* Analysts say situation too uncertain to make estimates
* Q1 earnings due after Malaysia stock market closes
* Carrier looking to sell stake in engineering unit- sources
By Anshuman Daga
SINGAPORE, May 15 Malaysian Airlines will report
first-quarter earnings later on Thursday that are set to provide
confirmation of just how badly the already loss-making carrier's
finances have been hit by the vanishing of flight MH370 on March
Struggling for years to cope with high costs and nimbler
regional and international rivals, Malaysian Airline Systems
Bhd's quarterly performance has been made so uncertain
by reduced traffic and potential costs linked to the jet's
unexplained disappearance that analysts say they simply can't
issue January-March estimates.
The carrier known as MAS reported a net loss of 343 million
Malaysian ringgit ($106 million) for the last quarter of 2013,
squeezed between AirAsia Bhd on short-haul routes, and
Gulf carriers and AirAsia X in the medium and
long-haul market. The first-quarter numbers are expected after
the close of trading on the Malaysian stock exchange on
Its worst quarter on record was in October-December 2011,
when a series of one-off provisions related to jet deliveries
and maintenance pushed it to a 1.28 billion ringgit net loss.
The airline said last month that passenger numbers dropped
sharply after MH370's disappearance, its load factor - or
percentage of seats sold - slipping to 74.1 percent, close to
January 2013's record monthly low of 73.9 percent. Analysts
expect the uncertainty over MH370 to continue to deter
travellers from using the airline, 69 percent-owned by Malaysian
state investor Khazanah.
"If there is new political will to restructure, MAS can be
saved from itself, and our forecasts, target price, and perhaps
even our recommendation may be raised," CIMB said in a report
this week. But the brokerage, which has a 'reduce' rating on the
shares, said the path forward remains risky.
Analysts have long urged change at the carrier. As part of a
strategic overhaul of the company, MAS is looking to sell a
stake in its profitable aircraft maintenance unit, sources told
Reuters this week.
Regular customers like Ray Tan highlight the problem facing
MAS. For the past two years, the Singapore-based technology
executive flew MAS for business trips to Kuala Lumpur every
Since flight MH370 disappeared, though, he has shunned the
"If it's just the incident alone, I would think it's an
isolated one, but right after it, there were a couple more
breakdowns with the planes and that kind of really eroded
confidence I had for MAS," said the 31-year-old, who won't even
take the airline for leisure now.
Since last year, MAS has adopted a strategy of lowering
fares to try and bolster traffic. Yet hampered by a strong trade
union, it has also been unable to slash costs and improve
Analysts have argued that bringing in private investment and
reducing the role of state investor Khazanah might promote
change at the airline, improving competitiveness.
That prospect appears remote. Khazanah attempted to cut its
stake in MAS in 2012, but the airline's main union successfully
blocked a share swap deal with AirAsia that would have brought
in a profitable airline with experience of competing
"Their operating costs are still so high, they need to
relook at the business model," said Kuala Lumpur-based Ang Kok
Heng, chief investment officer at Phillip Capital. "Whatever
restructuring they go through, they will have to overcome union
opposition which is very difficult to do."
With no near-term improvement seen, investors including
Khazanah may see the value of their holdings further eroded.
Since MH370 disappeared, MAS shares have slumped as much as
20 percent. Its market value has tumbled about 80 percent over
the past five years, while the broader Malaysian market
has risen about 80 percent.
($1 = 3.2385 Malaysian Ringgits)
(Additional reporting by Al-Zaquan Amer Hamzah in KUALA LUMPUR;
Editing by Rachel Armstrong and Kenneth Maxwell)