Malaysia Airlines Posts Q4 Profit

February 26, 2007

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Malaysia Airlines on Monday posted net profit of MYR122.04 million ringgit (USD$35 million) for the fourth quarter to December 31, its second straight quarterly profit.

The state-controlled airline ended a run of five loss-making quarters in the third quarter, helped by revenues from domestic routes, better yields and cost reduction.

"I can say that Malaysia Airlines is fully alive and kicking. The crisis is behind us. We've said this is the year we want to generate profit," Chief Executive Idris Jala told reporters.

Under its business turnaround plan, Malaysia Airlines has targeted a net profit of MYR50 million ringgit for 2007, but Jala was more optimistic about the outlook.

"If we can achieve a profit of between 50 and 99 million ringgit, it will be on target," he said.

The airline posted a net loss of MYR133.7 million (USD$38.3 million) in 2006, much smaller than its MYR620 million (USD$177.8 million) target and compared with a loss of MYR1.3 billion (USD$372.8 million) in 2005.

Like many of its Asian rivals, record-high oil prices had weighed on the carrier, which is also battling with fierce competition at home from budget operator Air Asia.

A 16 percent fuel price increase in 2006 was mitigated by hedging and a reduction in volume consumed, resulting in a fuel cost increase of only 2.8 percent, the airline said.

Malaysia Airlines Chief Financial Officer Tengku Azmil Zahruddin said the airline has hedged 68 percent of its fuel requirement for this year at an average USD$70 per barrel.

Malaysia Airlines also confirmed a newspaper report that it was planning to set up a new domestic and regional operation on Malaysia's northern island of Penang.

"I confirm that we are planning to do something like that. We are going through the process of getting approvals," Jala said, without giving details. The Business Times reported on Monday that the operation was to service the premium travel market.

Transport Minister Chan Kong Choy said on Saturday that a new Malaysian airline would operate from Penang in April. He did not identify the airline but said it is in the final stage of seeking the required permits.

(Reuters)