Malaysia Airlines 'Aggressively Hedging' on Forecast Oil Will Rise to $70

Updated on
  • Carrier has hedged for current year at more than $60 a barrel
  • Airline projects more consistent profitability in 2018

Malaysia Airlines CEO Sees Oil Rising to $70 End-of-Year

Malaysia Airlines Bhd. projects oil prices will increase to about $70 a barrel toward the end of this year and has aggressive fuel hedging in place as the money-losing national carrier seeks to return to profitable operations.

“At the moment we are hedged about 65 percent of the current year at about a little bit north of $60,” Chief Executive Officer Peter Bellew said in a Bloomberg TV interview with Haidi Lun on Friday. “We are quite aggressively hedging 12 months ahead on a quarter-to-quarter basis and taking a fairly prudent approach to it.”

Malaysia Airlines is projecting a return to what Bellew calls “more consistent profitability” in 2018 following an expected loss this year as it fills a larger portion of seats amid demand from markets leading with China. The ringgit’s depreciation against the dollar since Donald Trump won the U.S. presidential election in November is a big concern for Malaysia Airlines, the CEO said.

Click here to watch Bellew’s interview on the airline, oil outlook

The Malaysian currency -- which has weakened more than 5 percent since the U.S. election -- may strengthen over the next six to nine months, helping to bolster the carrier’s earnings, Bellew said.

Crude oil futures were trading at $52.66 a barrel as of 12:35 p.m. in Singapore.

Demand for seats on Malaysia Airlines plunged after the carrier lost two planes in 2014, with one vanishing over the Indian Ocean en route from Kuala Lumpur to Beijing and another shot down over Ukraine.

Chinese passengers have since returned to Malaysia Airlines, making the country its strongest market now, Bellew said. The carrier still needs more wide body planes to carry the influx of tourists from China to Malaysia and is projecting to fly as many as five million Chinese travelers in three to four years, he said.

“My problem with Chinese is I don’t have enough aircraft right now to operate flights there,” Bellew said. “We are seeing no problems with our brand or reputation among Chinese nationals.”

There are some bargains in the aircraft market now and Malaysia Airlines may add six to seven planes in 2018, Bellew said. It’s in talks with Boeing Co. on the 787 aircraft while negotiating with Airbus SE on the A330 neo, he said.

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— With assistance by Karolina Miziolek

(Updates with Chinese passengers in seventh paragraph.)
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