Malaysia airlines vision and mission
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Malaysian Airline System Berhad Annual Report 04/05 11
(10601-W)
malaysia airlines
vision and mission
Vision
‘An airline uniquely renowned for its personal touch,
warmth and efficiency’
Mission
‘To provide air travel and transport service that rank
among the best in terms of safety, comfort and
punctuality’
2 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
notice of annual general meeting
NOTICE IS HEREBY GIVEN THAT the Thirty-Fourth Annual General Meeting of
Malaysian Airline System Berhad will be held at Nirwana Ballroom 1, Lower Lobby,
Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on
Monday, 19 September 2005 at 10.00 am for the following purposes:-
AGENDA
As Ordinary Business
1. To receive and adopt the Report of the Directors and the Audited Accounts for
the financial year ended 31 March 2005 together with the Report of the Auditors
thereon. Resolution 1
2. To approve the declaration of a final tax-exempt dividend of 2.5 sen per share in
respect of the year ended 31 March 2005. Resolution 2
3. To approve the Directors’ fees for the financial year ended 31 March 2005. Resolution 3
4. To re-elect the following Directors retiring under Article 139 of the Company’s
Articles of Association, and who, being eligible, offer themselves for re-election:-
(i) Dato’ Mohamed Azman bin Yahya Resolution 4
(ii) Dato’ N. Sadasivan a/l N. N. Pillay Resolution 5
(iii) Datuk Abdillah @ Abdullah bin Hassan @ S Hassan Resolution 6
5. To re-elect the following Directors retiring under Article 137 of the Company’s
Articles of Association, and who, being eligible, offer themselves for re-election:-
(i) Dato’ Izzuddin bin Dali Resolution 7
(ii) Dato’ Mohd. Annuar bin Zaini Resolution 8
(iii) Dato’ Zaharaah binti Shaari Resolution 9
Resolution 9
6. To re-appoint Messrs Ernst & Young as Auditors and to authorize the Directors to
fix their remuneration. Resolution 10
As Special Business
7. To consider and if thought fit to pass the following Ordinary Resolution:-
Authority to Allot and Issue Shares
“THAT subject to the Companies Act, 1965 (the Act), the Articles of Association
of the Company, approval from the Bursa Malaysia Securities Berhad and other
government or regulatory bodies, where such approval is necessary, full authority
be and is hereby given to the Board of Directors pursuant to Section 132D of the
Act, to issue shares in the capital of the Company at any time upon such terms
and conditions and for such purposes as the Directors may in their discretion
deem fit, provided always that the aggregate number of shares to be issued shall
not exceed 10 per cent of the issued share capital of the Company and that such
authority shall continue to be in force until the conclusion of the next Annual
General Meeting of the Company.” Resolution 11
Resolution 11
8. To transact any other ordinary business for which due notice has been given. Resolution 12
Malaysian Airline System Berhad Annual Report 04/05 3
(10601-W)
NOTICE OF ANNUAL GENERAL MEETING
NOTICE OF BOOK CLOSURE FOR PAYMENT OF DIVIDENDS
Subject to the approval of shareholders at the Thirty-Fourth Annual General Meeting, a final tax-exempt dividend
of 2.5 sen per share in respect of the year ended 31 March 2005 will be paid on 18 October 2005 to shareholders
whose names appear on the Register of Members and the Record of Depositors at the close of business on 7
October 2005.
NOTICE IS HEREBY GIVEN that the Share Transfer Books, the Register of Members and the Record of Depositors
of the Company will be closed from 8 October 2005 to 11 October 2005 (both dates inclusive) to determine
shareholders’ entitlements to the dividend payment.
A Depositor shall qualify for entitlement only in respect of:-
a. shares deposited into the Depositor’s Securities Account before 12.30 pm on 5 October 2005 (in respect of
shares which are exempted from mandatory deposit);
b. shares transferred into the Depositor’s Securities Account before 4.00 pm on 7 October 2005 (in respect of
ordinary transfers);
c. shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa
Malaysia Securities Berhad.
By Order of the Board
Rizani bin Hassan (LS 05125)
Company Secretary
26 August 2005
Kuala Lumpur
4 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
NOTICE OF ANNUAL GENERAL MEETING
Explanatory Notes on Item 7 of the Agenda
Resolution pursuant to Section 132D, Companies Act, 1965.
The Ordinary Resolution proposed under item 7 of the Agenda, if passed, will empower the Directors to issue
shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company,
subject to compliance with the relevant regulatory requirements. The approval is sought to avoid any delay and
cost in convening a general meeting for such issuance of shares. This authority, unless revoked or varied by the
Company at a general meeting, will expire at the next Annual General Meeting.
Notes:
1. A member of the Company entitled to attend and 5. The instrument appointing a proxy must be
vote at the Meeting is entitled to appoint a proxy/ deposited at Symphony Share Registrars Sdn
proxies to attend and vote in his stead. A proxy may Bhd, Level 26, Menara Multi Purpose, Capital
but need not be a member of the Company and a Square, No 8 Jalan Munshi Abdullah, 50100
member may appoint any person to be his proxy and Kuala Lumpur, not less than 48 hours before the
the provisions of Section 149(1)(b) of the Companies time for holding the Meeting or at any adjournment
Act, 1965 shall not apply to the Company. thereof.
2. In the case of a corporate member, the instrument 6. Shareholders’ attention is hereby drawn to the
appointing a proxy shall be under its Common Seal Listing Requirements of Bursa Malaysia Securities
or under the hand of its officers or attorney, duly Berhad, which allows a member of the Company who
authorised in that behalf. is an authorised nominee as defined under the
Securities Industry (Central Depositories) Act, 1991, 1
3. A holder may appoint more than two proxies to to appoint at least one (1) proxy in respect of each
attend the Meeting. Where a member appoints two securities account it holds with ordinary shares of
or more proxies, he shall specify the proportion of the Company standing to the credit of the said
his shareholding to be represented by each proxy. securities account.
4. The right of foreigners to vote in respect of their
deposited securities is subject to Section 41 (1) (e)
and Section 41 (2) of the Securities Industry (Central
Depositories) Act, 1991 and the Securities Industry
(Central Depositories) (Foreign Ownership)
Regulations, 1996. The position of such Depositors
in this regard will be determined based on the
General Meeting Record of Depositors. Such
Depositors whose shares exceed the Company’s
foreign shareholding limit of 45% as at the date of
the General Meeting Record of Depositors may
attend the above Meeting but are not entitled to
vote. Consequently, a proxy appointed by such
Depositor who is not entitled to vote will also not
be entitled to vote at the above Meeting.
Malaysian Airline System Berhad Annual Report 04/05 55
(10601-W)
statement accompanying the
notice of annual general meeting
Directors standing for re-election at the Thirty-Fourth Annual General Meeting of the Company to be held at
Nirwana Ballroom 1, Lower Lobby, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur
on Monday, 19 September 2005 at 10.00 am are as follows:-
NAME OF DIRECTOR DETAILS OF ATTENDANCE DETAILS OF INDIVIDUAL DIRECTORS
OF BOARD MEETINGS AND OTHER DISCLOSURE
REQUIREMENTS
Dato’ Mohamed Azman bin Yahya
(Article 139 of the Company’s
Articles of Association) 9/11 Refer to page 88 of Annual Report
Dato’ N. Sadasivan a/l N.N. Pillay
(Article 139 of the Company’s
Articles of Association) 11/11 Refer to page 83 of Annual Report
Datuk Abdillah @ Abdullah Bin
Hassan @ S Hassan
(Article 139 of the Company’s
Articles of Association) 9/11 Refer to page 89 of Annual Report
Dato’ Izzuddin bin Dali
(Article 137 of the Company’s
Articles of Association) 4/5 Refer to page 85 of Annual Report
Dato’ Mohd. Annuar bin Zaini
(Article 137 of the Company’s
Articles of Association) 3/3 Refer to page 92 of Annual Report
Dato’ Zaharaah binti Shaari
(Article 137 of the Company’s
Articles of Association) 4/7 Refer to page 93 of Annual Report
General Meeting held during the financial year ended 31 March 2005
THIRTY-THIRD ANNUAL GENERAL MEETING
Date : 13 September 2004
Time : 10.00 am
Venue : Nirwana Ballroom 1
Lower Lobby
Mutiara Hotel Kuala Lumpur
Jalan Sultan Ismail
50250 Kuala Lumpur.
6 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
Malaysian Airline System Berhad Annual Report 04/05 7
(10601-W)
corporate report
Ten-Year Statistical Review of the Group - 8
In A Class Among The World’s Best - 10
Chairman’s Statement - 12
Managing Director’s Report and Review - 26
Corporate Information - 80
Details of Board of Directors’ Meetings - 81
Board of Directors and Profile - 82
Board Audit Committee Report - 96
Statement on Internal Control - 100
Statement on Corporate Governance - 104
Group Structure - 116
Organisational Structure - 118
Management Committee and Profile - 120
Management Team - 128
Corporate Social Responsibility - 132
Corporate Calendar of Events - 138
Employee Calendar of Events - 140
Fleet Status - 142
Route Network - 144
88 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
ten-year statistical review of the group
2004 2003 2002 2001
2005 2004 2003 2002
FINANCIAL*
Total Revenue (RM’000) 11,364,309 8,780,820 8,864,385 8,695,150
Total Expenditure (RM’000) 11,046,764 8,591,157 8,872,391 9,569,435
Taxation (RM’000) (35,707) (117,543) (5,017) (14,898)
Profit/(Loss) after Tax and Exceptional Item (RM’000) 326,079 461,143 336,531 (835,563)
Shareholders’ Funds (RM’000) 3,318,732 3,023,984 2,562,841 1,215,290
Profit/(Loss) as a % of Revenue (%) 2.9 5.3 3.8 (9.6)
Return on Shareholders’ Funds (%) 9.8 15.2 13.1 (68.8)
Earnings/(Loss) Per Share (Sen) 26.0 36.8 38.7 (108.5)
PRODUCTION
Network Size (KM) 504,051 445,263 439,547 453,720
Time Flown (Hours) 411,134 352,540 357,328 340,741
Distance Flown (000 KM) 265,050 227,865 228,762 201,189
Available Capacity (000 TKM) 10,299,867 8,413,110 7,977,845 7,823,943
Available Passenger Capacity (000 Seat KM) 64,115,190 55,692,377 54,265,627 52,594,942
TRAFFIC
Passengers Carried (000) 17,536 15,375 16,325 15,734
Passengers Carried (000 Pax KM) 44,226,090 37,658,910 37,652,955 34,708,514
Passenger Load Factor (%) 69.0 67.6 69.4 66.0
Cargo Carried (000 TKM) 2,686,783 2,184,226 2,071,271 1,759,209
Mail Carried (000 TKM) 3,004 2,840 2,054 2,014
Overall Load Carried (000 TKM) 6,728,547 5,628,573 5,496,735 5,149,942
Overall Load Factor (%) 65.3 66.9 68.9 65.8
STAFF
Employee Strength (As at 31 March) 22,513 20,789 21,916 21,438
Revenue Per Employee (RM’000) 505 422 429 406
Available Capacity Per Employee (TKM) 457,508 404,690 364,019 364,957
Load Carried Per Employee (TKM) 298,874 270,748 250,809 240,225
*As per Audited Financial Statements for the financial year under review
Malaysian Airline System Berhad Annual Report 04/05 9
(10601-W)
TEN-YEAR STATISTICAL REVIEW OF THE GROUP
2000 1999 1998 1997 1996 1995
2001 2000 1999 1998 1997 1996
9,712,097 8,288,273 7,536,510 7,154,024 6,563,799 5,766,365
10,336,829 9,566,041 8,647,874 7,991,746 6,258,561 5,515,895
26,683 18,813 26,961 31,277 15,434 18,131
(417,428) (258,574) (700,051) (259,851) 333,018 247,666
1,252,148 3,222,276 3,496,250 4,211,701 4,486,952 3,685,372
(4.3) (3.1) (9.3) (3.6) 5.1 4.3
(33.3) (8.0) (20.0) (6.2) 7.4 6.7
(54.2) (33.6) (90.9) (33.7) 43.8 33.3
488,243 366,578 361,203 362,997 352,703 353,443
349,352 330,205 306,949 303,569 291,418 279,416
191,668 200,223 189,754 174,659 166,777 156,795
8,054,870 7,531,473 6,649,146 5,528,737 5,246,353 5,381,925
51,237,536 48,905,537 45,442,288 42,293,932 40,096,883 35,161,376
16,745 15,371 13,709 15,117 15,371 14,311
38,312,570 34,930,136 30,592,900 28,698,112 27,903,706 24,565,816
74.8 71.4 67.3 67.9 69.6 69.9
1,837,426 1,664,600 1,477,403 1,005,465 925,227 1,328,061
1,830 2,828 2,006 2,726 3,832 3,299
5,379,101 4,853,377 4,246,894 3,361,408 3,212,436 3,354,670
66.8 64.5 63.9 60.8 61.2 62.3
21,518 21,587 23,076 23,436 22,546 19,925
451 384 327 305 291 289
374,332 348,889 288,141 235,908 232,696 270,109
249,981 224,829 184,039 143,429 142,484 168,365
10
10 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
in a class among the world’s best
“Malaysia Airlines has joined the most exclusive group
of world airlines, being ranked as a 5-Star airline by the
aviation rating organisation, Skytrax. There are just four
airlines in the world that merit this prestigious 5-Star
accolade, and we are delighted to be in this coterie that
represents the very best in air travel today.”
Dato’ Dr Mohd Munir bin Abdul Majid
Chairman
Malaysian Airline System BerhadMalaysian Airline System Berhad Annual Report 04/05 11
(10601-W)
SUMMARY RANKING
Combined Quality of Product / Staff service in airport and onboard
environments
First Class
Business Class
Economy Class
AIRPORT SERVICES
Check-In service - First / Business
Check-In service - Economy Class
Transfer Services - First / Business
Transfer Services - Economy Class
Arrival Services
Business Class Lounge - product facilities
Business Class Lounge - staff service
First Class Lounge - product facilities
First Class Lounge - staff service
ONBOARD FEATURES
Inflight entertainment may vary according to aircraft type
Cabin Safety Procedures
Inflight Entertainment
Amenities, Blankets, Pillows, Towels etc
Airline Magazine, Newspapers & other mags
CABIN SEAT COMFORT
Seating may vary according to aircraft type
First Class - long haul
Business Class - long haul
Business Class - regional
Economy Class - long haul
Economy Class - regional
ONBOARD CATERING
First Class meals - long haul
Business Class - long haul
Business Class - regional
Economy Class meals - long haul
Economy Class meals - regional
STAR RANKING Certification CABIN STAFF SERVICE
Excellent First Class - service efficiency
Good First Class - staff attitude & friendliness
Fair Business Class - service efficiency
Poor Business Class - staff attitude & friendliness
Very Poor Economy Class - service efficiency
N/A not applicable Economy Class - staff attitude & friendliness
U not ranked Responding to Passenger requests
Cabin presence through flights
Assisting Parents with children
Staff Language Skills12
12 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
chairman’s statement
OUR PERFORMANCE IN 2004/2005
An Accolade
Malaysia Airlines has joined the most exclusive group of world
airlines, being ranked as a 5-Star airline by the aviation rating
organisation, Skytrax. There are just four airlines in the world
that merit this prestigious 5-Star accolade, and we are delighted
to be in this coterie that represents the very best in air travel
today.
It is a great honour because it is such a world-class award. The world airline star ranking
programme applies quality assessment for more than 375 airlines across the globe,
rating the standards of each airline’s front-line product and service. This is
predominantly based upon international flight operations. A 5-Star rating testifies
not only to the quality of product Malaysia Airlines provides to customers, but also to
the very high standards of staff service. Malaysia Airlines cabin staff service is renowned
as one of the world’s best - it has the required hallmarks of efficiency, but what sets it
apart is a most distinctive charm and character so reflective of the Malaysian culture.
According to Skytrax, our service philosophy of Going Beyond Expectations is well
portrayed by our front-line staff, and is a defining element of our elevation to 5-Star
airline status.Malaysian Airline System Berhad Annual Report 04/05 13
(10601-W)14 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
I would like to congratulate the management and employees whose professionalism
and dedication to excellence made this great achievement possible. We must seek to
improve on those standards and have them spread more evenly across the network.
Being a 5-star airline reflects our commitment to consistently deliver high standards
of service wherever we are around the world. It also underscores our ongoing efforts
to make Malaysia more attractive to the world as a favourite tourist destination and
our determination to rank Malaysia Airlines top of the class.
Malaysian Economy
In 2004, the Malaysian economy experienced its most rapid growth in four years,
expanding as a result of robust growth in both global trade and domestic demand.
Real gross domestic product (GDP) increased by 7.1 per cent in 2004 against 5.3 per
cent in 2003, the fastest growth since 2000. Growth was led by the private sector
while the Government made further progress in fiscal consolidation. The services sector
recorded a stronger growth of 6.7 per cent in 2004. Expansion was driven mainly by
higher consumer spending as a result of rising disposable incomes, higher tourist arrivals
and increased trade-related activities that were spurred on by a buoyant export
performance.
While growth was positive in 2004, the business landscape was also increasingly being
reshaped and transformed by the rapid pace of globalisation, market liberalization
and advances in technology. On the global front, there were notable shocks to the
world economy in 2004, namely, high oil prices, revival in inflationary pressures,
tightening of the global monetary cycle, measures to reduce overheating in the People’s
Republic of China, sporadic outbreaks of avian flu and the effects of the tsunami in
December.
Although the Malaysian economy remained resilient, most businesses focused on
innovating and improving to compete in the rapidly changing global environment.
A Good Basis, But ...
Malaysian Airline System Berhad (Malaysia Airlines/the Company) had initiated a
strategic move three years ago with the implementation of the Widespread Asset
Unbundling (WAU) exercise in November 2002 which brought Malaysia Airlines back
to good and strong financial standing. This has to be followed through, as was the
plan, with high level operating performance to ensure and sustain earnings.
The strong balance sheet, in other words, has to be matched by operational efficiencies
that deliver excellent financial result. We have other strengths too, such as
acknowledged world-class air travel service quality, from which to leverage strong
operating performance, but there are many areas of doing business which we can
improve upon in the challenging airline industry.
Let me now present the highlights for the Company in the financial year ended 31
March 2005.Malaysian Airline System Berhad Annual Report 04/05 15
(10601-W)
CHAIRMAN’S STATEMENT
FINANCIAL PERFORMANCE
Revenue
Malaysia Airlines’ total revenue in 2004/2005 improved by RM2.6 billion to RM11.4
billion due primarily to the record 24 per cent increase in international passenger
traffic growth of 1.7 million passengers and a 21 per cent increase in cargo tonnage
flown. International passenger revenue grew by 29 per cent to RM7.9 billion while
cargo revenue increased by 44 per cent to RM2.4 billion.
Operating Expenditure
The Group’s total operating expenditure however increased by 29 per cent or RM2.4
billion to RM11.0 billion, primarily due to the RM1.5 billion increase in fuel cost which
rose sharply and became a major concern during and as the year ended, and to a
significant extent also to network expansion that covered new destinations. Total
passenger traffic which rose to 17.5 million compared to 15.4 million in the previous
year, reflecting a 14.1 per cent increase, further contributed to the increased operating
expenditure.
Profit
Profit before tax (PBT) for the financial year ended 31 March 2005 improved to RM364.5
million from the RM345.2 million registered in the previous year. Profit after tax (PAT)
registered RM326.1 million, a decrease from RM461.1 million recorded in the previous
year. The previous year’s PAT included a deferred tax asset of RM127.3 million.
Dividend
The Board has proposed for shareholder approval
at the Thirty-Fourth Annual General Meeting a final
dividend of 2.5 sen per share (tax-exempt). This
translates into a gross dividend payout ratio of 13.3
per cent for the year compared to 9.4 per cent in
the previous financial year. This is the second
consecutive year a dividend has been declared for
Malaysia Airlines shareholders. The dividend will
be paid on a date to be determined.16 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
Earnings Per Share
For the year under review, Malaysia Airlines registered basic earnings per share of
26.02 sen compared to 36.80 sen in the previous year.
Financial Position
As at 31 March 2005, the cash balance at Malaysia Airlines improved to RM2.19 billion.
The primary use of cash during the year was to finance capital expenditure that included
investments to improve product and service standards, and improvements to various
operational and support service systems.
Shareholder Funds
During the year, shareholder funds at Malaysia Airlines increased by 10 per cent to
RM3.3 billion.
Assets
Total assets increased by 12 per cent to RM7.4 billion while net tangible assets per
share rose 10 per cent to RM2.66 per share.
Total assets increased by 12 per cent to
RM7.4 billion while net tangible assets per
share rose 10 per cent to RM2.66 per share.Malaysian Airline System Berhad Annual Report 04/05 17
(10601-W)18 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
THE AIRLINE INDUSTRY
Big Business
The global airline industry is big business. Airlines the world over, employ 4 million
people and generate US$400 billion in economic output. While this is a colossal sum,
losses between 2001 and 2004 exceeded US$36 billion. According to an International
Air Transport Association (IATA) report, the industry is expected to lose another US$6
billion in 2005. The extraordinary price of fuel is affecting profitability. The latest rise
in oil prices in June 2005, taking the price of a benchmark barrel past the US$60 mark
for the first time, is having an impact on airline ticket prices as carriers slap on fresh
fuel surcharges. Many airlines are also increasing their freight charges. The increase in
fuel costs has indeed had a dramatic impact on the bottom line of airlines as fuel
represents an average of 20 per cent of their overall costs. Last year alone, the industry
lost US$4.8 billion.
However, regional differences are astonishing. For example, North American carriers
lost US$9 billion. Efficiency gains could not make up for structural problems. Labour
costs remained high and low cost competition at major hubs drove yields down.
European carriers posted a profit of US$1.4 billion. Yields were better and consolidation
helped capacity management. Middle Eastern carriers made US$100 million. Strong
traffic growth led to profitability but the economics of matching capacity to demand
is a challenge for this region. Latin American carriers were near break-even. The
situation is changing fast with some of the region’s airlines making money, but a large
number are technically bankrupt. African airlines were reported to have lost over
US$150 million. This region has major safety problems and is not investing in
infrastructure. Asian carriers on the other hand posted a hefty US$2.6 billion in profit.
Strong growth fuelled by China and low labour costs were the competitive advantage.
India may be the next great market for the industry.
Overall, during the year under review, the global airline industry saw positive
developments. Air transport has never been safer with over 1.8 billion passengers
flying safely. Indeed 2004 was the airline industry’s safest year. Airlines are
environmentally responsible with modern aircraft having a fuel efficiency of 3.5 litres
per 100 passenger kilometres, the same as a small compact car. More people than ever
are flying with new business models meeting consumer expectations for lower airfares.
And airlines are vital to the global economy. The airline industry makes global business
possible. Forty per cent of the value of goods traded in the world, are flown on aircraft.
Without air transportation, you would have a different world.
Closer To Home
Our financial year saw the travel industry rebounding strongly with the return of
traffic into the region following the scare of SARS in 2003. Economically, China
continued to dominate, providing much of the optimism in Asia. Forecasts from leading
sources agreed that Asia, particularly China and India will fuel much of the economic
expansion in the region with traffic growth projected to be at 2 percentage points
above the world’s average of 5 per cent. The promise of good profitability was, however,
dampened by the unprecedented high fuel prices which have been soaring.Malaysian Airline System Berhad Annual Report 04/05 19
(10601-W)20 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
CORPORATE DEVELOPMENTS
On 4 October 2004, Malaysia Airlines and Asset Global Network Sdn Bhd (AGN) agreed
to end the conditional reimbursement agreement dated 26 March 2003 for the
reimbursement of Subang Complex A buildings. The deposit of RM1.0 million was
refunded by the Company and AGN was also reimbursed RM580,000 for the cost
incurred.
The Board of Directors approved on 2 February 2005 that the financial year end of
Malaysia Airlines after 31 March 2005, be changed to 31 December effective 2005, to
be co-terminous with that of the ultimate holding company, Khazanah Nasional Berhad,
and to comply with Section 168(1) of the Companies Act, 1965.
HUMAN CAPITAL AND PRODUCTIVITY
During the year under review, productivity at Malaysia Airlines saw a 19.5 per cent
increase to RM504,789 per employee compared with RM422,378 per employee recorded
in the previous year. This is a result in the right direction, even if there is room for
improvement.
The Company continues to develop its human capital through investments in relevant
training programmes and has also implemented a career development and succession
planning system. In addition, Malaysia Airlines also intends to increase the supply of
its pilots and ground engineers to ensure a continuous and sufficient availability for
the current and future requirements of the business, bearing in mind the problems
faced in this area in the past year.
Your Company will continue to implement measures to develop its human capital and
to ensure organisational readiness in realising business objectives.
CORPORATE GOVERNANCE
To protect and enhance shareholder value, the Board of Directors remains committed
to ensuring that the highest standards of corporate governance are observed
throughout the Company and Group as an imperative part of discharging its
responsibilities. In a separate chapter of this Annual Report, a comprehensive disclosure
on corporate governance by Malaysia Airlines is presented.Malaysian Airline System Berhad Annual Report 04/05 21
(10601-W)
CHAIRMAN’S STATEMENT
CORPORATE SOCIAL RESPONSIBILITY
At Malaysia Airlines, we recognise the need to strike a harmonious balance between
private sector pursuits and community pursuits – both of which provide the combined
force that wins not only customer loyalty and support, but also the support of the
world community at large.
A full and dedicated report on our corporate social responsibility pursuits is outlined
in a separate section of this Annual Report.
COLLABORATION
During the year under review, Malaysia Airlines entered into partnerships with two
leading international Maintenance, Repair and Overhaul (MRO) operators, Leading
Edge and Aviation Partner Boeing. The collaboration with Leading Edge will offer
specialised boutique external aircraft painting services. The tie-up with Aviation Partner
Boeing will offer installation of fuel-saving wing extension (winglets) services on Boeing
737 aircraft.
The development of the MRO activities are synergistic to current operations and will
support the government initiative to transform Subang into a regional hub for MRO
activities.22 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
AWARDS
During the year under review, Malaysia Airlines was honoured with the World’s Best
Cabin Staff Award for 2004 for the fourth consecutive year by Skytrax of London. The
award recognizes Malaysia Airlines as an airline that fulfils the sincerity, warmth,
friendliness, attentiveness, efficiency and overall best services criteria that passengers
seek in an in-flight experience. Skytrax also awarded Malaysia Airlines with a third
placing for best on-board catering in the economy class category for 2005.
In a web-based poll by Smart Travel Asia in 2005, Malaysia Airlines emerged number
one in the category for Favourite Airline Food.
In March 2005, our freighter division MASkargo received two international standards
certification from SIRIM QAS International (SIRIM). The two certificates are the OHSAS
18001:1999 for MASkargo’s Advanced Cargo Centre (ACC) in KLIA, and the ISO
9001:2000 certification for the Penang Cargo Centre (PCC) facility. MASkargo was the
first airline to receive the OHSAS 18001:1999 certification.
During the year, MASkargo was also recognised as ‘Asia’s Top 3 Air Cargo Carrier’ for
a third consecutive year during the Asian Freight & Supply Chain Awards ceremony
organized by Cargonews Asia.
In the Asia Money-Malaysia “Best Managed Company” polls for 2004, Malaysia Airlines
emerged as Most Improved Investor Relations Company, a joint first for Most Improved
Annual Report, a joint second for Best Annual Reports, a joint second for Best Chief
Financial Officer conferred on Mr Low Chee Teng and a joint second for Best Investor
Relations Officer conferred on Mr Senthil Balan Danapalan.
Malaysia Airlines was also listed within the top 5 in the Best Investor Relations category
in the FinanceAsia Best Companies Poll 2005 for Malaysia.
Malaysia Airlines front-line crew showed remarkable product skills and effort in raising
the profile of in-flight merchandise selling and marketing by winning the Best In Product
Knowledge Award in the In-flight Sales Person of the Year (ISPY) 2004 competition
held in London. This effort had contributed to a 38 per cent increase in the overall in-
flight sales for the Company in the last financial year.Malaysian Airline System Berhad Annual Report 04/05 23
(10601-W)
CHAIRMAN’S STATEMENT
PROSPECTS
China, India and ASEAN will be the focused markets of our capacity growth in 2005 as
up to five additional long range narrow-bodied aircraft are planned to be leased in
the last quarter of 2005.
Competition, however, will remain strong as airlines continue to inject additional
capacity with delivery of new aircraft and more low cost carriers poised to be launched
this year in this region. New traffic rights granted by China and India to the United
Kingdom, Europe, Canada and the United States will result in greater capacity and
frequencies being redirected by European and North American carriers to Asia.
According to IATA, traffic demand is expected to remain buoyant in Asia Pacific. The
forecast growth is above 6 per cent for 2005 despite slightly lower economic growth
and capacity expansion. The Pacific Association of Travel Agents (PATA) has forecast
even higher visitor arrivals in Asia Pacific averaging 10.6 per cent per annum until
2007.
The Company will continue to broaden regional cooperation through collaboration
with other full service carriers within the region. During the year, Malaysia Airlines
forged collaborations with Singapore Airlines, Silk Air and Korean Air.
The Malaysia Airlines Travel Fair (MASTF) generated RM115 million in February 2005
and will continue to be an annual event for distribution. The Company will also
continue to diversify its distribution channels to increase its market reach and enhance
its customer loyalty and ownership. The Internet booking facility (IBF) will continue to
be enhanced with global partnerships, such as the recent tie-up with GRS Networks in
May 2005.
The ongoing upgrading of the First and Business Class cabins of the B747-400 and
B777 fleet, the re-branding of the front-end experience coupled with the new
advertising campaign will help strengthen Malaysia Airlines’ competitive position this
highly competitive year.
The uncertainties surrounding the US currency, instability in the Middle East, higher
interest rates, slower economic growth in Asia Pacific, high fuel prices and strong
demand for technical crew and engineers are the key concerns of the airline industry
presently. Slower demand for cargo space and increase in available capacity in the
market will result in pressure on yields. Make no mistake, 2005 will be a challenging,
potentially difficult year.24 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
CHAIRMAN’S STATEMENT
On a brighter note, the Malaysian government has revised upward its projected tourist
arrivals for this year from 16.6 million to 20 million. Malaysia Airlines is tapping this
growth forecast.
The Company hopes to exploit the various opportunities in China and India. In 2005,
Malaysia Airlines intends to reinforce its presence and expand further into China and
India, to include Shengyang, Chongqing, Fuchou, Haikou, Amritsar, Cochin, Trivandrum
and Trichi. In the same period, Malaysia Airlines proposes to increase its capacity into
Guangzhou, Hyderabad, New York and Stockholm, and its frequency into Singapore.
Within China and India, our expansion strategy is designed to ensure we reach the
various lucrative points there. Malaysia Airlines currently operates into all key metro
points in China and India. We will continue to expand into key secondary points in
China and India to further tap these growing markets.
In spite of high fuel prices, heightened competition from full service carriers and
increasing proliferation of low cost regional carriers, the Company continues to remain
committed to improving and growing from our current position. Our network
expansion strategy is focused on strengthening our regional connectivity to grow and
feed our international network, without taking our eye off cost and return. Malaysia
Airlines is focused on ensuring that the upgrade of its product and service standards
translate into further improvements in yield, seat factor, customer loyalty and overall
revenue performance.
Malaysia Airlines will also continue to look at its operations as a whole and increase
efficiencies and productivity of our existing resources to drive cost savings. During the
year, fuel cost as a percentage of total cost increased from 27 per cent to 34 per cent.
The fuel surcharge and hedging of fuel requirements will continue to provide a cushion
to the Group’s performance, although they cannot fully meet the punishing cost
imposition.
The Company will take all measures to adapt to the high fuel price environment to
protect our financial position and performance while maintaining our competitive
position. We have a commitment to manage our responsibility to both shareholders
and customers alike.Malaysian Airline System Berhad Annual Report 04/05 25
(10601-W)
CHAIRMAN’S STATEMENT
APPRECIATION
As always, I am extremely grateful to the many loyal and valued customers for their
support in flying Malaysia Airlines. Your allegiance and the valuable feedback offered
have helped the Group to better serve customers. Malaysia Airlines’ performance for
the year ended 31 March 2005 would not have been what it was if not for the continued
confidence in our brand. For this, I wish to thank you very much.
To our shareholders, travel agents, service subscribers, suppliers and contractors, the
Government and all stakeholders involved in the performance of Malaysia Airlines, I
would also like to express my appreciation and gratitude for your contribution and
support in making it another good year for Malaysia Airlines.
I would like to thank Dato’ Gumuri bin Hussain and Dato’ Zaharaah binti Shaari who
resigned as directors with effect from 16 August 2004 and 2 November 2004 respectively
for their invaluable contributions.
I would like to welcome Dato’ Izzuddin bin Dali, Tengku Azmil Zahruddin bin Raja
Abdul Aziz and Dato’ Mohd Annuar bin Zaini who have been appointed to the Board
with effect from 13 September 2004, 23 August 2004 and 2 February 2005 respectively,
and look forward to their contributions. I am also pleased to welcome back Dato’
Zaharaah binti Shaari who rejoins Malaysia Airlines as a director effective 18 July 2005.
In closing, the performance of Malaysia Airlines has again been driven by the dedication
and commitment of the management and employees. I wish to record my gratitude to
them, and look forward to their full support in the coming challenging year.
Dato’ Dr Mohd Munir bin Abdul Majid
Chairman
18 July 200526
26
Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
managing director’s report
and review
OVERVIEW
The year ended 31 March 2005 was another great year
for Malaysian Airline System Berhad when the Company
reported a profit after tax (PAT) of RM326.1 million
achieved on the back of a RM11.4 billion turnover, a
29.4 per cent increase over the RM8.8 billion turnover
reported in the previous year.
It was also a period when we were measured for our very high staff service standards
as well as enhanced product levels being offered by the airline. As a result, Malaysia
Airlines was elevated to a 5-star status by Skytrax in June 2005. This prestigious
conferment confirms that our formula for excellence works. Indeed everybody at
Malaysia Airlines is proud of this elevation as we are among only four in the world to
be in this class. A detailed profile of our ranking is outlined in this report.
Great effort continues to be made towards our ultimate goal of positioning Malaysia
Airlines as a truly global brand. The airline is uniquely renowned for its personal touch,
warmth and efficiency. Indeed, our customers bear testimony that Malaysia Airlines is
going the extra mile to provide air travel and a transport service that rank among the
best in terms of safety, comfort and punctuality.
During the year under review, Malaysia Airlines delivered on its brand promise in
Going Beyond Expectations. And I am pleased to report on our many initiatives and
endeavours that helped build a great airline to be among the top four in the world.Malaysian Airline System Berhad Annual Report 04/05 27
(10601-W)28 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
GOING BEYOND EXPECTATIONS
As at 31 March 2005, the total fleet size at Malaysia Airlines was 111 comprising 50
wide–bodied and 54 narrow-bodied passenger aircraft, and seven wide-bodied B747-
200 freighters. It was this magnificent fleet that afforded Malaysia Airlines the golden
opportunity to report a profitable year. This fleet size represented a net increase of
two wide-bodied aircraft over the previous financial year. The Company took delivery
of two B777-200 aircraft from Boeing on 22 November and 13 December 2004. One
A330-300 was leased from ILFC on 17 May 2004.
To ensure the highest standards of customer satisfaction, emphasis on maintaining
on-time departures, minimal delays and the reduction in mishandled passengers were
undertaken at our main hub at the Kuala Lumpur International Airport (KLIA). In all
three aspects, satisfactory performance was achieved despite the substantial increase
in flights out of KLIA.
As our customer service operations expanded to cope with the higher passenger load
and additional flights, our operational budget also increased. The total operating
expenditure expanded by RM28.5 million to RM249.5 million during the financial year
under review. This 12.9 per cent increase was attributed to higher staff costs, hire and
maintenance of equipment, passenger layover and delay costs, other passenger sales
expenses, and other expenses. These costs were necessary to enable Malaysia Airlines
to uplift 17,535,823 passengers, an increase of 14.1 per cent from the previous year.
Revenue from cargo and traffic handling increased by 30.5 per cent to RM42.4 million
during the year under review. The higher traffic handling was due to the increased
frequency by customer airlines, and the addition of new airlines. As the KLIA operator
Malaysia Airports Berhad and the government continue to woo more airlines to
subscribe to KLIA as its hub, Malaysia Airlines expects a further boost to our revenue
from customer airlines in the next financial year.
The Company’s strategy to pamper our customers with new offerings in our products
and services continued with the introduction of new menus. Even new menus designed
for the children that fly Malaysia Airlines, were introduced. Advanced in-flight
entertainment (IFE) systems to complement the installation of new sleeper beds on
our wide-bodied fleet were also introduced. Additional enhancements for our in-flight
services will be the introduction of new dinnerware, cutlery, glassware, linen and seat
comfort items. Our enhanced products and services will enable Malaysia Airlines
passengers to enjoy facilities and amenities that are on par or above that of our
competitors.
In our efforts to enhance service quality, Malaysia Airlines is now participating in the
IATA Global Airline Performance (GAP) survey. For the period from July to September
2004, in terms of “overall rating on airline performance” on the Europe-Asia routes,
Malaysia Airlines achieved third position amongst the airlines. In terms of the airline
lounge, Malaysia Airlines emerged top in the first and business class lounge category
on the Europe-Asia routes.
A commitment to excelMalaysian Airline System Berhad Annual Report 04/05 29
(10601-W)30 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
THE FULL REVIEW OF OPERATIONS OF MALAYSIA AIRLINES
Flights Handled
During the year, Malaysia Airlines managed a total of 179,715 flight
departures system-wide compared to the previous year of 166,025 flight
departures system-wide. Malaysia Airlines at KLIA handled a total of 46,732
flight departures, an increase of 10.8 per cent as compared to the previous
year, and also an increase of 4.9 per cent from the estimated flights handled
for the year 2004/2005.
Malaysia Airlines has also managed to handle the increasing frequency of
customer airlines, both existing and new, such as First Cambodia Airlines,
Lufthansa, China Eastern Airlines, PT Riau and Shenzen Airlines.
On Time Performance
On time performance for Malaysia Airlines flights recorded an average of
86.8 per cent for international flights and 90.5 per cent for domestic flights.
Malaysia Airlines managed a total of 179,715 flight
departures system-wide compared to the previous
year of 166,025 flight departures system-wide.Malaysian Airline System Berhad Annual Report 04/05 31
(10601-W)
A statement of pride32 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
In the year 2004/2005, the system-wide passenger uplifted
increased by 14.1 per cent to 17,535,823 passengers as
compared to the previous year.Malaysian Airline System Berhad Annual Report 04/05 33
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
Passengers Handled By Malaysia Airlines
In the year 2004/2005, the system-wide passenger uplifted increased by
14.1 per cent to 17,535,823 passengers as compared to the previous year.
The increase in the number of passengers was partly due to the higher
number of flights handled as a result of an expansion of current routes
and the launching of new destinations. Malaysia Airlines at KLIA recorded
6,621,300 passengers uplifted, an increase of 14.6 per cent compared to
the previous year.
Integrated System For Regulatory Compliance
Passenger clearance through the immigration at their arrival destination
was also part of Malaysia Airlines’ concern. In view of the strict border
controls, Malaysia Airlines as with other airlines, was also being subjected
to the stringent regulatory ‘Advance Passenger Processing’ (APP)
requirement.
The Company is in compliance with the Australian APP and New Zealand
‘Advance Passenger Screening’ (APS) through the integrated functions
implemented within the Departure Control System applications in early
2004. For the Australian APP, Malaysia Airlines achieved the highest
compliance level of 98 per cent. Indirectly, passengers can be processed
speedily at the immigration checkpoints as their data have been pre-
verified and captured by the authorities.34 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
Malaysia Airlines Travel Fair
The Company scored yet another success with its second Malaysia Airlines Travel Fair
held in February 2005 that attracted an overwhelming 180,000 visitors and generated
a turnover of RM115 million in ticket sales, excluding our packages. The Company
intends to use this event as a platform to raise the Malaysia Airlines brand awareness.
The Company will explore opportunities of replicating the travel fair initiative in
selected international markets.Malaysian Airline System Berhad Annual Report 04/05 35
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
A challenge to embrace
The Company scored yet another success with
its second Malaysia Airlines Travel Fair held in
February 2005 that attracted an overwhelming
180,000 visitors and generated a turnover of
RM115 million in ticket sales, excluding our
packages.36 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
INNOVATING FOR COMPETITIVE ADVANTAGE
New Service Delivery
In line with the cabin upgrade for First Class/Business Class on B747/B777 aircraft, total
change of equipment of dinnerware, cutlery, glassware, linen and seat comfort items
were introduced on two B747 aircraft and on five B777 aircraft under phase one.
From 29 March 2005 the new service delivery was introduced on the Kuala Lumpur/
London/Kuala Lumpur and Kuala Lumpur/Sydney/Kuala Lumpur sectors using the
retrofitted B747 aircraft. At the same time, the new service delivery was also introduced
on the Kuala Lumpur/Zurich/Kuala Lumpur sector using the retrofitted B777 aircraft.
This new service delivery was also extended to the Kuala Lumpur/Sydney/Kuala Lumpur
non-stop B777 flights from 1 May 2005 and to the Kuala Lumpur/Tokyo/Kuala Lumpur
non-stop flights effective 18 May 2005.
Under phase two, the new service delivery will be further extended to the Kuala
Lumpur/Manchester/Kuala Lumpur and the Kuala Lumpur/Amsterdam/Kuala Lumpur
B747 flights effective July/August 2005.
In-flight Entertainment (IFE) Upgrade on B747 and B777 with Matsushita
System 3000i
Malaysia Airlines is expected to lead in its delivery of top of the line high quality in-
flight entertainment system with the Matsushita System 3000i. Our valued customers
will now have digitized on-demand audio and video media on all classes. The other
features of the system include new games, SMS, interactive flight information and pc
laptop power.Malaysian Airline System Berhad Annual Report 04/05 37
(10601-W)
MANAGING DIRECTOR’S REPORT AND REVIEW
IFE Re-Branding
To ensure a consistent look and feel, Malaysia Airlines revamped its interactive screen
designs, navigation and entertainment guide for all IFE systems. This exercise was
implemented in December 2004.
Better Reading Pleasure
Our in-flight magazine Going Places was revamped with a trendier look and feel, with
more feature articles and better pictures. The first issue with the new design layout
and concept was distributed on board our aircraft in August 2004. There has also been
a review of the current in-flight reading materials to accommodate the demand for
more variety.
Kerb Side Drop Off Facility
At KLIA, a new Kerb Side Drop-off and Front-end Check-in services have been
introduced. The Kerb Side Drop-off provides our premium class passengers with a
designated drop off point at the departure lane in KLIA with porter service to assist in
the baggage handling.
A statement of pride38 Malaysian Airline System Berhad Annual Report 04/05
(10601-W)
A promise to be better
EXTENDING HORIZONS FOR MARKET REACH
Destinations
As at 31 March 2005, the Malaysia Airlines global network comprised 32 domestic and
86 international destinations. Of the 86 international destinations, 17 were operated
in collaboration with our airline partners.
The Network Strategy
The strategic focus during the year under review was to build a viable and sustainable
network while focusing on capturing our share of the Asian market. Efforts were
aimed at increasing our market span into India and China and improving market
penetration through frequency increases in ASEAN, North Asia and the Middle East.
Highlights of Network Changes
North America
The 3x weekly services to Newark via Dubai were rerouted via Stockholm effective 1
November 2004 to improve the viability of the Newark service and to cater to the
growing outbound Scandinavian market.
United Kingdom
The 4x weekly Kuala Lumpur-Manchester return B747 services were retimed to depart
Kuala Lumpur in the morning instead of evening in order to provide connectivity for
the Brisbane, Sydney and Melbourne morning arrival services. Manchester Airport
Authorities offered reduced charges on landing, parking, and passenger handling for
these arrivals, giving Malaysia Airlines also the benefit of such incentives.Malaysian Airline System Berhad Annual Report 04/05 39
(10601-W)
Continental Europe
For Europe, the services to Paris were increased from 3x to 5x weekly effective 1 May
2004 while the 7x weekly services to Frankfurt were rescheduled as 4x weekly Kuala
Lumpur-Frankfurt return and 3x weekly Kuching-Kuala Lumpur-Frankfurt return from
Northern Summer 2004.
The 3x weekly Kuala Lumpur-Vienna return services that were suspended in 2003 were
reinstated in Northern Summer 2004. Stockholm was introduced as a new destination
replacing Dubai in the rerouting of the Newark flight.
The total weekly frequencies to Continental Europe were increased from 24x weekly
to 28x weekly in Northern Summer 2004 and to 31x weekly in Northern Winter 2004
with the operation of the 3x weekly Kuala Lumpur-Stockholm-Newark return on B777.
Australia/New Zealand
To strengthen our position in Australia, the services to Sydney and Melbourne were
increased and rescheduled to operate 14x weekly to each destination. In addition, the
3x weekly A330-200 Kuala Lumpur-Brisbane return and 3x weekly B747 Kuala Lumpur-
Brisbane-Auckland return services were rerouted as 5x weekly B777 Kuala Lumpur-
Brisbane return in Northern Summer 2004 and a sixth Brisbane service on day 7 was
introduced in Northern Winter 2004. For Kuala Lumpur-Auckland return, the services
were increased to daily from 1 May 2004 with 3x weekly operated on B747 and 4x
weekly on B777.
Japan
The 3x weekly Kuala Lumpur-Nagoya services were increased to 5x weekly effective
18 February 2005 and the 5x weekly Kuala Lumpur-Osaka services were increased to
7x weekly with the introduction of 2x weekly Kuala Lumpur-Kota Kinabalu-Osaka
return services in Northen Summer 2004. Meanwhile, the Kuala Lumpur-Fukuoka return
services which were suspended from 15 May 2003, were reinstated on 9 November
2004 with 3x weekly services.You can also read
