Malaysia Airlines Berhad (MAB) is solidly improving yields by increasing its emphasis on premium passengers, and the carrier indicates the approach will continue.

The airline’s “concerted focus on yield,” which began in the second half of 2017, produced positive results in the first quarter, Group CEO Izham Ismail said. Yield improved 6.6% year-on-year in the quarter, despite the strong competition that has been putting pressure on airline fares in Southeast Asia. MAB said it will “continue to drive yield by focusing on the premium segment to cushion the airline from rising costs.”

MAB does not produce a full quarterly report since it has been taken over by a government investment fund during its restructuring process. However, it does present a regular overview to indicate its progress.

Ismail said the first quarter was “relatively encouraging,” with the airline’s performance meeting budget expectations. This contrasted with a “challenging” year in 2017 when the carrier underperformed against its budget, thanks partly to adverse exchange rate movements. “Taken on aggregate, the company has made progress on the execution of the [MAB] recovery plan,” the CEO said.

Financial performance in the second quarter is expected to be weaker, although improvements are expected later in the year, Ismail said. Challenges will include more exchange rate volatility and escalating fuel prices. The carrier is “working hard” to deliver on its goal of achieving sustained profitability in 2019, he said.

Unit revenue was up 3.5% in the first quarter, with overall revenue increasing by 2%. The yield improvement offset a decline in load factor. International load factor dropped 3.9 points to 77.2%, and the domestic load factor fell 6.7 points to 64.1%.

During the first quarter, MAB received the third and fourth of its six Airbus A350s on firm order. These will be deployed on London and Japan routes where there is higher premium demand. The carrier also received the first two of six additional A330-200s during the quarter. They are being used on higher density routes in the Asia-Pacific region.

The airline has previously indicated it is considering placing a further order for widebody aircraft. MAB said it is still “undergoing an extensive process in selecting the next generation widebody fleet” for growth and fleet replacement.

MAB introduced 43 new fuel initiatives in the first quarter with a combined fuel-savings target of RM220 million ($54.3 million), and said these will be “tracked for 2018.” Several digital initiatives were also launched, including new systems for upgrade bidding and ancillary purchases, and a multi-currency platform allowing purchases in different currencies.

Adrian Schofield,