Malaysian Air Said to Consider Ordering Jets to Replace 777s

Malaysian Airline System Bhd. may order at least 17 planes to replace its aging Boeing Co. 777-200s as the state-run carrier seeks fuel-efficient aircraft to pare costs, a person familiar with the matter said.

Malaysian Air is considering both Boeing and Airbus SAS jets for the order and will take a decision on the manufacturer and type of planes in the first quarter of 2014, said the person, who asked not to be identified as the information is private. The carrier wants to add the new planes starting 2017, the person said.

The company is upgrading its fleet after fuel costs and competition from discount carriers including Malaysia’s AirAsia Bhd. pushed it into two straight annual losses. Budget operators in Southeast Asia have ordered at least 1,000 new aircraft in the past five years as economic expansion across the region enables more people to start flying in countries such as the Philippines and Vietnam.

“Retiring old fleet is not a bad thing, both from a competitiveness point of view and fuel efficiency,” James Lau, who helps manage $300 million as director of portfolio investment at Pheim Asset Management Sdn. in Kuala Lumpur, said in an interview. “It makes sense to do so as its rivals are already using newer fleet and customers enjoy new planes.”

Malaysian Air was today’s third most-active stock in Kuala Lumpur, with 57 million shares changing hands, according to data compiled by Bloomberg. The stock closed up 1.5 percent at 34 sen after earlier climbing as much as 4.5 percent, outperforming a 0.1 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index.

Group Chief Executive Officer Ahmad Jauhari Yahya couldn’t be immediately reached for comment as he’s traveling overseas. Najmuddin Abdullah, the head of strategic communications, also didn’t respond to an e-mail and telephone calls.

Fleet Renewal

The airline, based in Subang Jaya, Malaysia, will take delivery of 24 new aircraft this year and another 25 over the next two years, Ahmad Jauhari said in a June 11 interview. The carrier ordered 15 Airbus and 35 Boeing planes in 2011.

Malaysian Air is retiring 30 aircraft from its fleet this year to cut costs. New planes typically consume less fuel than older aircraft. With the retirement of old planes and aircraft additions, the average age of Malaysian Air’s fleet of 110 planes will be 5.4 years by end 2013, Ahmad Jauhari said then.

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