KUALA LUMPUR (March 21): Malaysia Aviation Group (MAG) has, for the first time since 2014, recorded an annual net profit. Earnings stood at RM766 million in 2023, 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.

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

"These were achieved despite higher operational and labour costs, a weaker ringgit, challenges in supply chains due to increasing costs and uncertain delivery commitments, fuel prices, and elevated interest rates," MAG group managing director Datuk Captain Izham Ismail said at a press conference here on Thursday.

MAG's main airline, Malaysia Airlines Bhd, achieved an operating profit of RM1.099 billion in 2023, more than 13 times higher than the RM80 million it recorded in 2022, attributable to higher capacity and robust yield amid strong passenger travel demand.

Yearly revenue improved by 45% compared to the year before, underpinned by higher capacity, strong demand, and focus on the international sector for the passenger business segment.

In terms of capacity, the airline business collectively achieved more than 89% across its domestic and international routes. MAB had reinstated 86% of its pre-pandemic capacity as at the end of December 2023, with a targeted full recovery expected by the second quarter of 2024.

Besides MAB, MAG's airlines business also includes Firefly, MASwings, and Amal, the group's haj and umrah pilgrimage arm.

While MAG did not disclose the details, it said Firefly narrowed its losses in 2023, while Amal recorded an improvement in its financial performance from the previous year, with the resumption of haj and umrah travel.

Meanwhile, MAG's cash balance stood at RM4.27 billion at end-December 2023, down 6% from RM4.56 billion a year earlier, due to capital expenditure spending.

"For 2024, we expect cash to remain positive on a daily basis," said Boo Hui Yee, MAG's group chief financial officer.

'MAG to remain profitable in 2024'

Looking ahead, Izham said MAG is poised for a comeback, as the aviation group looks to make 2024 the year of solidifying its credibility. Bolstered by its financial stability, Izham said MAG is now well positioned to reinvest in its cabin’s hard products, enhance its offerings, and execute its fleet expansion strategy.

Boo Hui Yee, Malaysia Aviation Group's group chief financial officer.

"MAG should be profitable this year, unless something serious happens. It could be geopolitics, a fast-track recession, very aggressive overcapacity, or yield collapse, but if we look at what it is in the forecast for 2024, with the current trend, God willing, MAG should achieve another profitable year this year," he said.

While the airline industry has been operating in a high-yield environment over the past two years, with MAG recording a passenger yield of around 34%-40% in 2023, Izham expects passenger yield to moderate this year but remain at double-digits of 14% to 18%, which would still be above 2019 levels, driven by the premium market and changes in consumer behaviour.

Izham said MAG had four priorities underpinning its focus in 2024, which are focused execution in core markets and high-margin products and services, investing heavily for the future through its fleet, customer experience, and its people, rebuilding reputation, and maintaining its profitability despite challenging macroeconomic headwinds.

Challenges for the year ahead include fuel and foreign exchange volatility, interest rate dynamics, the yield environment, and potential decline in the cargo market, Izham explained.