Malaysia Airlines Plans Aircraft Orders

Loss-making Malaysia Airlines is waiting for government approval to place a multi-billion dollar order for up to 100 Airbus and Boeing passenger aircraft, two people familiar with the negotiations told Reuters, a move aimed at boosting its profitability.

The new aircraft will lower the airline's operating costs by allowing it to retire its older, less fuel-efficient aircraft. That may help it cope with intense competition at home and within Southeast Asia, the people said.

Malaysia Airlines (MAS) has 88 aircraft in its fleet, including Airbus A330s and A380s, and Boeing 777-200s and 737s, according to its website.

It plans to initially order around 30 widebody aircraft, including Airbus A330s and A350-900s, to replace its older Airbus A330s and Boeing 777-200s over this decade. It could also order either the Boeing 787-10 or the Airbus A350-1000 for its fleet beyond 2020, one of the people said.

MAS is keen to begin taking delivery of some aircraft from 2016, which means that it could meet part of it requirements from leasing companies, the sources said.

While the airline considered adding one or two more A380s to the six in its fleet, it has decided that twin-engined widebody aircraft are its priority.

MAS, which operates Boeing 737-800s for its short haul and regional services, is also looking at an order for the 737 Max to replace the older planes in its fleet.

A Malaysia Airlines spokesman was not immediately available for comment and the people familiar with the order declined to be named as the details were confidential.

INCREASED COMPETITION

The airline believes the fuel efficiency and lower maintenance requirements of the new aircraft will help it cut costs. It will also be able to fly more passengers and reach new destinations with the planes, potentially raising revenues.

On Tuesday, the airline reported a net loss of 343.4 million ringgit ($104.23 million) in the October-December 2013 period, its fourth consecutive quarterly loss. Its full year losses were nearly three times higher than in 2012 at 1.17 billion ringgit.

"Malaysia Airlines expects the business environment to remain challenging with high fuel prices, volatile foreign exchange and intense competition impacting yield from both existing as well as new entrants into the market," the airline said in a statement.

"The significant increase in capacity, especially the continued expansion of Middle Eastern and European carriers into our region, is adding further competition to the already crowded marketplace."

The airline faces stiff competition at home from low-cost carrier AirAsia on the short-haul and domestic segments, and from AirAsia X in the medium and long-haul market.

The entry last year of Malindo, a full-service airline that is partly owned by Indonesia's Lion Air, sent yields sharply lower in 2013 as both MAS and AirAsia slashed fares to keep their market share.

MAS is also trying to keep up with other Southeast Asian full-service carriers in the highly competitive medium and long-haul markets, while Gulf carriers like Emirates, Etihad and Qatar Airways are also eating into its market on services to Europe and Australia.

Regional rivals like Singapore Airlines and Thai Airways have also ordered new generation widebody aircraft such as the A350 and 787. Garuda Indonesia is set to also choose between those two aircraft - or possibly pick both - for its fleet.