scary shyt... We're more used to moronic buffoons who can't even read prepared statements properly.
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Idris Jala and MAS on right track?
Gotta concede that so far he has done good....kudos to his team too. Having said that, if he wants to continue on his successful track he better lose some of the deadwood like rat**** khan, the useless blundering chairman and a whole host fruitcakes!
