Route cuts put Malaysia Airlines back to black

Struggling flag carrier Malaysia Airlines said on Tuesday it has swung back to a profit after six straight quarterly losses as the slashing of unprofitable routes helped cut costs.

The airline recorded a 37.08 million ringgit ($12.25 million) net profit for its third quarter ending September 30, compared to a 477.6 million loss in the same period a year earlier, it said.

"We are very encouraged by the improved trend in our financial performance in this third quarter especially after six quarters of loss," chief executive Ahmad Jauhari Yahya said in a statement.

"Our focus remains to increase revenue and manage our costs... Although the journey ahead is long, with focus, we will succeed."

The improvement in the airline's bottom line "was mainly due to the route rationalisation programme", which resulted in a nine per cent decrease in fuel costs and a seven per cent drop in non-fuel costs, the carrier said.

Lower fuel costs also helped, it said.

The airline has battled for years to stay in the black, with analysts blaming a combination of stiff competition, poor management, change-resistant unions, government interference and other factors.

Earlier this year, it reported a full-year 2011 loss of 2.5 billion ringgit and in June announced it was pushing back a planned 2013 return to profitability after a tie-up with rival budget carrier AirAsia crumbled.

Amid the gloom, the airline embarked on a cost-cutting campaign centered on slashing routes, including to Rome, Johannesburg, Cape Town, Buenos Aires, Karachi and Dubai.

Malaysia Airlines said the cost-cutting moves caused revenue to shrink only two percent to 3.5 billion ringgit.

Ahmad Jauhari said the airline continued to face challenges including the global economic woes and their affect on air travel, increased competition and high fuel costs.

The airline was still in the red for the first nine months of the year, with a net loss of 484 million ringgit, down from 1.25 billion for the same period a year earlier, it said.

Earlier this year, a tie-up with profitable AirAsia fell apart due to resistance by unions representing Malaysia Airlines.

Analysts had predicted the venture would help the flag carrier by eliminating head-to-head competition on some routes.

Malaysia Airlines, which in February admitted it was "in crisis", has announced a series of turnaround plans over the years, the latest major refocusing coming last December.

SOURCE

So are they finally recovering? Just like SIA, they resorted to cutting less popular routes to reduce on loss making flights. And also just like SIA, they're having having trouble fighting with the mainstream low cost carriers. All the budge airlines are killing the premium service airlines.