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Malaysian Air Falls on ‘Crisis,’ Fourth Loss: Kuala Lumpur Mover

Malaysian Air Falls on ‘Crisis,’ Fourth Loss
A Malaysian Airline System Bhd. aircraft takes off from Chek Lap Kok Airport in Hong Kong, China. Photographer: Jerome Favre/Bloomberg

March 1 (Bloomberg) -- Malaysian Airline System Bhd., the nation’s largest long-haul carrier, fell the most since October in Kuala Lumpur trading after its chairman said the company was “in crisis” following a fourth straight quarterly loss.

The airline dropped as much as 5.6 percent to 1.35 ringgit, the biggest intraday decline since Oct. 18. It closed 3.5 percent lower at 5 p.m. in Kuala Lumpur, compared with a 0.2 percent increase in the country’s benchmark FTSE Bursa Malaysia KLCI Index.

Malaysian Air yesterday reported a 1.28 billion ringgit ($426 million) loss for the quarter ended December because of rising fuel costs and provisions for returning leased planes early. The airline has cut routes, proposed a regional premium carrier and announced plans to shed units in a bid to return to profit.

“The company is in crisis,” Chairman Md Nor Md Yusof said in a statement yesterday. Still, “the board and I are confident that we now have a team and business plan in place that will bring the necessary sacrifices to ensure a turnaround.”

The carrier, based in Subang near Kuala Lumpur, plans to announce a new funding plan within 60 days, Mohammed Rashdan Mohd Yusof, its deputy chief executive officer, told reporters yesterday.

Annual Loss

Malaysian Air’s full-year loss was 2.5 billion ringgit, more than double the 1.21 billion ringgit average of 15 analyst estimates compiled by Bloomberg. Fuel costs surged 11 percent to 5.9 billion ringgit, eroding gains from a 5 percent increase in passenger numbers.

“We are cautious on the outlook due to rising oil prices and Malaysian Air’s weak pricing power,” Annuar Aziz, an analyst at Credit Suisse Group AG, wrote in a report today. He downgraded the carrier to “neutral” from “outperform” and cut the price target to 1.50 ringgit from 1.95 ringgit.

Malaysian Air has planned for another full-year loss this year though it will strive to break even, Chief Executive Officer Ahmad Jauhari Yahya told reporters.

“The bottom-line group losses for 2011 underscore the imperative need for Malaysian Air to immediately adopt strong measures to stop the bleeding,” he said in the statement. “These include staff redeployment, increasing productivity and efficiency, relentless cost control and making further route reviews.”

Non-fuel costs rose 15 percent to 10.4 billion ringgit in 2011, mainly due to provisions for obsolete engineering stock and returning 58 leased aircraft by 2014, the company said.

The carrier expects to save 302 million ringgit this year by paring flights to cities including Johannesburg and Buenos Aires. The company has also begun talks with Qantas Airways Ltd. and other airlines on potential partnerships, Ahmad Jauhari said Dec. 7.

“The outlook for 2012 remains challenging for the global aviation sector with both passenger and cargo segments expected to remain weak, coupled with rising fuel costs,” the CEO said.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Neil Denslow in Hong Kong at ndenslow@bloomberg.net

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