MH troubles grow

13 May 2014  2035 | Business & Trade Fairs

Troubled Malaysia Airlines cannot count on the government shoring up its finances according to statements made by the Tourism and Culture Minister Nazri Aziz during a visit to a trade show last week in Dubai.
He was attending the Arabian Travel Mart and was quoted as saying Malaysia’s transport ministry would be asked to come up with a plan that would end government financial support for the airline.
Kuala Lumpur’s Daily Star warned that coupled with the bleak outlook given by the MAS management to analysts, last Tuesday, it now raises questions about the airline’s immediate-term financial performance.
The Gulf News in Dubai last week quoted Nazri as saying that the government does not want to put “any more money” into the airline after the MH370 incident.
“To inject new capital is certainly not an option,” Nazri had said.
The government, via Khazanah Nasional Bhd, holds 69.4% in MAS. Last year, the airline had undertaken a MYR3 billion (US$922 million) rights issue, whereby Khazanah had pumped in MYR2.7 billion for its portion of the rights issue.
Its cash balance was MYR3.87 billion and total assets were MYR21.86 billion at the end of last year.
But the MH370 flight incident has been an expensive search. Although the search has been funded mainly by insurers, comprising a consortium led by Lloyds, how that is going to translate into MAS’ accounts is not clear.

Nazri Aziz
Over the weekend, TA Securities in its report said: “We are worried about the hidden risks that might be associated with the missing flight, as well as the substantial cost involved in the search operations”.
It added that the biggest risk at this juncture was how long the search operations would take and how costly it would become.
MAS has also had to cancel flights after the missing flight MH370 incident and ticket sales have been slow in China, a route that accounts for 10% of MAS’ total revenue.
TA Securities believes the possible loss of income could be a major threat to future earnings growth.
It has been two months since MH370 went missing and MAS has set up a separate management crisis unit to deal with the incident so that the airline can refocus on its operations.
MAS is expected to announce its first-quarter results by the end of the month and analysts expect it to remain very much in the red.
For the full year, they are projecting another MYR1 billion in net losses. MAS had reported a net loss of MY1.17 billion at the end of its last financial year.

Sourced: ttrweekly

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