MAG Sees Opportunity In China’s Boeing Delivery Halt

By Karina Imran

KUALA LUMPUR, April 20 (Bernama) -- Malaysia Aviation Group (MAG) is exploring the possibility of accelerating its Boeing aircraft acquisition timeline, following delivery slots potentially vacated by Chinese carriers due to the ongoing United States (US)-China trade war. 

Group managing director Datuk Captain Izham Ismail said the group views the situation as a potential window to secure earlier-than-expected aircraft deliveries from Boeing, although competition among global carriers for available slots remains intense.

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“MAG is in conversation with Boeing about whether we can take over those slots. So, we will meet our number faster (fleet). 

“Everybody wants it, 10,000 people want this aircraft. It is a competitive space and we are mindful of what we are getting into,” he told Bernama. 

It was reported that the Chinese government ordered its airlines to halt Boeing deliveries amid heightened trade tensions between the US and China.

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The US plane manufacturer has begun flying its jets, which were previously refused by Chinese airlines, back to the US. 

Additionally, Izham said that any additional aircraft acquired would not be part of MAG’s initial order of 25 aircraft, which are under a leasing arrangement with Air Lease Corporation (ALC).

The aircraft from ALC’s order book with Boeing will be delivered to the Malaysian carrier from 2023 until the beginning of 2026.   

“So if we are able to snatch this, we will need to go to the capital market to raise money for this,” he said. 

He noted that acquiring an aircraft is not a simple decision, as the airline company needs to consider specific requirements. 

“Where is the aircraft in the production line? Is it still a green tail (without an owner)? Or is it halfway through the production process? The other consideration is the seat supply.

“(Consider) what you order versus what is available. So, if this aircraft already has seats, it might not meet our configuration,” he said.

He said that among the key considerations is the aircraft’s cabin configuration, which the industry refers to as the layout of passenger accommodations (LOPA), including seat arrangement, lavatories, and galleys.

“Holistically, we want this aeroplane, but there are other considerations,” he said. 

Strategic Fleet Expansion

Meanwhile, group chief strategy and transformation officer Bryan Foong Chee Yeong said MAG is shifting its fleet strategy to meet the demands of the growing Asia Pacific regional network, particularly in congested ASEAN capital cities.

“Today, we are a narrowbody Boeing 737 operator, but by 2035, we envision a more widebody-focused fleet. 

"For example, destinations like the ASEAN capitals are very congested. (But), we simply cannot add more frequency to some routes due to congestion. So, we need bigger aircraft to increase capacity,” he said. 

He also revealed plans to expand or replace the airline’s Airbus A350 fleet, with long-term goals set as far as 2043. 

MAG Financial Strategy and Khazanah’s Role

Group chief financial officer Boo Hui Yee said MAG has exercised careful financial management in utilising the RM3.6 billion capital injection committed by sole shareholder Khazanah Nasional Bhd, drawing only RM1.3 billion to date.

“We have been cash-positive, and we are able to cover our operating costs. As of December last year, we still have (around) RM2.3 billion without drawdown. We do not want to draw down more cash and then induce a negative carry.

“Under the restructuring agreement, by this year, they (Khazanah) are supposed to inject the money (RM3.6 billion), but we do not want to induce negative carry. We are talking to lessors to extend to 2026 or 2027,” she said. 

Meanwhile, Izham also revealed plans to reduce reliance on operating leases by acquiring more aircraft outright.

Currently, around 80 per cent of the MAG fleet is leased, and the group’s ambition is to achieve a fleet balance of 50 per cent owned, 50 per cent leased, he said. 

“Leased aircraft come with end-of-lease (EOL) costs. You must return them in near-new condition, which can be very expensive. Owning (aircraft) helps taper long-term costs,” he said.

-- BERNAMA