MAB posts higher passenger yield for Q4 2017

• 2% RASK improvement; highest passenger yield at 23.6sen for Fiscal Year 2017
• Load factors at 77% with moderation in domestic load factors due to re-focus on higher yield passengers
• Steady on-time performance (OTP) for the year at 73%, an improvement of 3% from the previous quarter
• Total revenue in Q4 saw an increase by 2% YoY, highest total revenue for FY 2017

KLIA, 2 March 2018: Malaysia Airlines Berhad (MAB) reported an encouraging trend of year-on-year (YoY) yield improvement in the fourth quarter ended 31 December 2017 despite overcapacity for both international and domestic sectors. Revenue per Available Seat Kilometre (RASK) also followed suit, showing healthy growth of 2% YoY.

Malaysia Airlines Group (MAG) Chief Executive Officer Izham Ismail (GCEO), “Malaysia Airlines is firmly anchored to the MAS Recovery Plan (MRP) and I am happy to see steady progress continue in the fourth quarter. A concerted focus on yield in the second half of the year has seen an overall improvement in yield and RASK bucking the general downward trend of other regional players.”

That being said, overall the airline did underperform against budget compared to the previous year. This was due to a weaker first half impacted by a weak pricing strategy as well as the hike in exchange rates and fuel. Malaysia Airlines did recover in the second half with closer oversight on yield management and ended the year in a stronger position. Moving forward, we will continue to focus on and drive yield to cushion the group from rising fuel costs and forex volatility,” he added.

Amidst a regional trend of declining yields, the quarter saw Malaysia Airlines’ encouraging trend of yield improvement continue for both international and domestic sectors. Focus will continue to be on delivering yield improvement through growth of premium passenger segments, such as large and small corporations.

The increase in yield offset the slight reduction in load factor and also resulted in RASK improvement of 2% YoY. The growth was on the back of improved yield management and pricing segmentation.

Overall passenger load factor for Q4 2017 dipped to 77% y-o-y, from 81%, but the airline generated the highest passenger yield at 23.6 sen for the quarter as compared to the same period a year ago despite overcapacity. This was especially so for domestic loads on the back of intense competition from other carriers. International passenger load factor remained steady at 78%.

Investing in the Customer

Alongside the entry into service of the A350-900 aircraft, Malaysia Airlines has improved experience on board. The flagship A350 aircraft includes new in-flight entertainment systems with modern and improved functionality, refreshed first and business class amenity pouches, as well as new pyjamas set for first class passengers and larger blankets for Economy class.
The A350 is equipped with Wifi on-board, the first for Malaysia Airlines. The airline also relaunched its inflight shopping, Temptations, which is now available online for pre-order or home delivery.

Its Domestic and Regional lounge in KLIA re-opened its doors in Q4 2017 with a new look and upgraded facilities. The lounge design reflects the Baba Nyonya heritage and food has been improved with Malaysian favourites and a well received live cooking station in the Regional lounge.

A customer experience task force was set up in November 2017 to address the gaps across all customer touch points based on customer feedback. The task force has identified key focus areas of improvement and meets the GCEO on a weekly basis to update progress. Closer attention to these areas has seen customer service index improving in quarter one this year.

Technology driven company

In its efforts to transform to a digital airline, several digital initiatives have been introduced. MH Feedback, a mobile app, was launched, where passengers can give real-time feedback on every customer touch-point, from check-in to condition of aircraft.

Customers can now manage their bookings online through additional features on the website which include cancellation of trips and refunds. They will also have the option to change the date and time of their flights up to four hours before departure.

Another initiative will be introduced by the winners of the Malaysia Airlines Hackathon, Malaysia’s first ever airline Hackathon, the MH Guardian app, which will be implemented in the second half of 2018. The app will enable parents or guardians to track the movements of unaccompanied minors at all important check points. The airline will be the first to introduce this in Asia.

The quarter also saw Malaysia Airlines adopting Amadeus’ Customer Experience Management, a tool for building brand loyalty through a closer understanding of customers. This technological solution will enable the airline to deliver highly personalised offers across all touchpoints, maximising every merchandising revenue opportunity.

The fourth quarter saw the completion of the PSS migration for the airline with all 74 stations now on the PSS Amadeus Departure Control System. All Malaysia Airlines’ stations are now able to accept passengers who perform web or mobile check-in and ticket reconciliation is performed automatically.

Fleet

The airline saw the arrival of the first A350-900 at KL International Airport (KLIA) in November with the presence of Malaysia’s Second Finance Minister, Datuk Seri Johari Abdul Ghani, and the second A350-900 (with the special Negaraku livery) in December last year. The A350-900s will be replacing the A380s on the London route by March 2018. With the latest in technology, the aircraft provides unrivalled levels of operational efficiency, with a 25 percent reduction in fuel burn and emissions and lower maintenance costs. The A380 will be used primarily for Umrah and Hajj charter services as well as seasonal upgrades during peak travelling seasons.
The airline will also be receiving six more A330-200s throughout 2018. These will be operated on secondary Asia Pacific cities from Australia / New Zealand to ASEAN and South Asia. The fleet expansion is essential to remain competitive in the fast growing Asia-Pacific aviation market allowing the airline to up-gauge from a narrowbody on high demand markets, significantly improving the customer experience whilst also generating better revenue.

Network expansion

The aviation sector has always been extremely competitive and the ASEAN region is no exception, with many airlines investing heavily in new aircraft and new products and services. This has resulted in a significant increase in capacity and many airlines are competing aggressively for market share.

In addressing the overcapacity in the region, Malaysia Airlines has expanded to China with four new routes including Nanjing and Haikou and in November 2017, resumed flights into Surabaya attracting Umrah and Hajj traffic. The airline also expanded frequencies to Seoul in the last quarter of the year and announced the resumption of Brisbane, targeted to begin in June 2018.

Project Amal

Project Amal, the planned dedicated Umrah and Haj charter business, is progressing well and is on track to begin services this October. MAG (the Group) is in the midst of applying for the Airline Operator Certificate. Meanwhile the charter unit is on-going, running daily charters to Medina, using the A380s. The charters will continue until the end of May this year when the Haj season begins.

Operations

Higher on-time performance (OTP) of 73% was registered for Q4 2017, compared to Q3 2017 OTP of 70%. OTP was hampered primarily due to aircraft limitations, consequential delays due to the late arrival of aircraft and manpower constraints. External factors due to air-traffic restrictions also had an impact.

A total of 13 fuel initiatives were monitored and tracked for 2017. In the current environment of increasing fuel price, MAB continues to explore more efficient ways of operating the aircraft to further save on fuel bills in 2018. The carrier sees higher potential of savings in usage of electrical power on ground, performance based navigation as well as pilot procedures in optimizing descents and landings.

At the core of all of this, the Group continues to put safety at the heart of everything we do.

Investing in a talent pipeline and local succession planning

Malaysia Airlines continues to nurture local talents and draws on world-class expertise in efforts to acquire the relevant technical-skilled employees. The airline went on a recruitment drive in Q4 for both cabin crew and pilots.

The quarter saw a total of 10 recruitment drives across Malaysia with almost 2000 candidates applying for positions. Over 70 new cadet pilots were recruited to meet rapid travel demands. The new cadets also included, for the first time, female recruits.

Alongside this, programmes continued to train and strengthen internal talent. A group wide succession planning initiative was put in place with a talent mapping exercise concluded in the quarter. The exercise reviewed the performance and potential of all general managers and senior managers to ensure a strong leadership bench for business sustainability purposes.

The quarter also saw the announcement of a new Chief Human Capital Officer, Dato’ Mohd Khalis Abdul Rahim. With over 25 years in the field and having served several multinational companies, Dato’ Khalis will be instrumental in ensuring a high performance culture across the Group.

Outlook

Southeast Asia has strong traffic growth, but overcapacity remains a challenge, pressuring yields. MAB maintains its cautious outlook in the fiscal year of 2018. While the economy is anticipated to be resilient, MAG anticipates that supply and capacity pressure will continue to put a stress on yields although the effect for 2018 is expected to be moderate. The Group will continue to be prudent and agile in controlling capacity and has already scaled back on domestic route frequencies allocating aircraft where the best potential returns are seen.

Moving forward, MAG will be stressing on revenue, refocusing on delivering better and smarter products and services for our customers while continuing to drive operational efficiency. Alongside this Malaysia Airlines will be pushing forward on digital investment and innovations, where it has already invested strongly, to differentiate the airline from its competitors, producing more products and services designed for the business and value-focused leisure customers in mind.