Malaysia Aviation Group’s (MAG) post-pandemic balance sheet is healthier than before COVID-19. The company reported a post-tax profit of RM1.146 billionfor the fourth quarter of 2022, its best-ever quarter performance in the past two decades, according to its group chief financial officer Boo Hui Yee.
The cash balance stood at RM4.6 billion at the end of December 2022, and the full-year net loss after interest and tax dropped 79% to RM344 million from RM1.65 billion a year ago. MAG recorded a 272% improvement in EBITDA at RM+1.61bil compared to RM433mil a year ago.
When the pandemic struck in 2020, the Kuala Lumpur-based aviation group had to deal with a monumental loss of revenue stream as aircrafts were grounded, borders were closed, and movement was restricted worldwide.
“It was not business as usual for the group,” Boo said. “Overnight, we had no incoming cash flow to support operational costs and payment obligations. It was an existential crisis.”
The financial turnaround in three short years was an impressive feat. Clearly, the company has an interesting story to share – of how it turned a narrative of loss into one of victory.
Finding its feet
While the global lockdown was in effect, Malaysia Airlines’ planes helped transport stranded citizens from all over the world on rescue and repatriation missions. MASkargo, part of MAG, transported medical equipment and disaster relief supplies to impacted regions.
By October 2020 or seven months into the lockdown, the national flag carrier had operated 218 rescue and repatriation flights through scheduled and chartered services. Over 2,000 tons of ventilators, surgical gloves, sterile isolation gowns, protection suits and other provisions had been delivered by MASkargo for various organisations.
The company had collaborated with embassies, ministries, government agencies and regulatory bodies on these missions. At the backend, a fast-paced financial restructuring was taking place.
“We had to institute stringent cashflow management and seek short-term payment deferments from our major creditors to ensure we have sufficient cash to fund daily operations,” Boo shared, adding that since the end of the pandemic was uncertain, the company had to negotiate rate reduction and payment concessions with its creditors for the next two to three years.
MAG was one of the first aviation groups to embark on a restructuring during the pandemic. This proved to be a challenging feat as MAG has over 75 major creditors/lessors from across the world impacted by the restructuring. So, the aviation group took the bold step of restructuring select international creditors through UK courts under part 26 of the UK Companies Act.
“Our successful restructuring sets a global precedent as it was the first time an airline had used the English courts to reduce its aircraft lease liabilities,” Boo explained.
Established as a holding company by Malaysia's sovereign wealth fund, Khazanah Nasional Berhad, in 2016 following a restructuring, MAG had to rethink its business strategy during the pandemic.
“COVID-19 amplifies existing vulnerabilities in many companies, and for MAG, it was over-reliant on its “passenger flying” business for its revenue stream, the high fixed-cost structure, and under-investment in digitalization,” Boo noted.
From these lessons, the group focused on diversifying its business and reducing/variablizing its costs. And it had to act swiftly.
ATR 72-600 MASwings
Boo shared that as most passenger airlines were grounded during the pandemic, airfreight capacity via passenger airlines became scarce, creating a huge void in airfreight capacity. Seeing this as an opportunity to generate revenue, MAG deployed passenger aircraft to deliver cargo.
“We were the first airline in the region to convert a passenger plane to freight cargo, commonly known as P2C,” she added.
In the third year of the pandemic, the borders slowly started to re-open and flying gradually resumed. However, the group was hit again when the Omicron variant surfaced globally and led to a new outbreak of the virus, an unfortunate resurgence that had been exacerbated by high fuel prices and a weakened currency due to the Russia-Ukraine conflict.
“During this time, the management had to dynamically manage its capacity deployment to ensure we do not burn cash as the cost of operations became very expensive due to high fuel prices and the weakening ringgit [the Malaysian currency],” Boo elaborated.
The finance department had to work collaboratively with other departments in driving dynamic business decisions by providing data insights.
In 2023, the organisation undertook an organisational restructuring to reflect the new focus of growing the non-passenger flying business.
A diversified group
Today, MAG remains a private company with three business segments: the airlines business, which comprises Malaysia Airlines, Firefly, MASwings and AMAL; the aviation services business, which covers maintenance, repair and overhaul, cargo, ground handling and training; and the loyalty and travel solution business, which provides end-to-end travel solutions and loyalty programmes, complementing other areas of its businesses.
Boo Hui Yee
“We managed to overcome the crisis during the COVID-19 pandemic, and came out stronger because we were resilient, agile, innovative and fast in anticipating and reacting to the crisis."
Boo Hui Yee
And even amid this unprecedented crisis, there is room for innovation. In December 2021, Malaysia Airlines operated its inaugural flight using sustainable aviation fuel in partnership with PETRONAS Dagangan Berhad and Neste, demonstrating its commitment to pursue cleaner and more viable energy options for regular flights by 2025. In March 2023, Malaysia Airlines flew an all-women-operated flight from Kuala Lumpur to Kuching to showcase the role of women in aviation.
As the world recovers from the pandemic, the company is committed to continue driving improvements across all its business segments.
“From the board and [the] management’s perspective, uncertainty, volatility and disruptions in the market is the new norm,” Boo noted. “Management will always need to remain resilient and agile in addressing new challenges and headwinds.”
* Editor's notes: This article is part of the Cxociety Coffee Table Book project (The Project) which chronicles the journey and experiences of senior business, operations, finance and technology leaders in Asia in recent years. The Project illustrates the tenacity, ingenuity and resiliency of the human spirit in the face of seemingly endless challenges.
With nearly 50 stories chronicled in The Project, it is a must-read compendium of learnings and experiences from seasoned professionals in the region.
