MAS recorded an operating profit of RM103.8 million for the fourth quarter ended 31 March 2003, continuing the improved momentum experienced in the third quarter. This is RM154.5 million improvement over the same quarter last year.

The improved final quarter result has been achieved against better than expected demand in passenger and cargo services and a reduction in expenditure arising from the full application of the Widespread Asset Unbundling (WAU) restructuring exercise, which came into effect on November 6th 2002. The fourth quarter was the first time the new cost structure was fully applied and tested and in the event was more than justified. However, new challenges are now in the offing which will test it further.

The new operating model is principally characterised by reliance entirely on leased aircraft. The fourth quarter contributed to reducing the operating loss for the year to RM5.4 million turning around from the RM874.3million loss from the previous year.

In the quarter January 1st to March 31st, total passenger revenue increased by RM99.6million compared to the same quarter last year, largely contributed by an increase in international revenue of RM 130.9million or 9.6%. Domestic revenue recorded a decrease of RM31.3 million or 9.4%. Cargo revenue increased by RM 92.5 million or 35.1% to RM356.1 million compared to the same quarter last year.

During the quarter, the Group also recorded a gain of RM 30.0 million from sale of its properties in the Kuala Lumpur International Airport (KLIA) and a loss of RM 20.7 million from the sale of aircraft. The profit before tax for the fourth quarter was RM75.5 million, an improvement of RM126 million over the same quarter last year.

International traffic rose 10.9% for the quarter to 8,196 million passenger kilometers against a capacity increase of 17.4%. Similarly, cargo traffic rose 41.1% for the quarter to 525 million Load Ton Kilometer against capacity increase of 31.3%.
International passenger load factor rose by 0.5% to 67.2 %, whereas domestic passenger load factor decreased by 3.3% to 67.8%. The overall passenger load factor for the quarter decreased by 3.2% to 67.3%. Cargo load factor increased by 4.6% to 66.3%. Overall load factor decreased by 4.0% to 66.7%.

Total expenditure decreased by RM332.4million to RM1,943.0 million, or -14.6% for the quarter, over the same quarter last year, mainly due to lower depreciation and reduced finance charges following the activation of WAU, and coinciding with more cost efficient aircraft maintenance and overhaul expenditure. This was partly offset however by an increase in fuel and oil costs.

Full Year Results: The Group also announced today a net profit after tax of RM339.1million for the financial year ended 31 March 2003 compared to a net loss after tax of RM835.6million in the last financial year.

Total revenue for the full financial year increased by RM169.2 million, while expenditure in the same period was lower by RM699.7million.

For the financial year, international passenger traffic increased by 9.4% to 32,981million passenger kilometers while domestic traffic increased by 2.4% to 4,672million passenger kilometers. Cargo traffic increased by 17.7% to 2,073 million load ton kilometers.

The international passenger load factor increased by 3.3% to 68.8% and the domestic load factor increased by 4.2% to 74.0%. The overall passenger load factor improved 3.4% to 69.4%. Cargo load factor improved 9% to 68.0%. Overall load factor improved 2.2% to 68.9% compared to 66.7% last year.

The cumulative results for this year can be attributed to a combination of operating improvements and the financial restructuring.

Prospects:
The fourth quarter saw the outbreak of the Iraq War and Severe Acute Respiratory Syndrome (SARS). While the impact of the Iraq War was discounted well in advance, the financial impact of SARS on travel and commerce has been dramatic with no immediate end in sight. The performance of the last two weeks of the last quarter was affected by shrinkage in passenger traffic. At the time of issuance of this report, the impact of SARS on the traffic performance of MAS has been quite severe resulting in a contraction of passenger load and revenue. Traffic has declined by 15% and capacity adjusted by withdrawing services to SARS affected regions. Total capacity reduction to date is down by approximately 10%. The combined effect of reduction in passenger load and capacity cutback has caused considerable strain on the airline in the first two months of the new financial year.

The outlook for the immediate six months of the new financial year has greatly influenced travel anxiety associated with the outbreak of SARS. The challenge for MAS is to contain the reduction in revenue through cost savings and the redeployment of its capacity to other markets not affected by SARS. The prospects for cargo contribution remain encouraging while somewhat muted by shrinkage in belly space on reduced scheduled passenger services. To this can be added the resumption of terrorist attacks in recent days with renewed travel advisories likely to further deter air travel.

With regard to SARS, MAS is taking every possible precautionary measure and abiding scrupulously by the guidelines laid down by World Health Organization (WHO), Malaysian health authorities and those abroad.

Malaysia Airlines Managing Director, Dato Md Nor Yusof said, “We anticipate there will be considerable impact of the above on our future results. The Group is taking active steps to mitigate the possible effects. Eight aircraft have been grounded and the capacity on the affected routes reduced. We are proceeding with our development programme to enhance our products and services. Our strategy is to contain costs while maintaining quality. The setbacks we face at present are indeed challenging and vexatious, but our fundamentals and quality of service are still in place ensuring long term viability. I would like to thank the staff for their efforts and contribution in the first year of our turnaround programme.”

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