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Malaysian Airline Said to Weigh 100-Aircraft Order

Photographer: Goh Seng Chong/Bloomberg
Malaysian Airline System Bhd. is working to upgrade its fleet with new, fuel-efficient planes as fuel costs and competition from discount airlines such as AirAsia Bhd. pushed it into three straight annual losses.

Malaysian Airline System Bhd. (MAS) plans to order as many as 100 planes, a person familiar with the matter said, as the carrier seeks new aircraft to fend off competition that contributed to three straight annual losses.

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The state-run company is looking at a range of short-haul and long-haul models from both Airbus Group NV (AIR) and Boeing Co. (BA), said the person, who asked not to be identified because the information is private. A decision on the purchase may be taken by the end of first half of this year, the person said.

Malaysian Air seeks to start taking deliveries of the new planes from late 2016 or early 2017, the person said yesterday, as it works to upgrade its fleet over the next decade. The carrier needs new fuel-efficient jets to cut costs amid rising competition from discount airlines such as AirAsia (AIRA) Bhd., which have ordered hundreds of planes to tap Asia’s rising travel.

“Malaysian Air is playing catch-up with other airlines,” Mohshin Aziz, an analyst at Kuala Lumpur-based Maybank Investment Bank Bhd., said in a telephone interview. “It’s the right thing to do given the competition in the industry.”

Najmuddin Abdullah, a spokesman for Malaysian Air, didn’t answer a call made to his mobile phone today. He didn’t respond to an e-mail sent yesterday.

Malaysian Air said yesterday it lost 1.17 billion ringgit last year, exceeding a mean estimated loss of 882.8 million ringgit by 14 analysts in a Bloomberg poll. Its shares dropped 6.9 percent to close at a record low of 29 sen in Kuala Lumpur trading today, underperforming a 0.2 percent increase in the benchmark FTSE Bursa Malaysia KLCI Index. (FBMKLCI)

AirAsia, Lion

The national carrier, incorporated as Malayan Airways Ltd. in October 1937, operates a fleet of 88 planes, according to its website. The airline, which flies Boeing and Airbus jets, moves 37,000 passengers daily to 80 destinations worldwide.

About 15 low-fare carriers started flying in Asia-Pacific over the past decade as the region’s increasing urbanization and growing middle class fuel a surge in travel. Asia’s growth contrasts with the mature markets of the U.S. and Europe, where over-capacity has led to a consolidation.

AirAsia, the region’s biggest discount carrier, already has about 140 A320 planes in operation plus 335 on order. Indonesia’s PT Lion Mentari Airlines has a 105-strong fleet and a mammoth 650 Airbus and Boeing narrow-bodies yet to come.

VietJet Aviation Joint Stock Co., Vietnam’s only privately owned airline, last week signed an order for 100 Airbus planes.

Close to half the world’s air traffic growth will involve Asian routes over the next 20 years, Boeing marketing chief Randy Tinseth has said, with carriers from the region acquiring 12,820 more aircraft, or 36 percent of the global total. Competitor Airbus puts the figure at 11,000 planes.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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