19 August 2008

MAS, Virgin Blue suffer profit dips

KUALA LUMPUR Ã¢â¬' More grim news from the airlines today.

Malaysia Airlines' second quarter net profit fell 65 percent to RM40 million (US$11.9m) due to higher fuel costs, making this the second consecutive quarterly decline in its net profit.

"As for the second half of this year, it's going to be very tough and only the fittest (carriers) will survive this onslaught," said MAS managing director and CEO, Idris Jala.

MAS' revenue increased eight per cent to RM3.78 billion for the three-month period ended June 30, 2008. Total operating expenditure increased by 10 per cent while capacity decreased by three per cent. Ã¢â¬~¨Ã¢â¬~¨

The carrier said it has no plans to revise its fuel surcharge and will only do so if competitors drop their fuel surcharge and MAS is not able to maintain its passenger load. Ã¢â¬~¨

In Australia, Virgin Blue CEO Brett Godfrey said the high price of jet fuel had eaten into the airline's profits, which were down 54.6 percent from A$215.8 million (US$187.4m) in 2006/07 to A$97.7 million (US$84.8) for the year to June 30.

Also battling headwinds is China Southern Airlines. Chairman Liu Shaoyong said China's airlines are Ã¢â¬Åâœgenerally saddled with three major burdens, including insufficient market demand, fierce competition and high oil price. As such, the group expects to undergo a long period of hardshipÃ¢â¬~.

The Centre for Asia Pacific Aviation said a big concern is the recent depreciation of the yuan. Ã¢â¬ÅâœMuch will depend on the strength of the underlying Chinese economy. If growth does falter and the yuan continues to sink, the last pillar of support for airline earnings in China will fall,Ã¢â¬~ CAPA noted.