Malaysia Airlines reported widening losses on Monday and said it would raise a USD$1.1 billion cash lifeline and increase local fares to return to profitability next year.
The airline, posting its third straight quarterly loss for the current financial year, said it needed to raise 4 billion ringgit (USD$1.08 billion) in cash this year to stay afloat and would increase domestic fares for the first time in 13 years.
"There is no doubt MAS is in a crisis within the increasingly challenging Asian airline industry," the airline's new managing director, Idris Jala, said in a statement.
Malaysia Airlines reported a net loss of 616.4 million ringgit (USD$166 million) for the third quarter ended December 31, compared with a profit of 57.62 million (USD$15.5 million) a year earlier. For the first nine months of 2005/06, losses totaled about 1.3 billion ringgit (USD$350.1 million).
"On current business assumptions, course and speed, we will surely fail unless we radically change the way we run our business," Idris said. "I am convinced that with decisive action, MAS can be a success and emerge as a winner.
"We have a plan... that will turn around the business in two years."
He warned that the state-controlled airline would run out of cash by April this year if nothing was done, and said support from the government had been needed to make the necessary changes, such as the 10 percent rise in domestic fares.
"In 2006, we are already undertaking a series of measures to raise 4 billion ringgit (USD$1.08 billion) in cash through internal and external sources to tide us through our current cash crisis," Idris said.
He said last week that Malaysia Airlines' big problem was pricing rather than costs and he explained on Monday that planes were flying full -- but prices had tumbled.
The advent of budget airlines such as Malaysia's AirAsia, which led the way in introducing the low-cost business model to Asia, had hurt the profitability of full-service airlines like MAS, he added.
Idris forecast a loss of 620 million ringgit (USD$167 million) for calendar 2006 -- the firm is moving to calendar-year reporting this year -- before turning in a 50 million ringgit (USD$13.5 million) profit in 2007.
