Flagship carrier Malaysia Airlines is planning to purchase 39 new jetliners in an estimated US$1 billion plan to replace nearly half of its fleet, a company executive said.
The plan indicates that Malaysia Airlines hopes to expand its routes and capacity despite rising fuel prices and competition from Asia's emerging low-cost carriers.
The carrier expects to reach a decision by the end of April on possibly buying the planes from Airbus SAS or Boeing Co., Low Chee Teng, chief executive officer of airline operator Malaysian Airline System Bhd., said in a recent interview with Dow Jones Newswires. Passenger comfort and fuel economy were the main reasons to replace the carrier's 39 narrow-body Boeing 737 planes, Low added. Malaysia Airlines has 97 aircraft. The cost of the new narrow-body passenger jet is between US$25 million and US$35 million each, meaning the planned purchase could exceed US$1 billion, Low said.
Malaysia Airlines is also hedging a bigger portion of its fuel needs and refurbishing business and first class seats to raise revenue and enhance its image, Low said. Jet fuel will probably account for more than 30 percent of the carrier's total costs in the fiscal year ending March next year, up from 23 percent in the previous year, he added. Low declined to say how much he expects the higher fuel cost to affect net profit.
Capacity is forecast to rise between 10 percent and 20 percent in the current fiscal year, mostly due to more flights to Australia, China and India, Low said. Those flights have been added despite the fact that low-cost carriers also plan to penetrate markets in China and Australia. Malaysian-based budget carrier AirAsia Bhd. has said it will begin flying to Kunming, China, from Bangkok, Thailand, by the end of this year. Singapore-based Valuair is expected to start flying to Perth, Australia, in early December.