Malaysia Airlines signs cheaper, shorter catering contracts to cut costs

KUALA LUMPUR, Malaysia – Malaysia Airlines on Monday sealed two cheaper and shorter catering agreements with Brahim’s Holdings Bhd, as the national carrier looks to cut costs in its restructuring drive.

The separate contracts covering wide-body and narrow-body planes are expected to save the carrier 20-25 percent in catering costs compared with the previous agreement, and are set to run for an initial five years, the firm said in a statement.

The contracts, which begin on a transitional basis from May 10 with full terms taking effect by Sept. 1, allows for a five-year renewal — subject to strict conditions for Brahim’s to adhere to. The previous contract was for 25 years.

“Overall, the new catering agreements provide for a strict service level agreement and key performance indicators to be adhered to, considerably improved pricing, non-exclusivity and a shortened tenure, compared with the previous catering agreement,” Malaysia Airlines said.

Last week, new CEO Christoph Mueller warned employees in an internal email of impending cost cuts that the airline needed as it had been spending 20 percent more than its rivals, and that this year would be challenging as a strong U.S. dollar mitigated the benefit of lower jet fuel prices.

The carrier is seeking to emerge as a new company by July 1, hoping to put behind it the hit to both brand and profits from last year’s disappearance of flight MH370 and the shooting down of flight MH17 over war-torn Ukraine.