KUALA LUMPUR: Malaysia Aviation Group (MAG) is cautious about its outlook for 2024 despite a successful 2023, due to ongoing challenges such as foreign exchange fluctuations and high fuel prices.
MAG also said initiatives are being implemented to elevate Malaysia Airlines Bhd's status to one of the top 10 airlines worldwide and within the top five in Asia Pacific by 2030.
"We want to narrow the competitive distance with leading regional carriers such as Cathay Pacific, Japan Airlines, Singapore Airlines, Qatar Airways and various other prestigious airlines," said MAG group managing director Datuk Captain Izham Ismail.
Speaking at MAG's financial results briefing today, Izham said Malaysia Airlines' position has dropped down to 47th as the airline was not able to reinvest in its products in the last two decades.
"However, with strong operating performance over the last two years and with accumulation of a strong cash balance, we are able to reinvest into the product that is important to our customers," said the captain.
Izham said although foreign exchange remains a strategic concern, the group refuses to passively accept the depreciating ringgit.
"We have revamped our strategies and navigated around the weaker currency to maintain competitiveness.
"We are aggressively pursuing our international workflow. Over the past two years, we achieved an average of 85 per cent of our top-line revenue from international markets, compared to pre-2015 and pre-2017, where international revenue only accounted for around 50 per cent.
"I am pleased to announce that this strategy serves as a natural hedge on forex. Currently, we hold 42 per cent of our total cash balance in US dollar," he added.
He said MAG will persist in active fuel hedging, spearheaded by its group chief financial officer Boo Hui Yee and her team, with a proactive approach.
"In 2023, our hedging rate was 29 per cent, but currently it stands at 16 per cent, a moving target," he added.
Additionally, Izham said there is no need for the group to require additional shareholders funding.
"MAG has reinvented itself, pulling all the right levers strategically. Moving forward, things will happen differently. Therefore, we were able to sustain operations in 2022 and 2023 without relying on drawdowns.
"The cash balance, totaling RM4.6 billion, is entirely generated from our own operations, through our business," he said.
MAG aims to avoid further drawdowns, as it aspires to maintain a stable position without relying on its sole shareholder Khazanah Nasional Bhd.
"This is how MAG is poised to recover and undergo transformation across various dimensions including business strategies, products, our workforce, culture, and behaviour.
"At the time, there was a commitment from our shareholders, agreed upon by creditors, stipulating that MAG's cash balance must not fall below RM700 million at any given time.
"This condition was widely accepted during the restructuring process. If the cash balance were to dip below RM700 million, shareholders would inject additional funds, and this plan is in effect until 2025," he elaborated.
Izham said based on market assessments, it was estimated that RM3.6 billion might be required.
"To kick start the process, when the restructuring exercise concluded, Khazanah injected the agreed-upon RM1.3 billion," he added.
Regarding dividends, Izham said MAG would eventually be in a position to distribute dividends to shareholders in the future.
"However, there are currently no discussions on this matter. It remains an ideal state," he added.