Malaysian Airlines challenged by rising oil prices and consolidation

KUALA LUMPUR: National carrier Malaysian Airlines (MAS) said Thursday it was tackling the dual challenges of spiralling global oil prices and consolidation in the industry. Managing director Idris Jala told state news agency Bernama rising oil prices may prove a challenge to achieveing its profit targets but will not stop people from flying.

"People will still fly," Jala told Bernama, despite the airline's concern over its profit targets. The airline unveiled ambitious targets in January, saying net profit could hit 1.5 billion ringgit (465 million dollars) in five years as it enters a new growth phase. Last year, it booked a record profit of 851 million ringgit reversing losses in 2006 after sweeping reforms. Jala said the airline hedged 43 percent of its fuel requirements for this year at 89 dollars a barrel, Bernama reported.

MAS has also secured 13 percent of its fuel requirements for 2009 at 95 dollars a barrel, it reported. "I believe that MAS' fuel hedge is competitive," said Jala. Crude oil prices hit a fresh record near 120 dollars a barrel earlier this week amid a weakening dollar and concerns over supply. Jala also told Bernama overcapacity in Asia could accelerate the pace of consolidation in the industry. "Consolidation happens when there is overcapacity. We are looking (at opportunities of possible mergers) but we are not in a hurry," he said.

MAS will be interested in, "any airline that gives us synergy," Jala added.