MAS - Business strategy remains intact

By Sharen Kaur

LOW PRESSURE: MH370 incident will not dent MAS bid to restore profitability, says official

THE Malaysia Airlines flight MH370 incident will not put a dent in the carrier’s business strategy, says a company official.

 The official, who spoke on condition of anonymity, said the plan will remain intact until and unless it becomes necessary to adopt a new one.

“For now, the business strategy, which is churning out positive gains, will remain as it is,” the official said.

The airline’s business strategy is aimed at restoring profitability by significantly cutting capacity and focusing on its premium sectors.

Flight MH370, which carried 239 passengers, including 12 crew members, disappeared while flying over South China Sea on a flight from Kuala Lumpur to Beijing early on Saturday.

The incident weighed down on MAS’ share price on Bursa Malaysia in the morning session yesterday.

The counter, which closed at 25 sen last Friday, fell to 20.5 sen in morning trade but later rebounded to close one sen lower at 24 sen.

It was the most active stock on the local bourse with 385 million shares traded.

Meanwhile, analysts said MAS’ air flight safety procedures should not be blamed for the disappearance of flight MH370.

“The issue is more on airport security or unforeseen problems. I don’t see any reason why MAS might want to change its business strategy as a result of this incident,” says Mercury Securities
head of research Edmund Tham.

On the sharp movement in the airline’s share price yesterday, Tham expects it to be temporary and “the stock will rebound”.

“The lower share price is because of a drop in investors’ sentiment following the incident.

I believe investors may turn to other aviation stocks or other sectors for a while.

“The main issue is MAS’ profitability and not so much the missing plane. It is up to Khazanah (Nasional Bhd) on whether to prop up the price,” Tham told Business Times.

MAS stock dropped 19 per cent when it announced a fourth-quarter net loss of RM342 million for fiscal year 2013 on February 18.

HwangDBS Vickers Research has maintained a “fully valued” recommendation on MAS’ shares, with a target price of 27 sen a share.

Hong Leong Investment Bank (HLIB) Research said it expects minimal expenses to be borne by MAS over the MH370 incident and any compensation would likely be covered by insurance, as
with previous cases.

On the airline’s share price performance, HLIB expects selldown pressure in the immediate term.

The research firm maintained a “sell” call on the counter with a revised target price of 20 sen from 25 sen previously.

US$80m to redevelop Terminal 2 in Subang

By Sharen Kaur

TERMINAL 2 at Sultan Abdul Aziz Shah Airport in Subang, Selangor, will be redeveloped for about US$80 million (RM261.2 million) this year to accommodate growth in turboprop operations, sources said.

The redevelopment is an expansion of the SkyPark Terminal (formerly known as Terminal 3), which has eight parking bays and five remote parking spots.

"The airport apron is shared by several operators and is running about 40 per cent beyond capacity, with some planes double parking. It is crucial to redevelop Terminal 2 and cater for additional requirements," said a source.

Terminal 2 has been sitting idle since 1998 when the Kuala Lumpur International Airport in Sepang started operations.

The redevelopment will be undertaken by Subang SkyPark Sdn Bhd (SSSB).

SSSB won a 59-year concession from Malaysia Airports Holdings Bhd (MAHB) to redevelop Terminal 2 and 3 in 2008 for about RM300 million. The deal included building five hangers for RM100 million.

"SSSB is awaiting approvals from MAHB. It is targeting to start redeveloping Terminal 2 in the third or fourth quarter of this year," said a source.

According to the source, SSSB will spend around US$50 million to construct a new terminal building with a floor space of 300,000 to 400,000 sq ft, as well as retail and commercial facilities.

He said the airport apron, with more than 20 aircraft bays, will be built by MAHB for between US$25 million and US$30 million.

MAHB has demolished the Eurocopter Malaysia facility at Terminal 2 to make way for the apron. Eurocopter Malaysia moved to a new facility opposite SkyPark Terminal about 10 months ago.

When the redevelopment is completed in 2016, both SkyPark Terminal and Terminal 2 will have a combined passenger handling capacity of five million.

SkyPark Terminal houses the operations of Firefly, Malindo Air, Berjaya Air, VistaJet and Westair.

According to the MAHB website, aircraft movement at SkyPark Terminal had grown by 16.3 per cent to 74,008 in 2012 from 63,616 in 2010, the first year it started operations.

The number of passengers handled by the terminal had surpassed its one-million capacity.

The source said Firefly and Malindo Air, which operate 14 and five turboprops, respectively, are expanding their fleet to 17 and 13, respectively, by the end of this year.

Flynas charts expansion plans

By Sharen Kaur
sharen@mediaprima.com.my

KUALA LUMPUR: Saudi Arabia's carrier Flynas will raise over US$100 million (RM330 million) by the end of this year to help fund its growth, which includes expansion into Malaysia.

Flynas chief executive officer Raja M. Azmi said the airline is mulling over issuing sukuk or other financial instruments, such as securitisation of assets or revenue.

"We are talking to Arab and Malaysian banks. It is to partly finance the airline's growth and develop the global flight routes," said Raja Azmi, formerly AirAsia Bhd executive vice-president and group chief financial officer.

Flynas, owned by Nas Holdings, which is controlled by Arab royalties, offers flights within the Arab region, Turkey, Sudan and Egypt.
From April, it will offer regional travellers access to affordable, high-value air travel to Europe, Asia and Africa, operating out of its hub in Jeddah.

The new destinations include Kuala Lumpur, London, Gatwick and Manchester in the United Kingdom, Paris, Jakarta, and Casablanca.

In the near future, it will fly to Pakistan and India.

The global expansion is part of the airline's aim to fly 20 million passengers annually by 2020.

Last year, Flynas flew 3.5 million passengers and the target this year is to serve five to six million passengers, Raja Azmi said.

At a press conference after the launch of the Kuala Lumpur-Jeddah route yesterday, Raja Azmi said Flynas will use the A330 planes to offer three weekly flights starting early April.

The frequency will be doubled by the end of the year.

"We will fly out of the Kuala Lumpur International Airport in Sepang. If there is a good offer, we will fly from klia2.

"Our flight fares will be lower than the local airlines, especially AirAsia. In fact, we are talking to MAS, AirAsia and Malindo Air for code sharing and alliance," he said.

Raja Azmi is bullish on the airline's prospects here, targeting the 200,000 Muslims who travel for their annual pilgrimage to Mecca, as well as non-Muslims.

Flynas is also targeting Arab holidaymakers. In the first nine months of last year, some 73,000 Arabs visited Malaysia.