Fuel price volatility led Malaysia Airlines (MAS) to post RM532.591 million pre-tax loss in the second quarter ended June 30 compared with RM896.146 million pre-tax profit in the same period last year.

Its revenue however increased by 26 per cent to RM3.2 billion compared to RM2.5 billion while operating profit improved 33 per cent.

tengku datuk azmil zahruddin For the first half ended June 30, 2010, the airline posted a pre-tax loss of RM212.340 million from a pre-tax profit of RM189.904 million.

The revenue increased to RM6.5 billion from RM5.3 billion previously.

"We are doing the right things and this is reflected in the improved operational performance for the second quarter which is traditionally our weakest quarter, we have instituted additional measures to recover more of the fuel cost increase," said managing director and chief executive officer Tengku Azmil Zahruddin when announcing the second quarter financial results today.

He said fuel price volatility remains the key challenge for the industry.

The steep 44 per cent increase in fuel expenditure as a result of higer fuel price and consumption due to additional capacity resulted in a RM1.1 billion bill, up RM338 million from Q2 2009.

Advance bookings were strong

As a result of the fuel price volatility, the airline also made mark-to-market (MTM) losses of RM217 million in the second quarter of this year, bringing the net loss of MAS to RM535 million.

Tengku Azmil said there has been a continuous uptrend in fuel prices as in the Q2, the average price of jet fuel was US$89.7 per barrel compared to US$66.7 per barrel in the same period last year.

"The fuel MTM losses are effectively "paper losses" and the quantum realised will depend on the actual price as and when each contract matures.

mas stewardess malaysia airline serving food 220109 "As the fuel price is volatile, MTM gains or losses in the coming quarters will depend on the actual fuel price on the day the accounts are closed," he said.

As of June 30, 2010, MAS has hedged 60 per cent of its fuel requirement at US$100 per barrel West Texas Intermediate (WTI), a high quality fuel, for the rest of 2010 and 40 per cent at US$100/bbl for 2011.

On the operational front, Tengku Azmil said the advance bookings for the second half of the year were strong.

"The action is in our backyard as the Asia-Pacific region is demonstrating strong growth. For Q2 '10, our passenger numbers are up 14.7 per cent.

"We are recording higher than pre-economic crisis seat factor. As the positive trend is holding up for the rest of the year, we will continue to focus on increasing yield, as well as gaining premium customers.

Profit target: RM100 million to RM325 million

"We have put in place an aggressive sales programme to increase corporate sales," he said.

There will be more opportunities to increase yield as MAS starts to receive new planes. The airline has ordered up to 55 B737-800s and 25 A330-300s.

A total of 3 B737-800s will be received in 2010, one each in October, November and December.

malaysia airline mas aircraft Tengku Azmil said: "We have also completed our discussions with Airbus and will be taking the six A380s. The first will be delivered in April 2012."

MAS' cargo subsidiary MASkargo continues to demonstrate strong performance with three consecutive quarters of profits.

According to International Air Transport Association (IATA), freight grew by 29.8 per cent in June alone and this uptrend is expected to continue, he said.

He also said the airline’s aircraft financing was on track.

Following the evaluation of more than 50 financing proposals from various lenders, MAS has awarded to four lenders the financing of its 14 B737-800 aircraft to be delivered between 2010 and 2012.

The national carrier is currently in final discussions with few potential lenders for its A330 aircraft which will be delivered from 2011 to 2012.

For the full year ending Dec 31, 2010, the group's operating profit target is between RM100 million and RM325 million, he added.

- Bernama