Also from the New Straits Times :
MAS said to be given nod for domestic fare increase
By FAUZIAH ISMAIL and EIRMALASARE BANI
11 June 2001
THE Government is believed to have consented to an increase of up to 30 per cent in domestic airfare so that Malaysia Airlines can return the loss-making sector to profitability. The fare increase, which is crucial to turning around the national carrier, is believed to be only for routes in Peninsular Malaysia.
It will not affect Sabah and Sarawak, sources say.
The 30 per cent increase will see the national carrier breaking even on the loss-making domestic sector for its current financial year ending March 31 2002. The carrier is said to be losing RM320 million annually on domestic operations because of high operating costs, of which jet fuel and kerosene are the largest components. Inefficient route management is also said to be a factor for the losses.
Sources said an announcement is expected "anytime between now and August". The airline has been informed by the Transport Ministry to prepare for the increase in the second quarter of its current financial year. It is understood that the rise has been factored into the airline's projected performance for the current financial year. Sources said the domestic airfares for the First and Business Classes are expected to be raised by 30 per cent. On the Economy Class, the increase will be 10 per cent.
As for Sabah and Sarawak, especially rural air services, MAS is not affected because there is an agreement with the Government that "for any losses made on the sector, the Government will reimburse the same ringgit for ringgit," sources said. MAS managing director Datuk Md Nor Md Yusof, speaking at a briefing recently, said the airline has sufficient grounds to request a rise in domestic airfares as a lot of fundamentals have changed over the past nine years since the fares were last reviewed. "We need cash liquidity and it has to come from revenues," he said when announcing the company's financial results," he said.
MAS recently drew up a comprehensive turnaround programme to be implemented over the next six months to achieve a pre-tax profit of RM341 million and a net income of over RM1.5 billion by the year ending March 31 2004. Analysts believed that MAS has a strong case to argue for the fare increases. "The Government may allow sufficient increases so that the airline's earnings can be more sustainable," one said. The analyst also said an estimate 20 per cent increase in domestic airfares would generate up to an additional RM200 million in revenue, which, under MAS' current tax free status, means the extra revenue should fall direct to the net profit line.
The airline last raised airfares in July 1992 and has been granted only five airfare increases in the last 26 years. MAS' charges for services within the country, on a sen per mile basis, are currently among the lowest in the world, with Economy Class fare out of Kuala Lumpur averaging only 52 sen per mile. On top of that, it offers special fares at a discount of between 15 and 50 per cent. In contrast, flights out of Bangkok cost 59-65 sen per mile; Beijing, Shanghai and Guangzhou 82 sen; Manila 84 sen; New Delhi RM1.15; Ho Chi Minh City RM1.25; and Jakarta RM1.53.
MAS currently operates 49 direct flights a week between Kuala Lumpur and Kota Kinabalu, and 61 between Kuala Lumpur and Kuching. The national carrier also faces competition from regional airline Air Asia, which offers 40 per cent discount on fares currently quoted by MAS.