Malaysia Airlines flies back into black


KUALA LUMPUR, Malaysia – Malaysia Airlines posted profit in the first quarter, with increased passengers and compensation from Airbus over delivery delays of its A380 superjumbos helping to offset rising fuel costs.

The carrier said Monday its January-March net profit of 310 million ringgit ($97 million) was an improvement of more than 1 billion ringgit ($312 million) from a loss a year earlier.

Revenue surged 21 percent to 3.3 billion ringgit ($1 billion), including 329 million ringgit ($102 million) compensation it received from Airbus. Passengers surged 29 percent and the airline filled an average of 75 percent of seats per flight compared with 56 percent a year earlier.

Cargo traffic also surged 31 percent, boosting freight revenue by 53 percent to 456 million ringgit ($142 million).

“It has been an encouraging quarter. Both passenger and cargo business showed strong growth, boosted by the economic recovery,” said Chief Executive Azmil Zahruddin.

He said the Airbus compensation was based on delays in delivery for six A380 planes from 2007 to late 2011. Airbus recently further delayed delivery to the first half of 2012 and more compensation is expected, he said.

Azmil said the state-owned carrier expects to bear a loss of 15 million ringgit ($4.7 million) due to flight disruptions last month when most European airports were closed for a week due to the volcanic ash cloud.

He said he is optimistic about the airline’s growth prospects but foresee a “very challenging year” given rising fuel costs while revenue per passenger remains low.

Jet fuel cost has shot up 55 percent from a year earlier to an average $85 a barrel in the first quarter, resulting in a 42 percent increase in the airline’s fuel cost to 1 billion ringgit ($311 million), he said.

“Although fuel supply has remained constant, the speculators are back, driving the prices upwards,” he said. The airline has hedged 60 percent of its fuel needs for this year and 40 percent for 2011 at around $100 a barrel, he said.

The state-owned carrier reported a net profit of 490 million ringgit ($153 million) last year, mainly due to gains from fuel hedging contracts.

The International Air Transport Association has halved its forecast of losses for the airline industry in 2010 to $2.8 billion, with Asian and Latin American carriers leading a surprisingly strong recovery since late last year. It also lowered its 2009 loss estimate to $9.4 billion from $11 billion because of the year-end rally.

It has said Asia Pacific carriers could rebound to make $2.7 billion this year, after losses in 2009.