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Monday, May 5, 2008

Malaysia Airlines low fare strategy to boost domestic load factor

Malaysian Airline System Bhd’s (MAS) just-launched “Everyday Low Fares” programme should boost its domestic load factor at a small expense to yields, says OSK Investment Research said.

In a research note issued on Monday, the research house said MAS’ current low load factor of around 70% allowed it to offer zero fare tickets for around 30% of its domestic flights.

It said the need to book the tickets early meant there should be minimal cannibalisation of existing passengers while collection of fuel surcharges and other taxes should cover additional costs.

“Overall, we see a positive impact, lifting core net profit by between 3% and 4%. Fair value is raised to RM5.20 and we see MAS leveraging on its enhanced efficiency to increasingly muscle into low-cost carrier (LCC) territory where it deems profitable. Maintain Buy,” it said.

Under the programme, MAS will set aside one million tickets or 30% of each flight between June 10 and Dec 14. Passengers must book the tickets at least 30 days in advance over the Iternet and still pay the surcharges and administrative charges. No cancellations or modifications are allowed.


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