HONG KONG -- Malaysia Airlines' recovery is on track as the carrier works toward a target date of March 2019 for an initial public stock offering, chief executive Peter Bellew said Tuesday.
"We made a profit last month," said Bellew, who became chief executive in June, soon after the national flag carrier posted its first monthly profit in several years. "We expect the last quarter this year to be break even or to make a profit across the quarter. Currently I'm projecting to make a profit across next year."
In its update for the July-September quarter, Malaysia Airlines said its operating loss had declined 7% from the previous quarter, without giving specific figures. The International Air Transport Association projected last month that total Asia-Pacific airline profits will decline 13.7% this year to $6.3 billion.
"No airline has been through what we have been through," Bellew said in his speech to an aviation industry group in Hong Kong Tuesday, referring particularly to two fatal crashes the airline experienced in 2014. Officials from Malaysia, Australia and China said in a joint announcement later on Tuesday that the search for flight MH370, which went missing while flying between Kuala Lumpur and Beijing, would be suspended.
A key part of the airline's recovery strategy was to reassure staff that management was committed to pull through, which Bellew, a veteran of Irish carrier Ryanair, said he did by spending days working alongside front-line staff in baggage, maintenance and other departments and taking up the airline's case against fees at Kuala Lumpur International Airport, the airline's hub, which was seen to favor budget carriers unfairly.
Another element was to attract Malaysians back on board with a renewed marketing campaign for the airline. Bellew, who joined as chief operating officer in 2015, has worked to bring back business passengers with a program to upgrade in-flight menus and airport lounges and rebuild ties with travel agents.
About a year ago, Bellew said, the company was flying Boeing 737 jets with only 5-10 passengers on board some flights. On Airbus A380 super jumbo flights to London in November 2015, some flights only carried 50 passengers.
As of last May, the carrier was filling 45% of seats on its London flights. Last month, however, the figure reached 63%. Overall, the company filled 90% of seats in December and 82% in the last quarter, he said. That was up from the 79.3% reported for July-September. Business bookings are running at double year-ago levels, Bellew said.
Malaysia Airlines halted flights to Amsterdam and Paris a year ago, and Bellew does not expect the airline to resume these routes in the next couple of years since round-trip economy flights from Europe are selling for $500. "Really with the fares as low as they are, unbelievably low from Gulf carriers, I think it's going to be very risky for us to do that," he said.
The steep fall of the ringgit against the dollar after the election of Donald Trump as U.S. president in November has increased projected costs for Malaysia Airlines. "Our own budget altered within a week for this year by over $125 million," Bellew said.
Malaysia Airlines was delisted from Bursa Malaysia, the country's stock exchange, when it was acquired by state investment fund Khazanah Nasional at the end of 2014. Bellew said setting a clear target for a March 2019 listing had given focus to the recovery drive. "It's speeding things up," he said. "It's making us do things faster."
Bellew is working on a management succession plan, noting some Malaysians are uncomfortable that the national airline has had two foreign chief executives in a row. He said there was a shortlist of five or six local executives at the company who would be able "to take over from me in a couple years' time."
Looking toward the wider region, Bellew said he expected 4-6 airline groups to emerge with a dominant 80% share of Asian traffic over the next decade, following patterns seen in the U.S. and Europe. He said this could be led by new players, suggesting the possibility of a U.S. investment fund like TPG, which has invested in a number of American airlines, teaming up with Chinese investors.
Part of what he sees driving Asian consolidation is an expected rise in aircraft maintenance costs, as well as overcapacity.
"There definitely is over-ordering of aircraft in the region," he said. "Between Indonesia and Malaysia, there are twice as many aircraft on order than the total of all aircraft on order in China." Malaysia Airlines, however, is not holding back. It placed a firm order for 25 Boeing 737s in July, with an option for 25 more.