Malaysian Airlines earnings set to show financial burden of loss of MH370

Wed May 14, 2014 5:12pm EDT
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By Anshuman Daga

SINGAPORE (Reuters) - Malaysian Airlines will report first-quarter earnings later on Thursday that are set to provide confirmation of just how badly the already loss-making carrier's finances have been hit by the vanishing of flight MH370 on March 8.

Struggling for years to cope with high costs and nimbler regional and international rivals, Malaysian Airline Systems Bhd's MASM.KL quarterly performance has been made so uncertain by reduced traffic and potential costs linked to the jet's unexplained disappearance that analysts say they simply can't issue January-March estimates.

The carrier known as MAS reported a net loss of 343 million Malaysian ringgit ($106 million) for the last quarter of 2013, squeezed between AirAsia Bhd (AIRA.KL: Quote) on short-haul routes, and Gulf carriers and AirAsia X (AIRX.KL: Quote) in the medium and long-haul market. The first-quarter numbers are expected after the close of trading on the Malaysian stock exchange on Thursday.

Its worst quarter on record was in October-December 2011, when a series of one-off provisions related to jet deliveries and maintenance pushed it to a 1.28 billion ringgit net loss.

The airline said last month that passenger numbers dropped sharply after MH370's disappearance, its load factor - or percentage of seats sold - slipping to 74.1 percent, close to January 2013's record monthly low of 73.9 percent. Analysts expect the uncertainty over MH370 to continue to deter travelers from using the airline, 69 percent-owned by Malaysian state investor Khazanah.

"If there is new political will to restructure, MAS can be saved from itself, and our forecasts, target price, and perhaps even our recommendation may be raised," CIMB said in a report this week. But the brokerage, which has a 'reduce' rating on the shares, said the path forward remains risky.

Analysts have long urged change at the carrier. As part of a strategic overhaul of the company, MAS is looking to sell a stake in its profitable aircraft maintenance unit, sources told Reuters this week.

UNCERTAIN TIMES   Continued...

Malaysia Airlines aircrafts taxi on the runway at Kuala Lumpur International Airport in Sepang outside Kuala Lumpur May 13, 2014. REUTERS/Samsul Said