star say profit..

2ND UPDATE: Malaysian Air 1Q Net Loss MYR695 Mln

DOW JONES NEWSWIRES

(Adds further comments from executives, forward hedging details, background)

KUALA LUMPUR (Dow Jones)--Malaysian Airline System Bhd. (3786.KU) posted a first quarter net loss Friday as an operational deficit caused by weak demand was compounded by a MYR640.2 million fuel hedging loss.

The national carrier said in a statement that it had a net loss of MYR695.4 million in the three months to March 31 - breaking a streak of ten consecutive profitable quarters since mid-2006. The company had posted a net profit of MYR120.1 million in the corresponding quarter last year.

The airline also posted an operational loss of MYR138 million, its first since the third quarter of 2006 due to "a triple squeeze" of overcapacity, fuel volatility and a global slump in passenger and cargo traffic.

MAS said its revenue for the quarter was also lower at MYR2.7 billion against MYR3.8 million a year earlier due to weak passenger and cargo traffic.

In a stock exchange filing, MAS said its fuel hedging loss occurred on "the settlement of hedging contracts during the quarter and fair value changes due to movement in mark-to-market position on outstanding hedging contracts at March 31 as compared to Jan. 1, 2009."

The airline said the early adoption of a new local reporting standard on financial instruments and derivatives - the Financial Reporting Standard 139 - which requires the airline to recognize mark-to-market losses on its fuel hedging contracts, contributed to the losses.

Combined with gains in foreign exchange and interest hedging contracts of MYR83.2 million, the total derivative loss on hedging contracts was MYR557 million, MAS said.

FRS 139 is similar to the International Accounting Standard 39 that has been adopted by many of MAS' international competitors such as neighboring Singapore Airlines Ltd. (C6L.SG).

The Singapore national carrier suffered a 92% fall in net profit to S$42 million in the quarter ended March 31, hit by a combination of factors that included a S$543 million hedging loss.

Home-grown budget airline AirAsia Bhd. (5099.KU), which has not yet adopted the standard, posted a net profit of MYR203.2 million for the same period, 26% higher than a year earlier.

MAS said its hedging losses should reverse in the second quarter. Based on a fuel price of $66 per barrel, the carrier could make a hedging gain of MYR1.1 billion in the three months to June 30, it said. MAS has hedged 47% of its 2009 fuel needs at $103 per barrel of crude.

Chief Financial Officer Azmil Zahruddin said the airline has hedged 60% of its fuel requirements for 2010 and 40% of its 2011 needs at an equivalent of $100 per barrel of crude.

Travel demand in the second quarter "is expected to remain soft," the airline said, but could improve later. Forward booking trends - especially for the long-haul U.K. and Europe, Australia and U.S. routes - are expected to stabilize into the second half of the year, MAS said.

The airline's seat load factor fell 13.1 percentage points in the quarter, but passenger yields improved slightly to 29.5 sen per revenue passenger kilometers.

"The outlook remains challenging as yield pressures continue to mount as airlines proceed to reduce fares and fuel surcharges to encourage consumers to travel," the company said.

Full-year results are targeted to be between a loss of MYR499 million and a net profit of MYR50 million, the company said in the filing. On the upside, MAS could post a net profit of up to MYR1 billion, using its most optimistic scenario, the airline said.

Asked about the wide range in the target, Chief Executive Idris Jala said it "reflects the level of ambition (combined with) an element of realism."

He said the airline was "on track" to making cost savings of between MYR700 million and MYR1 billion this year.

Idris said MAS had already cut capacity by 11% so far this year and didn't rule out further capacity cuts should the demand situation worsen.

On the company's current financial position, CFO Azmil said its cash balance remained strong. Although the company saw negative shareholder funds of MYR459 million at the end of March, this was now positive at MYR690 million, Azmil said.

Azmil said MAS received a one-year waiver from Bursa Malaysia from being listed as a distressed company under the stock exchange's Practice Note 17 - even if it has negative shareholder funds at any time this year.

"We also don't need to raise funds," Azmil said.

The International Air Transport Association on Monday said the world's airlines are likely to post combined losses of $9.0 billion this year, with carriers from the Asia Pacific region - forecast to be $3.3 billion in the red - as the worst hit.

Company Web site: http://www.malaysiaairlines.com

-By Elffie Chew and K.P. Lee; Dow Jones Newswires; (603) 2026 1233; elffie.chew@dowjones.com

Copyright © 2009 Dow Jones & Company, Inc.

Next Monday share sure drop a lot. Anyone plan to buy ?

Next Monday share sure drop a lot. Anyone plan to buy ?

even if the price crashes.. i dont know how long it would take to rebound...
and i dont plan to keep MAS for long term.. 

Why they suspend this MAS today. Suspend one week la. Else next monday also will drop like hell.

Take note. After drop. Sapu.

 
PRIVATIZATION AND RE-NATIONALIZATION OF MALAYSIA AIRLINES 
 

 
1. BACKGROUND 
 
1.1. 
 Malaysia Airlines (MAS) was incorporated as Malaysia’s flag carrier in 1971 following the 
breakdown of Malaysia-Singapore Airlines partnership. Since then, MAS has continued to expand its 
network and fleet. By mid-1980s, MAS had a total of about 60 domestic and international destinations in its 
network and a fleet of over 35 aircraft. However, MAS’s balance sheet suffered especially from the 
loss-making domestic services where the Government rarely allowed increases in fares because of a policy 
of promoting trade and tourism in rural East Malaysia.
 
 
 
2. LIBERALIZATION OF REGULATORY FRAMEWORK 
 
2.1.  Under the Government’s privatisation plan, MAS became the first governmental agency to 
go partly private in 1985. The Government sold 40 per cent to the public, including Brunei Investment 
Agency, while keeping total 60 per cent in the hands of Malaysian Central Bank Negala and local 
Governments. The privatization raised additional funds for MAS’s capital expenditure on aircraft fleet 
expansion. The Government had also considered the idea of separating the airline’s domestic and 
international operations into two divisions to improve the profitability of the international airline, but the 
plan was subsequently abandoned. In 1994, as one of the attempts to reverse the weak financial position 
vulnerable to rising labour costs, higher interest rates and reluctant lenders, the Central Bank sold its 32 per 
cent controlling stake to Malaysia Helicopter Services (changed name to Naluri in 1998) led by 
Tajudin Ramli
1
. The move eliminated the Government as the largest shareholder, although the Government 
continued to hold a “golden share” giving it a veto on board decisions, and State-owned entities acquired a 
minority stake in the airline. 
 
 
3. 
EFFECTS AND 
DEVELOPMENTS 
 
3.1.  For consecutive three years after privatization in 1994, MAS posted profits. 
Tajudin Ramli’s new commercially-oriented management forged a 7 per cent reduction of expenses in 1995 
by targeting fleet utilization, fuel usage and employee composition. The domestic first class fares were 
increased to compensate for cumulative loses. Some transpacific flights were replaced by codesharing 
operations, which increased MAS’s market coverage. 
                                                 
1
  In 1996, Naluri’s stake was diluted to 29.09 per cent. In 1994, Naluri also acquired controlling stakes in Air Maldives and Royal 
Air Cambodge, but both airlines ceased operations in 2000 and 2001, respectively. 

buy buy .... but mas like never rebound one since last time le 

MAS already bailed out 2 times!. Now having negative shreholders' fund and fall into PN17. LoL.. malaysia GLC boleh!!



Look SIA.. 10x market cap more than our bolehland MAS.

profit?

Condition 1: The Conditional Waiver is only in respect of unrealised MTM losses for fuel hedging contracts arising from the adoption of FRS 139. If MAS triggers the PN 17 criteria due to reasons other than the above (e.g. realised losses from hedging contracts), the above Conditional Waiver will not apply;

Condition 2: MAS must ensure full compliance with FRS 139 in recognising and measuring all the financial assets, financial liabilities and certain contracts to buy or sell non-financial items as stipulated in FRS 139 in all its financial statements issued in the financial year 2009;

Condition 3: MAS is to take all necessary measures to cease or avoid triggering the PN 17 criteria by 31 December 2009. In the event that the Company triggers or continues to trigger the PN 17 criteria after the expiry of the Conditional Waiver (i.e. 31 December 2009), MAS will be required to fully comply with PN 17 requirements;

Condition 4: MAS must take the following disclosures in its quarterly report(s):

i) a Proforma balance sheet position in its quarterly report (“QR”) ended 31 March 2009, showing shareholders’ equity based on MTM valuation of the fuel hedging contracts as at 29 May 2009 under the FRS 139 reporting principles;
ii) a Proforma balance sheet position without FRS 139 in all its QRs for financial year 2009;
iii) total realised and unrealised losses due to fuel hedging contracts under FRS 139 for financial year to-date in all its QRs for financial year 2009; and
iv) the status of the measures as referred to in Condition 3 above in all its QRs for financial year 2009.

The Conditional Waiver granted by Bursa was after taking into consideration of, amongst others, the following factors:

i) high volatility of the underlying assets (i.e. fuel) hedged by MAS which is subject to MTM valuation giving rise to fluctuations in the Group Equity Holders’ Fund. In this regard, it is noted that the Group Equity Holders’ Fund was negative for the quarter ended 31 March 2009 based on the pricing of fuel price at the material period but positive based on the comparative fuel forward curve as at 29 May 2009; and
ii) the MTM losses of the Group’s fuel hedging contracts are unrealised losses.

hm... MAS lowest price in a year ago at 2.4 something .. thinking to buy if drop to 2.4 ~ 2.6

I agree. I think 2.4 is a good price to enter but you may need to hold it for long term.

Haha...I leave after work and find MAS is nearly kena PN-17 since the company become Net Tangible Liability (NTL). They managed to get a waiver and not put on PN-17 - somehow someone managed to get this waiver.

Actually, lots of airlines hedge against fuel price increase, but I think last year most, if not all, bet the wrong way and recorded losses due to fuel price drop.

The waiver takes into account that the reason it became NTL is due to hedging wrong way, NOT because MAS management failed to properly execute the MAS operations.

In fact, I bought MAS at 2.6 because I have faith that Idris Jala will turnaround the company, and not because it is a GLC. Based on the recovery from 2007, Idris Jala has shown he is capable to turnaround a loss company to profit, taking hard steps where needed. I believe that at the end of 2009, this company will already turn around and later the MTM losses will be history.

Hehe...Just my 2 cents.

if really become pn17?? jia lat la...