Malaysia Airlines projects oil prices will increase to about US$70 a barrel toward the end of this year and has aggressive fuel hedging in place as the money-losing national carrier seeks to return to profitable operations.
“At the moment we are hedged about 65 percent of the current year at about a little bit north of $60,” said the chief executive Peter Bellew at the weekend.
“We are quite aggressively hedging 12 months ahead on a quarter-to-quarter basis and taking a fairly prudent approach to it.
“Malaysia Airlines is projecting a return to what Mr Bellew calls “more consistent profitability” in 2018 following an expected loss this year as it fills a larger portion of seats amid demand from markets leading with China.
The ringgit’s depreciation against the dollar since Donald Trump won the US presidential election in November is a big concern for Malaysia Airlines, Mr Bellew said.
The Malaysian currency – which has weakened more than 5 per cent since the US election – may strengthen over the next six to nine months, helping to bolster the carrier’s earnings, he said.
Crude oil futures were trading at $52.66 a barrel as of 12:35pm in Singapore.
Demand for seats on Malaysia Airlines plunged after the carrier lost two planes in 2014, with one vanishing over the Indian Ocean en route from Kuala Lumpur to Beijing and another shot down over Ukraine.
The carrier still needs more widebody planes to carry the influx of tourists from China to Malaysia and is projecting to fly as many as five million Chinese travelers in three to four years, he said.
“My problem with Chinese is I don’t have enough aircraft right now to operate flights there,” Mr Bellew said.
“We are seeing no problems with our brand or reputation among Chinese nationals.
It is in talks with Boeing on the 787 aircraft while negotiating with Airbus on the A330 neo, he said.