Malaysia Airline Financial Analysis

Malaysia Airline Financial Research Paper

Sai Kham Park Hpa

Module 9 Research Paper

MBAA 518 – Managerial Finance

Embry-Riddle Aeronautical University

Table of Contents

Introduction 3

Malaysia Airline (The Firm) 4

Financial Condition and Strategies 6

Financial Analysis and Annual Reports 8

Malaysia Airline in Aviation Industry 9

Stock Performance 10

Currency Exchange Risk 11

Conclusion 11

Appendices 13

References 16

Section XI Supplement 18

Introduction

In 2008 the airline industry was once again in crisis. During the first half of the year fuel prices escalated to the highest levels ever seen and airline costs sky-rocketed. Airline losses began to mount. Numerous airlines had collapsed by mid-2008, including ATA, Maxjet and Aloha in the United States, Sterling, Futura and XL in Europe and Oasis in Hong Kong. Then, after August, the fuel prices dropped rapidly, but for many airlines this only helped marginally. When fuel prices had been rising early in the year, such airlines had bought a large part of their 2008, 2009 or even 2010 future fuel requirements at fixed but high 2008 prices, in the expectation that they would continue to rise. As a result, they were locked in, continuing to pay inflated prices for fuel even after fuel prices had plummeted. (Doganis, R 2010). Four to five years of poor or bad performance is generally followed by an upturn improving result in a form of cyclical nature. Uncertainty has become the new normal for airlines in the world, the Gulf carriers have changed the world, seemingly impervious to the pressures of most other airlines. Asia is rising particularly in China and will dominate within five years. Industry saw a bounce back profit in 2010 but doesn’t last long to dip into lost again in 2012. The global aviation industry could report losses of USD5.3 billion in what is set to be another tough year in 2012 amid weak global GDP growth and rising fuel costs. (CAPA 2012). Recovery slow or stopping in key...