MAS drops to $170 million second-quarter loss, blames rise in fuel costs

By Aaron Karp | August 23, 2010

Malaysia Airlines. Photo: By Roger Payne.

Malaysia Airlines last week reported a second-quarter net loss of MYR533.6 million ($170.4 million), reversed from a MYR875.7 million profit in the year-ago quarter, blaming the result on a spike in fuel costs.

The carrier's second-quarter fuel expenses lifted 44% year-over-year to MYR1.1 billion. It said the average per barrel price of jet fuel during the three months ended June 30 was $89.7, up 35.5% compared to $66.7 in the year-ago quarter. MD and CEO Azmil Zahruddin said the fuel cost rise "wiped off operational gains" made by the carrier during the quarter, including a 26% year-over-year increase in revenue to MYR3.2 billion. "The volatility of the fuel price remains a key challenge for the industry," he said.

MAS also endured a mark-to-market fuel hedge loss of MYR217 million in the quarter. It said it is 60% hedged at $100 per barrel for the rest of 2010 and 40% hedged at $100 for 2011.

On the fleet front, the airline will take delivery of one 737-800 each in October, November and December. It said "aircraft financing is on track" for all 14 737-800s scheduled to be delivered through 2012. The carrier's first of six A380s will arrive in April 2012, Azmil said.

He said two 747 freighters will be added to MASkargo's fleet next month, allowing it "to offer new twice-weekly services into New York via Amsterdam." New York will mark MAS's first North American all-cargo destination.

MASkargo will receive one A330-200F each in September and November 2011. Azmil said "discussions are underway" to convert two additional A330-200Fs from options to firm orders for delivery "by the first half of 2012." MAS said the cargo unit has had "three consecutive quarters of profits."

Overall second-quarter expenses rose 17.8% to MRY3.5 billion and operating loss was MYR285.6 million, narrowed from a MYR425.6 million operating loss in the year-ago period. First-half 2010 net loss was MYR223 million, reversed from a MYR181 million profit in the prior-year period.