Datuk Captain Izham Ismail (Photo by Shahrill Basri/The Edge)

KUALA LUMPUR (March 21): Malaysia Aviation Group (MAG), the parent company of Malaysia Airlines Bhd (MAB), is aiming to have its non-airline business contribute 30% of its revenue by 2027, said MAG group managing director Datuk Captain Izham Ismail.

This is part of the group’s efforts to diversify its business risk, given that airlines are vulnerable to a wide range of risks from geopolitical tensions, economic climate to pandemic and regulations.

"Previously, pre-pandemic, I would say 95% of our topline revenue was from our airlines business. So it makes us so vulnerable when there is an economic downturn, [or] another pandemic, so to set up MAG to be future-proof, we embrace that we cannot rely on one basket," he said during a press conference on MAG’s financial performance.

For the financial year ended Dec 31, 2023 (FY2023), MAG's non-airline business contributed about 22% of its total revenue of RM13.85 billion, according to Izham.

MAG posted its first annual net profit in ten years since its reorganisation in 2014. Its net profit came in at RM766 million, compared with a net loss of RM344 million in 2022, driven by robust traffic in the premium segment, active capacity management and stronger yield for the group's passenger segment.

Besides, MAG also attributed the improved performance to its intensified international network flow and deep partnership collaborations.

MAG's non-airline business consist of loyalty and travel services, which include the group's tour operating arm MHHolidays, as well as aviation services such as its cargo arm MASkargo, its maintenance, repair and overhaul (MRO) business led by MAB Engineering, and MAB Academy, which offers education and service training in hospitality and aviation.

Also under its loyalty and travel services, Enrich — MAB's travel and lifestyle loyalty business segment —notched 34% higher year-on-year revenue in 2023, with increased flight redemptions as the group resumes flights to more destinations during the year.

Journify, the one-stop travel and holiday planning app of MAG, delivered higher revenue than its target and recorded 10 million new customer traffic and over 100,000 app downloads since its inception.

Meanwhile, under its aviation services, MAB Engineering continued to gain traction as third party revenue contributed 24% of its revenue. AeroDarat Services, the one-stop centre for ground handling services, on the other hand, recorded an improvement on its financial performance. The number of flights handled was 16% higher in 2023 compared to a year ago.

MASkargo, however, recorded a lower operating profit in FY2023, impacted by further softening of in-freight cargo demand and increased market competition.

In order to maintain its business resilience, Izham said that MASkargo must continue to deliver a strong network. To achieve this, he said that the cargo company is open to new partnerships.

"We need to find a partner, we need to expand ourselves to ensure that we have East and West connectivity to ensure that MASkargo is able to navigate the overcapacity of cargo especially during a global economic downturn," he said.

However, Izham sees an expected decline in global air cargo demand this year caused by the global economic downturn, surge in capacity and demand rationalisation in a post-pandemic landscape.

Besides that, he said another challenge for the cargo business in 2024 is the gradual return of belly-hold cargo, which has pressured air cargo rates downwards.

"Nevertheless, the cargo business is still NIAT (net income after tax)-positive for 2023, and we do forecast 2024 to be a positive year for cargo," Izham added.