page_title: Malaysia Airlines
section_title: 1997–2005: Financial struggles
hierarchical_section_title: Malaysia Airlines / History / 1997–2005: Financial struggles
caption_attribution_description: Old Pictures
context_page_description: Malaysia Airlines Berhad, formerly known as Malaysian Airline System, branded as Malaysia Airlines is the flag carrier airline of Malaysia and a member of the oneworld airline alliance. The company headquarters are located at Kuala Lumpur International Airport. In August 2014, the Malaysian government's sovereign wealth fund Khazanah Nasional—which then owned 69.37% of the airline—announced its intention to purchase remaining ownership from minority shareholders and de-list the airline from Malaysia's stock exchange, thereby renationalising the airline. It operates primarily from Kuala Lumpur International Airport and from secondary hubs in Kota Kinabalu and Kuching to destinations throughout Asia, Oceania, and Europe.
  Malaysia Airlines owns two subsidiary airlines: Firefly and MASwings. Firefly operates scheduled flights from its two home bases Penang International Airport and Subang International Airport. The airline focuses on tertiary cities. MASwings focuses on inter-Borneo flights. Malaysia Airlines has a freighter fleet operated by sister company MASkargo, which manages freighter flights and aircraft cargo-hold capacity for all Malaysia Airlines' passenger flights.
context_section_description: Prior to the Asian Financial Crisis in 1997, the airline suffered losses of as much as RM 260 million after earning a record-breaking RM333 million profit in the financial year 1996/1997. The airline then introduced measures to bring its P&L back into the black. For the financial year 1999/2000, the airline cut its losses from RM700 million in the year 1998/1999 to RM259 million.
  The airline plunged into further losses in the following year, however, amounting to RM417 million for the financial year 2000/2001 and RM836 million for the financial year 2001/2002. With these losses, the airline cut many unprofitable routes, such as Brussels, Darwin, Madrid, Munich and Vancouver. The airline recovered from its losses the following year, achieving its then-highest profit, totalling RM461 million.
  In 2005, MAS suffered yet another period of unprofitability, reporting a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue decreased by RM64.1 million or 4.2%, to RM1.5 billion. Costs increased by 28.8% or RM2.3 billion, amounting to a total of RM 10.3 billion, primarily due to escalating fuel prices. Other cost increases included staff costs, handling and landing fees, aircraft maintenance and overhaul charges, Widespread Assets Unbundling (WAU) charges and leases.
  The Malaysian government then appointed Idris Jala as the new CEO of MAS on 1 December 2005, to execute changes in operations and corporate culture. Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. The most substantial factor in the losses was fuel costs. For the period, the total fuel cost was RM3.5 billion, representing a 40.4% increase compared to the same period in 2004. Total fuel cost increases comprised RM977.8 million due to higher fuel prices and another RM157.6 million due to additional consumption. In the third quarter, fuel costs were RM1.26 billion, compared to the RM1.01 billion in the corresponding period in 2004, resulting in a 24.6% increase or RM249.3 million.
  Another factor for the losses was poor revenue management. MAS substantially lagged its peers on yield. Some of this gap was due to differences in traffic mix, with less business traffic to and from Malaysia than to and from Singapore, but much of it was due to weaknesses in pricing and revenue management, sales and distribution, brand presence in foreign markets, and alliance base. Moreover, MAS had one of the lowest labour costs per available seat kilometres (ASK) at US$0.41, compared to other airlines such as Cathay Pacific and Singapore Airlines at US$0.59 and US$0.60 respectively. Despite low labour costs, however, the ratio of ASK revenue to this cost was, at 2.8, much lower than Singapore Airlines, where the ratio is 5.0, and slightly higher than Thai Airways There are other factors listed in the later-revealed Business Turnaround Plan of Malaysia Airlines, all leading to the net loss of RM1.3 billion in the year 2005.
caption: Malaysia Airlines DC-10-30, a backbone for the medium-long haul expansion of the airline from 1976 till 2000
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