Malaysia's MAS could be the loser in MASkargo spin-off: S&P analyst

2012 03 09

AILING national carrier, Malaysia Airlines, spinning off some of its ancillary businesses, including its air cargo unit MASkargo, as part of a business plan to turn itself around could be losing an important long-term income earner for short-term capital gains, says a Standard & Poor's analyst.

"Cargo has proven to be a profitable business for MAS, with Malaysia recognised as a manufacturing base for many companies," said the S&P credit agency's aviation analyst Shukor Yusof.

"As such, divesting MASkargo is an easy way to raise money, but more importantly is whether it makes sense for MAS in the long term," he said, according to the Star Daily of Malaysia.

He pointed to the need for MAS to address the 15 per cent increase in non-fuel expenses to MYR10.4 billion (US$3.4 billion) last year from MYR9.03 billion in FY10, which he said is "worrying".

MAS said in its business plan announced last December that it had become a very complex business with a number of different operating entities: core full-service airline, MASholidays, MASkargo, MAS Aerospace Engineering (engineering and maintenance), training, catering and ground handling.

"The business recovery requires the need to de-clutter to ensure proper focus on the core business: flying the customers. MAS also needs to give the ancillary businesses sufficient freedom to achieve full potential.

"The plan is therefore to commence the process of having strategic partners to these ancillary businesses starting with ground handling, training and engineering and maintenance. However, at present MAS is now focused on the introduction of the Airbus A380 (super jumbo) into its fleet and the launch of the short-haul premium service carrier," the airline said in an email reply to criticisms published in the Star Daily.

At news conference last week, MAS group CEO Ahmad Jauhari Yahya, said the airline was in the process of exploring options including joint ventures and/or strategic alliances for MASkargo amid the "stubbornly high fuel prices and weak global demand for cargo."

MASkargo contributed 15 per cent of the airline's revenue after passenger operations. The cargo unit has been profitable until last year (FY11) when it reported a pre-tax loss of MYR18.78 million on revenue of MYR2.05 billion, compared with a pre-tax profit of MYR141.71 million on revenue of MYR2.36 billion in the previous year.

MAS had said the cargo division suffered in line with an overall slowdown of the industry globally, as well as due to higher fuel costs and impairment of its A330 freighter fleet.

Source Shipping Gazette - Daily Shipping News

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