“I don’t see that as an option at this stage,” Hugh Dunleavy, the airline’s director of commercial operations, said in an interview with Bloomberg Television’s Haslinda Amin yesterday, when asked about a possible insolvency. A review of all operations may take about three months, with implementation of changes maybe requiring another six to nine months, he said.
Malaysian Air shares plunged the most since 1998 this month amid investor concern the government may let the company fail. The carrier has said the jet’s disappearance put additional stress on operations, forcing it to review its business plan after reporting the biggest loss since 2011.
“Now is the time to take a close, hard look at all aspects of our business model and find out those that are core to us, let’s enhance those, make them as efficient as possible,” Dunleavy said in the interview at the airline’s training academy near Kuala Lumpur. “Those that are less core, or where we think another group can do it more efficiently, we should start looking at it.”
The carrier will review all routes, Dunleavy said. Bookings from China dropped 50 percent to 60 percent after MH370, carrying mostly Chinese passengers, vanished March 8, he said. To date, no single piece of debris from the Boeing wide-body airliner has been retrieved.
The airline gained 2.9 percent to 17.5 sen in Kuala Lumpur trading yesterday, trimming the drop this year to 44 percent. The stock is the worst performer on the 63-member BI Global Airlines - Principal business index in the period. All but one analyst tracked by Bloomberg say investors shouldsell the stock.
The Subang Jaya, Malaysia-based company last reported an annual profit 2010. The flag carriermissed its target to be profitable last year as rising prices for fuel, maintenance and financing wiped out revenue gains.
“Obviously, MH370 has put a rather significant hurdle to that objective,” Dunleavy said of a plan to return to profit. “I don’t believe we will achieve that for this year, but I believe what we will be doing, what we are doing is looking at our current business plans, revamping those, looking at all opportunities to escalate the rate of the changes we are putting in so that 2015 will be the break even year.”
The company lost a total 4.57 billion ringgit ($1.4 billion) since the start of 2011. Analysts projectlosses through 2016 for the airline, according to data compiled by Bloomberg.
The airline pointed to unfavorable foreign exchange rates as an additional challenge. Winning back customers and a “relentless cost focus” will be part of the recovery, it said earlier this month.
Flight 370 with 239 passengers and crew vanished from civilian radars on March 8 while headed north over the Gulf of Thailand. It then doubled back over Peninsular Malaysia and flew south into some of the world’s most remote waters. The hunt for the aircraft has become the longest in modern aviation history.
The incident has put the carrier under global scrutiny, jeopardizing its reputation and prompting boycotts by travel agents in China. It has also hurt the country as a travel destination, with Chinese tourists canceling their visits to the Southeast Asian nation, according to Malaysia’s tourism promotion agency.
The disappearance triggered a “major short-term reaction in consumer behavior,” with the airline observing high cancellation of existing bookings and a reduction in long-haul bookings in favor of short-haul ones, the company said May 15.
Listing Malaysian Air’s profitable divisions and selling stakes in two aviation businesses could raise 4.15 billion ringgit, Malayan Banking Bhd. analyst Mohshin Aziz said in an April 16 report. Government investment company Khazanah Nasional Bhd. owns a 69.4 percent stake in the airline, according to data compiled by Bloomberg.
To contact the reporters on this story: Haslinda Amin in Singapore at firstname.lastname@example.org; Shamim Adam in Singapore at email@example.com
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