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Our Vision TobeTheWorld’sFiveStarValueCarrier(FSVC).
Our Mission Tobeaconsistentlyprofitableairline.
Our Customer Value Proposition TodeliverMalaysian Hospitality,hasslefreealltheway, andindoingsoreflectournation’shighestambitions.
Our Brand Promise MH. Morethanjustanairlinecode. Itiswhereeverythingcomesfromtheheart. Wheredifferentculturesandneedsareunderstood. Andrespectisnotlearntfromatrainingmanual. Itisustreatingeveryonelikeaguestinourhome. Andensuringsmoothjourneysalltheway.
ThisisMH. MHisMalaysian Hospitality.
Contents
2 JourneyofTransformation
6 NoticeofAnnualGeneralMeeting
8 StatementAccompanyingtheNoticeofAnnualGeneralMeeting
9 CorporateInformation
10 GroupStructure
11 BoardofDirectors
20 SeniorManagement
28 FinancialandStatisticalHighlights
38 Chairman’sStatement
42 ManagingDirector’sStatement
50 OperationalReview
54 RouteNetwork
58 DetailsofBoardofDirectors’Meeting
59 AuditCommitteeReport
63 StatementofInternalControl
68 StatementofCorporateGovernance
84 StatementofCorporateSocialResponsibility
88 ListofCompanyProperties
91 AnalysisofShareholdings
104 FinancialReport
232 CorporateDirectory
234 Appendix
235 ProxyForm
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)2
ELF: ‘Weekend Specials launched’ Enrich-GOMprogramme launched
MH Big Sweep
Frost&SullivanAward
forE&M
GMR,Indiajoint
venturewithE&M
MATTA Fair 2009
MalaysiaAirlinesTravelFair
(MATF)2009
oneMH - Serve Customers,
Make Money, Save Money
(SMS) launched
ELF:‘WeekendSpecials’
launched
MHValueFaresgoes
international
RM244milprofitforFY2008
Jet Airways - MH codeshare
SkytraxWorld’s
BestCabinStaff
5 Star Airline
ItalianAwardforMD/CEO
Get-A-Deal/MASFamily
Programme
BestAirCargoCarrier2009(Asia)
Memorandum of Agreement with
2 foundations in Terengganu and
Kota Bahru for aircraft engineers &
pilot training
MASTicketOfficeat
SkyParkTerminalopens
MAS Stimulus Package
2ndMATF&Global
LowFares
MAS36thAnnual
GeneralMeeting
Q1FinancialResults
IATA 65th AGM -
MAS is host
JunFeb Apr
BTP 2 Journey 2009
MarJan May
3Annual Report 2009
New purchase of Avient-
crew system for Crew
Planning & Deployment
LaunchofBusiness
Firstproduct
Asean Pass launched
TributetoTunRazak
menulaunched
Airlineoftheyear2008
AwardforMASkargo
Dato’SriIdrisJala
appointedasMinisterin
thePM’sdepartment
TengkuDato’Azmil
Zahruddinappointedas
ManagingDirector
Newfreighterroute
forMASkargo
Senai-Narita
BestInflightMealsin
EconomyClass2008
JALAwardfor
MASkargo
Mini Townhall with
Tengku Dato’ Azmil
Zahruddin
FirstBoeing777
operatestoLAX
MAS & Mercy sign
a 3-year MoU under
programme ‘Change
for Charity’
PSS2: Cutover
successful
MASmovesfrom
Terminal3toTerminal
4inLondonHeathrow
Asia’s Leading Airline
by World Travel
Awards 2009
LIMA2009
Announcementof
rightsissueand
aircraftacquisition
Flymas.mobi launched
Aug Oct Dec
NovSeptJul
BTP2JOURNEY2009
5Annual Report 2009
PURCHASE
Makingreservationseasywithawidechoiceofticketingchannelstosuiteveryone’sneeds.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)6
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN THATtheThirtyNinthAnnualGeneralMeetingofMalaysianAirlineSystemBerhadwillbeheldattheAuditorium,1stFloor,SouthWing,MASAcademy,No.2JalanSS7/13,KelanaJaya,47301PetalingJaya,SelangorDarulEhsanonMonday,21June2010at10.00a.m.forthefollowingpurposes:-
AGENDA
AS ORDINARY BUSINESS1. ToreceivetheAuditedFinancialStatementsforthefinancialyearended31December2009andtheReportsof
DirectorsandAuditorsthereon. 2. Tore-electthefollowingDirectorswhoretirepursuanttoArticle139oftheCompany’sArticlesofAssociation,
andwho,beingeligible,offerthemselvesforre-election:- (i) Dato’MohamedAzmanbinYahya (ii) TengkuDato’AzmilZahruddinbinRajaAbdulAziz (iii) DatukSeriPanglimaMohdAnnuarbinZaini
3. Toconsiderand if thoughtfit, topass the followingOrdinaryResolutionpursuant toSection129(6)of theCompaniesAct,1965:-
“THATDato’N.Sadasivana/lN.N.Pillay,retiringpursuanttoSection129(6)oftheCompaniesAct,1965,beandisherebyre-appointedaDirectoroftheCompanytoholdofficeuntilthenextAnnualGeneralMeeting.”
4. ToapprovethepaymentofDirectors’feesforthefinancialyearended31December2009.
5. Tore-appointMessrs.Ernst&YoungasAuditorsoftheCompanyforthefinancialyearending31December2010andauthorisetheDirectorstofixtheirremuneration.
AS SPECIAL BUSINESSToconsiderandifthoughtfit,topassthefollowingOrdinaryResolution:-
6. Authority to Allot and Issue Shares “THATsubjecttotheCompaniesAct,1965(theAct),theArticlesofAssociationoftheCompany,approval
fromtheBursaMalaysiaSecuritiesBerhadandothergovernmentorregulatorybodies,wheresuchapprovalisnecessary,fullauthoritybeandisherebygiventotheBoardofDirectorspursuanttoSection132DoftheAct,toissuesharesinthecapitaloftheCompanyatanytimeuponsuchtermsandconditionsandforsuchpurposesastheDirectorsmayintheirdiscretiondeemfit,providedalwaysthattheaggregatenumberofsharestobeissuedshallnotexceed10%oftheissuedsharecapitaloftheCompanyandthatsuchauthorityshallcontinuetobeinforceuntiltheconclusionofthenextAnnualGeneralMeetingoftheCompany.”
Toconsiderandifthoughtfit,topassthefollowingSpecialResolution:-
7. Proposed Amendments to the Articles of Association “THATtheproposedamendmentstotheArticlesofAssociationoftheCompanyascontainedintheAppendix
1attachedtotheAnnualReport2009beandareherebyapprovedANDTHATtheDirectorsoftheCompanybeandareherebyauthorisedtoassenttoanymodifications,variationsand/oramendmentsasmaybeconsiderednecessarytogivefulleffecttotheProposedAmendmentstotheArticlesofAssociationoftheCompany.”
8. Totransactanyotherordinarybusinessforwhichduenoticehasbeengiven.
BY ORDER OF THE BOARD
SHAHJANAZ BINTI KAMARUDDIN(LS 0009441) CompanySecretary
27May2010SelangorDarulEhsan
Resolution 1
Resolution 2Resolution 3Resolution 4
Resolution 5
Resolution 6
Resolution 7
Resolution 8
Resolution 9
Resolution 10
7Annual Report 2009
ExPLANATORY NOTES ON SPECIAL BUSINESS
Ordinary Resolution 8
ResolutionpursuanttoSection132D,CompaniesAct,1965.
OrdinaryResolution8,ifpassed,willempowertheDirectorstoissuesharesintheCompanyuptoanamountnotexceedingintotal10%oftheissuedsharecapitaloftheCompany,subjecttocompliancewiththerelevantregulatoryrequirements.Theapprovalissoughttoavoidanydelayandcostinconveningageneralmeetingforsuchissuanceofshares.Thisauthority,unlessrevokedorvariedbytheCompanyatageneralmeeting,willexpireatthenextAnnualGeneralMeeting.
Special Resolution 9
SpecialResolution9ontheProposedAmendmentstotheArticlesofAssociationoftheCompanyreferstothepaymentofdividend,interestorothermoneyspayableincashdirectlybyelectronictransferintoshareholders’accountsopenedandmaintainedwithafinancialinstitutionbasedinMalaysia.Thiswouldpromotegreaterefficiencyandalignthepaymentsystemtothenationalagendaofmigratingtoelectronicpayment.
In addition, theSpecialResolution9, if passed,will bring theArticlesofAssociationof theCompany in linewith the recentamendmentstotheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad.
PleaserefertoAppendix1intheAnnualReport2009fordetailsontheProposedAmendmentstotheArticlesofAssociation.
Notes:1. AmemberentitledtoattendandvoteattheMeetingisentitledtoappointmorethantwo(2)proxiestoattendandvoteinhis
stead.AproxymaybutneednotbeamemberoftheCompanyandamembermayappointanypersontobehisproxywithoutlimitationandtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytotheCompany.
2. Theinstrumentappointingaproxyshallbeinwritingunderthehandoftheappointerorhisattorneydulyauthorisedinwritingor,iftheappointerisacorporation,eitherunderitssealorunderthehandofanofficerorattorneydulyauthorised.
3. Aholdermayappointmorethantwo(2)proxiestoattendtheMeeting.Whereamemberappointstwo(2)ormoreproxies,heshallspecifytheproportionofhisshareholdingtoberepresentedbyeachproxy.
4. TherightofforeignerstovoteinrespectoftheirdepositedsecuritiesissubjecttoSection41(1)(e)andSection41(2)oftheSecurities Industry (Central Depositories) Act, 1991 and the Securities Industry (Central Depositories) (Foreign Ownership)Regulations,1996.ThepositionofsuchDepositorsinthisregardwillbedeterminedbasedontheGeneralMeetingRecordofDepositors.SuchDepositorswhosesharesexceedtheCompany’sforeignshareholdinglimitof45%asatthedateoftheGeneralMeetingRecordofDepositorsmayattendtheaboveMeetingbutarenotentitledtovote.Consequently,aproxyappointedbysuchDepositorwhoisnotentitledtovotewillalsonotbeentitledtovoteattheaboveMeeting.
5. TheinstrumentappointingaproxymustbedepositedatSymphonyShareRegistrarsSdn.Bhd.,Level6,SymphonyHouse,PusatDaganganDana1,JalanPJU1A/46,47301PetalingJaya,SelangorDarulEhsan,Malaysia,notlessthan48hoursbeforethetimeforholdingtheMeetingoratanyadjournmentthereof.
6. Shareholders’ attention is hereby drawn to the Listing Requirements of Bursa Malaysia Securities Berhad, which allows amemberoftheCompanywhoisanauthorisednomineeasdefinedundertheSecuritiesIndustry(CentralDepositories)Act,1991,toappointatleastone(1)proxyinrespectofeachsecuritiesaccountheholdswithordinarysharesoftheCompanystandingtothecreditofthesaidsecuritiesaccount.
NOTICEOFANNUALGENERALMEETING
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)8
1. Directorsrankingforretirementandre-electionatthe39thAnnualGeneralMeeting:
TheprofileoftheDirectorswhoarestandingforre-electionorre-appointmentunderOrdinaryResolutions2to4aresetoutonpages14to19ofthisAnnualReport.
2. TheaboveDirectors’directinterestsinthesecuritiesoftheCompanyasat15April2010:
Direct Interest Name of Directors No. of Issued Shares % of Issued Shares
Dato’MohamedAzmanbinYahya Nil Nil TengkuDato’AzmilZahruddinbinRajaAbdulAziz 2,707,438*0.08* DatukSeriPanglimaMohdAnnuarbinZaini Nil Nil
*ShareoptionsgrantedunderMASESOS
Statement Accompanying theNotice of Annual General Meeting
9Annual Report 2009 CORPORATEINFORMATION
COMPANYSECRETARYShahjanaz binti Kamaruddin(LS0009441)
REGISTEREDOFFICE3rdFloor,AdministrationBuilding1MASComplexASultanAbdulAzizShahAirport47200SubangSelangorDarulEhsan,MalaysiaTel:60378404550Fax:60378463932Website:www.malaysiaairlines.com
AUDITORSErnst & Young (AF0039)
CharteredAccountantsLevel23A,MenaraMileniumJalanDamanlelaPusatBandarDamansaraDamansaraHeights50490KualaLumpurMalaysiaTel:60374958000Fax:60320959076
REGISTRARSymphony Share Registrars Sdn. Bhd. (378993-D)
Level6,SymphonyHousePusatDaganganDana1JalanPJU1A/4647301PetalingJayaSelangorDarulEhsanMalaysiaTel:60378418000Fax:60378418151
Corporate Information
INVESTORRELATIONSAisyatul Aizzura Salha binti Ab RahimCommunicationsDivisionGroundFloor,AdministrationBuilding1MASComplexASultanAbdulAzizShahAirport47200SubangSelangorDarulEhsan,MalaysiaTel:60378404523Fax:[email protected]
STOCKEXCHANGELISTINGMain Market of Bursa Malaysia Securities Berhad(Listedsince16December1985)(Stockcode:3786)
PRINCIPALBANKERSCitibank Berhad(297089-M)
MenaraCitibank165JalanAmpang50450KualaLumpurMalaysia
Malayan Banking Berhad(3813-K)
MenaraMaybank100JalanTunPerak50050KualaLumpurMalaysia
CIMB Bank Berhad (13491-P)
5thFloor,BangunanCIMBJalanSemantanDamansaraHeights50490KualaLumpurMalaysia
FinancialCalendar
26 February 2009AnnouncementofFY2008AnnualResults
12 June 2009Announcementof2009FirstQuarterResults
06 August 2009Announcementof2009SecondQuarterResults
25 November 2009Announcementof2009ThirdQuarterResults
22 December 2009AnnouncementofRightsIssue&aircraftacquisition
25 January 2010ExtraordinaryGeneralMeeting
22 February 2010AnnouncementofFY2009AnnualResults
12 March 2010ListingofRightsShares
8 April 2010PaymentofTax-ExemptNon-cumulativePreferentialDividend
21 June 2010AnnualGeneralMeeting
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)10
Group Structure
MALAYSIAN AIRLINE SYSTEM BERHAD (10601-W)
80% AbacusDistributionSystems(Malaysia)Sdn.Bhd.(180535-T)
51% AerokleenServicesSdn.Bhd.(277266-X)
100% FlyFireflySdn.Bhd.(346606-K)*
*FlyfireflySdn.Bhd.owns100%equityinFlyfireflyHolidaySdn.Bhd.(780113-P)
100% Kelip-KelipLabuanLimited(LL06736)
100% Kelip-KelipIILabuanLimited(LL07075)
100% Kelip-KelipIIILabuanLimited(LL07638)
100% Kelip-KelipIICaymanLimited(WK-225671)
100% MASkargoLogisticsSdn.Bhd.(68121-P)
100% MalaysiaAirlinesCapital(L)Limited(LL01132)
100% MalaysiaAirlinesCargoSdn.Bhd.(318815-M)
100% MASAcademySdn.Bhd.(317184-W)
60% MASCatering(Sarawak)Sdn.Bhd.(372384-D)
100% MASGoldenBoutiquesSdn.Bhd.(317182-T)
100% MASGoldenHolidaysSdn.Bhd.(317144-A)
100% MASwingsSdn.Bhd.(773841-A)
100% MASAerotechnologiesSdn.Bhd.(317185-K)
100% MalaysianAerospaceEngineeringSdn.Bhd.(775412-D)
*MalaysianAerospaceEngineeringSdn.Bhd.owns50%equityin MASGMRAerospaceEngineringCompanyPrivateLimited
100% MacnetCCN(M)Sdn.Bhd.(318626-W)underMembersVoluntaryWindingUp
100% SyarikatPengangkutanSenaiSdn.Bhd.(39752-P)
INVESTMENT IN ASSOCIATES
30% GEEngineServicesMalaysiaSdn.Bhd.(423679-X)
49% HamiltonSundstrandCustomerSupportCentre(M)Sdn.Bhd.(301833-D)
30% HoneywellAerospaceServices(M)Sdn.Bhd.(465037-M)
30% LSGSkyChefs-Brahim’sSdn.Bhd.(317281-X)
24% PanAsiaPacificAviationServicesLimited(470740)
20% TajMadrasFlightKitchenLimited(30706StateCode18)
Annual Report 2009 BOARDOFDIRECTORS
11
Board of Directors
Tan Sri Dr. Mohd. Munir bin Abdul Majid
Chairman, Non-Independent Non-Executive Director
Dato’ N. Sadasivan a/l N. N. Pillay
Deputy Chairman, Independent Non-Executive Director
Tengku Dato’ Azmil Zahruddin bin Raja Abdul Aziz
Managing Director/Chief Executive Officer, Non-Independent Executive Director
Keong Choon Keat
Independent Non-Executive Director
Dato’ Mohamed Azman bin Yahya
Non-Independent Non-Executive Director
Martin Gilbert Barrow
Independent Non-Executive Director
Datuk Seri Panglima Mohd. Annuar bin Zaini
Independent Non-Executive Director
Tan Sri Datuk Seri Dr. Wan Abdul Aziz bin Wan Abdullah
Non-Independent Non-Executive Director
Datuk Haji Yusoff bin Datuk Haji Mohamed Kassim
Independent Non-Executive Director
Datuk Amar Wilson Baya Dandot
Independent Non-Executive Director
Dato’ Puteh Rukiah binti Abd. Majid
Alternate Director to Tan Sri Datuk Seri Dr. Wan Abdul Aziz bin Wan Abdullah
Dato’ Haji Abdul Rahman bin Haji Abdul Ghani
Alternate Director to Datuk Haji Yusoff bin Datuk Haji Mohamed Kassim
Datuk Amar Haji Mohamad Morshidi bin Abdul Ghani
Alternate Director to Datuk Amar Wilson Baya Dandot
1
23
5 710
8
49
6
1 TanSriDr.MohdMunirbinAbdulMajid2 Dato’N.Sadasivana/lN.N.Pillay3 TengkuDato’AzmilZahruddinbinRajaAbdulAziz4 KeongChoonKeat5 Dato’MohamedAzmanbinYahya6 MartinGilbertBarrow7 DatukSeriPanglimaMohd.AnnuarbinZaini8 TanSriDatukSeriDr.WanAbdulAzizbinWanAbdullah9 DatukHajiYusoffbinDatukHajiMohamedKassim10 DatukAmarWilsonBayaDandot
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)14
Tan Sri Dr. Mohd. Munir bin Abdul MajidChairman,Non-IndependentNon-ExecutiveDirector
TanSriDr.MohdMunirbinAbdulMajid,aged62,aMalaysian,joined the Board of Directors of MAS on 1 June 2004. Hewas appointed Non-Independent Non-Executive Chairmanon1August2004.HeservesasChairmanoftheNominationCommittee.
HeobtainedaBachelorofScience(Economics)degreefromtheLondonSchoolofEconomicsandPoliticalScience(LSE)in1971andwentontoearnaPh.DinInternationalRelationsin1978.DuringhisyearsinLondon,hetaughtattheDepartmentof International Relations in LSE and worked as a researchanalystatDaiwaEuropeNV.
Upon his return to Malaysia in 1978, Tan Sri Dr. MohdMunir joined the News Straits Time Press as leader writer,ending his service there as Group Editor in 1986. He tookontheappointmentofChiefExecutiveOfficerofamerchantbank,PertanianBaringSanwa,(whichwasrenamedCommerceInternational Merchant Bankers Berhad), later becoming itsExecutiveChairman.HewasthefirstandfoundingChairmanof the SecuritiesCommissionwherehe served from1993 to1999.
He has served on various governmental boards andcommittees, such as the Malaysian Investment DevelopmentAuthority (MIDA) (formerly known as Malaysian IndustrialDevelopment Authority), Bursa Malaysia Securities Berhad(formerly known as The Kuala Lumpur Stock Exchange),ForeignInvestmentCommittee(FIC),aswellasvariousprivatesector companies and organisations such as Kuala LumpurOptions and Financial Futures Exchange (KLOFFE), Councilof the Association of Merchants Malaysia and the MalaysianInternationalChamberofCommerceandIndustry.HewasalsothefoundingPresidentoftheKualaLumpurBusinessClubandwasappointedby theMalaysian InstituteofManagement tobeamemberofitsCourtofFellowsinMay2004.InDecember2005,hewasmadeanHonoraryFellowoftheLondonSchoolofEconomicsandPoliticalScience(LSE)andsubsequentlyasaVisitingSeniorFellowattheLSEIDEAS(CentreortheStudyofInternationalAffairs,DiplomacyandStrategy)inOctober2008.HeisPresidentoftheLSEAlumniAssociationofMalaysia.
HepresentlysitsontheAdvisoryBoardforSecuritiesMarketRegulation of the Toronto Centre for Leadership in FinancialMarketRegulation.HeisamemberoftheInternationalInstituteforStrategicStudies(IISS)inLondon.
He was the Senior Independent Non-Executive DirectorofTelekomMalaysiaBerhad (2000–2004), theChairmanofCelcom(Malaysia)BerhadandTechnologyResourcesIndustriesBerhad(2002–2004).
He is currently theChairmanofBankMuamalatMalaysiaBerhad.
He has attended all 14 Board Meetings of the Companyheldduringthefinancialyear.
Dato’ N. Sadasivan a/l N. N. PillayDeputyChairman,IndependentNon-ExecutiveDirector
Dato’ N. Sadasivan, aged 70, a Malaysian, joined the BoardofDirectorsofMASon1December2001.HewasappointedIndependentNon-ExecutiveDeputyChairmanon20July2004.HeistheChairmanoftheBoardTenderCommitteeandmemberof the Board Audit Committee, Nomination Committee andRemuneration Committee. He is also Chairman of MalaysiaAirlinesCargoSdn.Bhd.
He holds a Bachelor of Arts (Hons) degree in Economicsfrom University of Malaya. He started his early career as aneconomist with the Economic Development Board Singaporeuntil1967.HesubsequentlyservedinvariouscapacitieswiththeMalaysianIndustrialDevelopmentAuthority(MIDA)until1995.HislastpositionwithMIDAwasasitsDirector-General.Uponhisretirement,hesetupaconsultancyfirm,SKAManagementConsultantsSdn.Bhd.whereheistheExecutiveChairman.
HesitsontheBoardsofBankNegaraMalaysia,PetronasGasBerhad, Leader Universal Holdings Berhad, APM AutomotiveHoldingsBerhadandYeoHiapSeng(Malaysia)Berhad.
He has attended all 14 Board Meetings of the Companyheldduringthefinancialyear.
Board of Directors’ Profile
Annual Report 2009 BOARDOFDIRECTORS
15
Tengku Dato’ Azmil Zahruddin bin Raja Abdul AzizManagingDirector/ChiefExecutiveOfficer,Non-IndependentExecutiveDirector
Tengku Dato’ Azmil, aged 39, a Malaysian, is currently theManagingDirector/ChiefExecutiveOfficerofMAS,apositionheheldsince28August2009.HewasfirstappointedtotheBoardofMASon23August2004,subsequentlyasExecutiveDirectorofMASon23August2005andChiefFinancialOfficerofMASon1February2006.HeisalsoamemberoftheBoardSafety&SecurityCommittee.
He holds a double first class degree in Economics fromthe University of Cambridge. He is a Chartered Accountantand an associate member of the Malaysian Institute ofAccountants and the Institute of Chartered Accountants inEnglandandWales.HeisalsoanAssociateoftheAssociationof Corporate Treasurers, United Kingdom. Upon graduating,hewasattached to theAuditandBusinessAdvisoryServicesDivisioninPricewaterhouseCoopersinLondonandHongKongspecialisinginbankingandcapitalmarkets.In2002,hetookupthepositionofChiefFinancialOfficerinPenerbanganMalaysiaBerhad,andsubsequentlywasappointeditsManagingDirector/ChiefExecutiveOfficerin2004.
He does not hold any directorships in other publiccompanies.
He is also a member of the Issues Committee of theMalaysianAccountingStandardsBoard.
He has attended all 14 Board Meetings of the Companyheldduringthefinancialyear.
Keong Choon KeatIndependentNon-ExecutiveDirector
Mr.KeongChoonKeat,aged65,aMalaysian,wasappointedasanIndependentNon-ExecutiveDirectorofMASon16April2001.He servesasChairmanof theBoardAuditCommitteeandisamemberoftheNominationCommittee,RemunerationCommitteeandESOSCommittee.
HeisamemberoftheMalaysianInstituteofAccountantsandMalaysian InstituteofCertifiedPublicAccountants.He isalsoaFellowMemberoftheInstituteofCharteredAccountantsin England and Wales. He was attached to Bristol Myers &CompanyLtd inEnglandasanAccountant in1968.HethenjoinedMalaysianTobaccoCompanyBerhadasanaccountantin1969.From1974to1999,hewasattachedtoUMWHoldingsGroup, where he held various management positions fromGeneral Manager to Director Group Accounts before beingpromotedtothepositionofExecutiveDirectorin1988.Uponretirementin1999,hejoinedaconsultancyfirmprovidingoutplacementandcareermanagementservicesinMalaysia.
HesitsontheBoardsofJTInternationalBerhad,ChinTeckPlantationsBerhad,NegriSembilanOilPalmsBerhadandCrestBuilderHoldingsBerhad.
Hehasattended13outofthe14BoardMeetingsoftheCompanyheldduringthefinancialyear.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)16
Martin Gilbert BarrowIndependentNon-ExecutiveDirector
MartinGilbertBarrow,aged66,aBritishcitizen,wasappointedas an Independent Non-Executive Director of MAS on 29August 2001. He serves as Chairman of the Board Safety &SecurityCommittee.
Mr. BarrowobtainedOxford andCambridge Examination“A” Levels in Science and Mathematics and subsequentlyattendedcoursesinFinanceandMarketing.HejoinedJardineMatheson,HongKong in1965.From1975to1980,hewastransferred to Japan as Managing Director of the Group’soperations in Japan. He was promoted to the position ofPresident of the Group’s affiliate, Olayan Saudi HoldingCompanyinSaudiArabiain1980.HereturnedtoHongKongasRegionalManagingDirectoroftheGroup’soperationinHongKongandChinain1983andwasappointedDirectorofJardineMathesonLimitedat itsGroupHeadOffice in1989.HewasalsoactiveinpublicserviceandwasappointedbytheGovernorofHongKongasMemberoftheLegislativeCouncilfrom1988to1995.Otherpublic-relatedpositionshehadheld includedbeing a member of Hong Kong’s Aviation Advisory Board,memberoftheNewAirport’sSteeringGroup,ChairmanoftheHongKongTouristAssociationandChairmanoftheBusinessAdvisoryGroupCommitteeonDeregulation.He retired fromJardineMathesoninJune,2001.
HedoesnotholdanydirectorshipinotherpubliccompaniesinMalaysia.
Hehasattended12outofthe14BoardMeetingsoftheCompanyheldduringthefinancialyear.
Dato’ Mohamed Azman bin YahyaNon-IndependentNon-ExecutiveDirector
Dato’Azman,aged46,wasappointedasaNon-IndependentNon-ExecutiveDirectorofMASon1December2001.Heservesas Chairman of the Remuneration Committee and also as amemberoftheNominationCommitteeandESOSCommittee.
HeholdsaFirstClassHonoursdegree inEconomics fromthe London School of Economics and Political Science (LSE)andisamemberoftheInstituteofCharteredAccountantsinEnglandandWales,theMalaysianInstituteofAccountantsandaFellowoftheMalaysianInstituteofBanks.
His career appointments include auditing with KPMGin London, finance with Island & Peninsular Group andinvestmentbankingwithAmanahMerchantBank.In1998,hewasappointedbytheGovernmentofMalaysiatosetupandhead Danaharta Nasional Berhad and subsequently becameits Chairman until 2003. He was also the Chairman of theCorporateDebtRestructuringCommittee,whichwassetupbyBankNegaraMalaysiauntilitsclosurein2002.
He is currently the Group Chief Executive and a Boardmember of Symphony House Berhad, a listed outsourcinggroupandistheExecutiveChairmanofBoltonBerhad,alistedpropertygroup.
Outside his professional engagements, Dato’ Azman isactive inpublicservice.HesitsontheBoardsofanumberofGovernment Linked Corporations namely Khazanah NasionalBerhad, the investment arm of the Malaysian Government,PLUS Expressways Berhad and Pharmaniaga Berhad. He alsoserves as a member of the Bursa Malaysia Securities MarketConsultativePanel,theNationalCouncilforScientificResearch&Development, theNational InnovationCouncil, the SpecialTaskForcetofacilitatebusiness(PEMUDAH)andtheFinancialReporting Foundation. He is also a Director of Scomi GroupBerhad and Ekuiti Nasional Berhad; and Chairman of theMotorsportsAssociationofMalaysia.
Hehasattended12outofthe14BoardMeetingsoftheCompanyheldduringthefinancialyear.
Annual Report 2009 BOARDOFDIRECTORS
17
Datuk Seri Panglima Mohd Annuar bin ZainiIndependentNon-ExecutiveDirector
Datuk Seri Panglima Mohd Annuar bin Zaini, aged 58, aMalaysian, was appointed as Independent Non-ExecutiveDirectorofMASon2February2005.HeisamemberoftheBoardTenderCommittee.
He holds a Master of Arts in Law & Diplomacy from theFletcherSchoolofLaws&Diplomacy,TuftsUniversity,USA;andaBachelorofArtswithhonoursinEconomicsfromUniversityKebangsaanMalaysia.
He began his career in the government service as anAdministrativeandDiplomaticOfficer in1977.HeservedtheMalaysianGovernmentatvariousministriesanddepartments.In 1993, he was appointed General Manager of the PerakFoundation,apositionhehelduntil1999beforehechosetotakeanoptionalretirementfromthegovernmentservice.
He was Advisor and Chief Executive of the NorthernCorridorImplementationAuthorityfrom2007to2009.HewastheChairmanofMalaysianNationalNewsAgency(BERNAMA)fromFebruary2004toJanuary2010. InFebruary2004,HRHTheSultanofPerakconsentedhisappointmentasMemberoftheCouncilofElderstoHRHSultanofPerak.Heisamemberof thePerakCouncil of IslamicReligionandMalayCustoms.He is alsoaDistinguished Fellow to the Instituteof Strategicand InternationalStudies (ISIS)Malaysia,AdjunctProfessorofNorthernCorridorEconomicRegionResearchCentre,UniversitiUtaraMalaysiaandMemberoftheAdvisoryBoardofthePublicComplaintsBureauofthePrimeMinister’sdepartment.
HesitsontheBoardsofPlusExpresswaysBerhadandDijayaCorporationBerhad.
He attended 12 out of the 14 Board Meetings of theCompanyheldduringthefinancialyear.
Tan Sri Datuk Seri Dr. Wan Abdul Aziz bin Wan AbdullahNon-IndependentNon-ExecutiveDirector
TanSriDatukSeriDr.WanAbdulAziz,aged58,aMalaysian,wasappointedasNon-IndependentNon-ExecutiveDirectorofMASon20March2007.
He holds a Bachelor of Economics (Honours) degree inApplied Economics from University of Malaya and a Masterof Philosophy in Development Studies from the Institute ofDevelopment Studies, University of Sussex, United Kingdom.HewentontoearnaPh.D inEconomics fromtheSchoolofBusiness and Economic Studies, University of Leeds, UnitedKingdom. In 2004, he attended the Advanced ManagementProgrammeatHarvardBusinessSchool,HarvardUniversity.
Hebeganhis career in theAdministrativeandDiplomaticService as Assistant Director of the Economic Planning Unitin the Prime Minister’s Department in 1975. He was laterpromotedtothepositionofSeniorAssistantDirector,Macro-economicsin1984,SeniorAssistantDirector,HumanResourceSectionandDirector,EnergySectionin1988.Inthesameyear,hewassecondedtotheWorldBankGroupinWashingtonDC,USA,representingBruneiDarussalam,Fiji,Indonesia,LaosPDR,Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga andVietnam as Alternate Executive Director. He then served theMinistryofFinanceasDeputySecretaryintheEconomicsandInternationalDivisionin2001.HelaterreturnedtotheEconomicPlanning Unit in the Prime Minister’s Department as DeputyDirectorGeneral,MacroPlanningDivisionin2004.In2005,hewas appointed Deputy Secretary General of Treasury (Policy),FederalTreasuryintheMinistryofFinance.HeiscurrentlytheSecretaryGeneralofTreasuryintheMinistryofFinance.
Tan Sri Datuk Seri Dr. Wan Abdul Aziz is Chairman ofthe Inland Revenue Board, Kumpulan Wang Persaraan(Diperbadankan) (KWAP), Cyberview Sdn. Bhd., PembinaanBLTSdn.Bhd.BintuluPortHoldingsBerhadandKualaLumpurInternationalAirportBerhad.HealsositsontheBoardofFederalLand Development Authority (FELDA), Petroliam NasionalBerhad (PETRONAS), MISC Berhad, Syarikat Bekalan AirSelangorSdn.Bhd.(SYABAS),PelaburanHartanahBumiputeraBerhad,BankNegaraMalaysia,andMalaysiaDepositInsuranceCorporation(PIDM).
He also represents theMinistry of Finance asMemberofEconomic Council, PEMUDAH, Iskandar Malaysia, RegionalCorridor Development Authority (RECODA) Sarawak, SabahEconomicDevelopmentandInvestmentAuthority(SEDIA)andEastCoastEconomicRegion(ECER).
He has attended 9 out of the 14 Board Meetings of theCompanyheldduringthefinancialyear.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)18
Datuk Haji Yusoff bin Datuk Haji Mohamed KassimIndependentNon-ExecutiveDirector
Datuk Haji Yusoff, aged 60, a Malaysian, is an IndependentNon-ExecutiveDirectorofMASandwasappointedtotheBoardofDirectorsofMASon23January2006.
He holds a Bachelor of Economics from University ofAdelaide, Australia and attended the Public Budgeting andFinancial Management programme at the John F. KennedySchoolofGovernment,HarvardUniversity,USA.HebeganhiscareerinSabah’sPublicServicesasAssistantDirectorintheStateEconomicPlanningUnitin1979.HehadalsoservedasDistrictOfficer,Beaufort,Sabahin1982.From1984to1994heheldvarious positions within the Chief Minister’s Department andtheMinistryofIndustrialDevelopment,Sabah.InJuly1994,heheldthepostofDirectorofStateBudgetinMinistryofFinanceand subsequently served as the Permanent Secretary of theMinistryofFinanceuntil31January2010.
He sits on the Boards of Saham Sabah Berhad, KojasaHoldings Berhad and Sabah Development Bank Berhad andasChairmanofYayasanUsahaMajuaswellasTabinWildlifeHolidaysSdnBhd.
He has attended 7 out of the 14 Board Meetings of theCompanyheldduringthefinancialyear.
Datuk Amar Wilson Baya DandotIndependentNon-ExecutiveDirector
DatukAmarWilsonBayaDandot,aged58,aMalaysian,wasappointedasan IndependentNon-ExecutiveDirectorofMASon11 January2008.He is amemberof theBoard Safety&SecurityCommitteeandtheBoardAuditCommittee.
He holds a Bachelor of Economics from University ofWesternAustraliaandaMasterinDevelopmentEconomicsfromUniversityofSussex,UnitedKingdom.HealsoattendedaSeniorExecutive Fellows Programme at JFK School of Government,Harvard University. He first joined the Sarawak StateGovernmentOfficeastheAssistantSecretaryofStatePlanningUnitin1973.HewasanEconomistoftheInternationalPepperCommunity, Jakarta in 1977 to 1983, and later became thePrincipalAssistantSecretaryintheStatePlanningUnitin1983.In1990,hewasappointedasDeputyDirector,StatePlanningUnit,Sarawak.HelaterassumedthepositionofDirector,State
Dato’ Puteh Rukiah binti Abd MajidAlternateDirectortoTanSriDatukSeriDr.WanAbdulAzizbinWanAbdullah
Dato’PutehRukiah,aged57,aMalaysian,wasappointedasAlternateDirectortoTanSriDatukSeriDr.WanAbdulAzizbinWanAbdullahon16August2007.
SheholdsaBachelorofEconomicsdegreefromUniversityofMalayaandaMasterofEconomicsfromWesternMichiganUniversity, USA. She has held various posts in the MalaysianGovernment since 1976 and her various appointmentsincluded being the Deputy Undersecretary, Privatisation andPublic Enterprise Division in 2000 of the Ministry of Finance(Incorporated),andsubsequently,until2006,servedasUnder-secretary,InvestmentandPrivatisationDivision,oftheMinistryofFinance(Incorporated).Currently,sheistheDeputySecretaryGeneral(SystemsandControls),attheMinistryofFinance.
She sits on the Boards of Tenaga Nasional Berhad,Perbadanan Usahawan Nasional Berhad, Pengurusan AsetAir Berhad, Penerbangan Malaysia Berhad and PerbadananHartanah Berhad (formerly known as Pelaburan HartanahBumiputeraBerhad).
Shehasattended2outof the14BoardMeetingsof theCompanyduringthefinancialyearonbehalfofTanSriDatukSeriDr.WanAbdulAzizbinWanAbdullah.
PlanningUnitin1995andDeputyStateSecretary(Planning&Development)in2000.HewasthenappointedasDeputyStateSecretary (HumanResource)andwassubsequentlyappointedasDeputyStateSecretary(Administration,Security&Protocol)attheChiefMinister’sDepartment.In2007,hewasappointedtheSarawakStateSecretary.HeiscurrentlytheChiefExecutiveOfficer, Sarawak Regional Corridor Development Authority(RECODA).
HesitsontheBoardsofSarawakEnergyBerhad,SarawakEconomicDevelopmentCorporationBerhadandtheMalaysianInstituteofResearch.HealsositsontheBoardofotherSarawakStateGovernmentLinkCompanies.
He has attended 9 out of the 14 Board Meetings of theCompanyheldduringthefinancialyear.
Annual Report 2009 BOARDOFDIRECTORS
19
Dato’ Haji Abdul Rahman bin Haji Abdul GhaniAlternateDirectortoDatukHajiYusoffbinDatukHajiMohamedKassim
Dato’ Haji Abdul Rahman bin Haji Abdul Ghani, aged 58, aMalaysianwas appointedasAlternateDirector toDatukHajiYusoffbinDatukHajiMohamedKasimon23January2006.
He graduated with a Bachelor of Arts degree from theUniversityofQueensland,Australia.HebeganhiscareerinthecivilserviceasPenolongPenguasaKastamattheRoyalCustomsandExciseDepartment1977.Hethenservedinvariousseniorpositions in theStateCivil Service, including statutorybodiesandagenciesforover24years.
HewastheGovernmentPrinterattheSabahGovernmentPrinting Department before assuming his current position ofChiefExecutiveOfficer,WarisanHartaSabahSdnBhd,awhollyownedinvestmentholdingcompanyoftheStateGovernmentofSabahin2000.
He also sits on the Board of Borneo Housing MortgageFinanceBerhad.
He attended 5 out of the 14 Board Meetings of theCompanyheldduringthefinancialyearonbehalfofDatukHajiYusoffbinDatukHajiMohamedKasim.
Datuk Amar Haji Mohamad Morshidi bin Abdul GhaniAlternateDirectortoDatukAmarWilsonBayaDandot
Datuk Amar Haji Mohamad Morshidi, aged 53, a Malaysian,was appointed as Alternate Director to Datuk Amar WilsonBayaDandoton11January,2008.
HeholdsaBachelorofEconomicsdegree fromUniversityKebangsaanMalaysiaandaMasterofScienceinHumanResourceAdministration from University of Scranton, Pennsylvania,USA. HestartedhiscareerasaManagementExecutivewithPETRONAS in 1980. He was appointed Director of KuchingNorthCityHallfrom1988to1998.HethenwentontoholdanumberofseniorpositionsintheChiefMinister’sDepartmentthat included Director, Human Resource Management andDirector,HumanResourceDevelopmentandQualityfrom1998to 2001. He was later appointed as Permanent Secretary intheMinistryofSocialDevelopmentandUrbanisationin2001.He was the Director in the State Planning Unit in the ChiefMinister’s Department before assuming a position as DeputyStateSecretaryofSarawakin2006.On2August2009,hewasappointedasStateSecretaryofSarawak.
He does not hold any directorships in other publiccompanies.
He is currently the Board Member of Sarawak EconomicDevelopment Corporation (SEDC), Chairman of the BoardAuditCommittee (SEDC),Directoron theBoardofUniversityMalaysiaSarawak(UNIMAS),BoardDirector/UniversityCouncilMember of SWINBURNE University of Technology Sarawak,Director of ASSAR Asset Management Sdn Bhd Sarawak,Chairmanof FARADALEDevelopment SdnBhd,ChairmanofSarawakDevelopment Institute,CouncilMemberof SarawakInformation Technology & Resources Council, Director ofSarawakInformationSystemsSdn.Bhd.,DeputyChairmanofAngkatanZamanMansang(AZAM),BoardmemberofRegionalCorridor Development Authority (RECODA), Chairman ofFaradale Development Sdn. Bhd, Board Director of FaradaleHoldings, Chairman of Sarawak Water Resources Counciland Board of Governors International College of AdvanceTechnologySarawak(ICATS).HeisalsoinvolvedinothersocialorganisationssuchasDeputyPresidentofKelabGolfSarawak,CouncilMemberofSarawakBadmintonAssociationandPatronofSarawakRugbyUnion.
He has attended 1 out of the 14 Board Meetings of theCompany held during the financial year on behalf of DatukAmarWilsonBayaDandot.
Notes:1. None of the Directors has any family relationship with any Directors/Shareholders of MAS, nor has any conflict of interest with MAS.2. None of the Directors has been convincted for any offences (other than traffic offences if any) within the past ten years.
1 TengkuDato’AzmilZaharuddinbinRajaAbdulAziz
2 Mohd.AzhabinAbdulJalil
3 CaptainMohamedAzharuddinbinOsman
4 Dato’CaptainMohd.NawawibinAwang
5 IndiraNair
6 Dr.AminKhan
7 Dato’BernardFrancis
8 MohdRoslanbinIsmail
9EffendibinAbdulRahman
10MuzzaffarbinOthman
11ShaharibinSulaiman
12Dato’EddyLeongChinTung
13Dato’Mohd.SallehbinAhmadTabrani
14CaptainDr.OoiTeongSiew
15ShahjanazbintiKamaruddin
16EstherYapSiewYen
1 2 15 4
7
16
314
1113
5
612
810
9
Senior Management
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)22
Tengku Dato’ Azmil Zahruddin binRaja Abdul AzizManagingDirector/ChiefExecutiveOfficer
TengkuDato’Azmil Zahruddin, 39, is theManagingDirectorof Malaysia Airlines. He was first appointed to the Board ofMalaysia Airlines on 23 August 2004 and subsequently asExecutive Director on 23 August 2005 and Chief FinancialOfficeron1February2006.
He was part of the senior management team whosuccessfullyledtheturnaroundofMalaysiaAirlines.The3-yearBusinessTurnaroundPlan(BTP1)wascompletedinlessthan2yearsin2008.
He is currently driving the Business Transformation Planwhichaimstotransformthenationalcarrier intoTheWorld’sFiveStarValueCarrier,offering5-Starproductsandservicesataffordableprices.
AzmilisalsoaboardmemberofTourismMalaysia.Prior to Malaysia Airlines, Azmil was the Chief Financial
Officer and then Managing Director/ Chief Executive Officerof Penerbangan Malaysia Berhad, Malaysia Airlines’ holdingcompany. He was also with PricewaterhouseCoopers in theirLondon and Hong Kong offices where he was in the AuditandBusinessAdvisoryServicesdivision,specialisinginfinancialservices.
AzmilholdsadoublefirstclassdegreeinEconomicsfromtheUniversityofCambridge.HeisaCharteredAccountantandanassociatememberoftheMalaysianInstituteofAccountantsand the Institute of Chartered Accountants in England andWales.HeisalsoanAssociateoftheAssociationofCorporateTreasurers,UnitedKingdom.
Mohd. Azha bin Abdul JalilChiefFinancialOfficer
MohdAzhaAbdulJalil,aged43,graduatedwithaBachelor’sDegreeinAccounting(HighDistinction)fromIndianaUniversity,Bloomington,USA.HejoinedMASinJuly2007.
Prior to joining MAS, he held eight different positions intheShellgroupofcompanieswithinaspanof17years.TheassignmentsincludedasGeneralFinanceManagerofShellMDSMalaysia,SeniorAnalyst(BusinessPerformance&Strategy)atShell International London, Finance Manager (Commercial)of Shell Malaysia Trading Berhad and several other financepositionsatSarawakShellBerhad.HestartedhiscareerwithKPMGPeatMarwick.
Captain Mohamed Azharuddin bin OsmanDirectorofOperations
CaptainMohamedAzharuddinOsmanjoinedMalaysiaAirlinesin1973after completinghisflying trainingunder theQantascadetpilottrainingprogrammeinSydney.HestartedhisflyingcareerasaCo-pilotontheFokker27andnowfliestheBoeing747-400.
During his years in MAS he has held various positions intraining as well as inflight operations management. His lastpositionwasGeneralManagerFlightOperations.HeiscurrentlytheDirectorofOperationsresponsiblefortheairline’soperationsnetwork.
HeisamemberoftheCharteredInstituteofTransportandLogistics(CILT)UK,holdsanMBA(IMCUK)aswellasMSc(HRD)fromUniversityPutra(UPM)Malaysia.
CaptainAzharuddinrepresentsMASasaBoardmemberofMASAerotechnologiesSdn.Bhd.,GEEngineServicesMalaysiaSdn. Bhd., MAS Catering (Sarawak) Sdn. Bhd., MalaysianAerospaceEngineeringSdn.Bhd.,AerokleenServicesSdn.Bhd.,andHamiltonSunstrandCSC(Malaysia)Sdn.Bhd.
Dato’ Captain Mohd Nawawi bin AwangSeniorGeneralManager,ExternalRelations
Dato’ Nawawi, an airline pilot by profession, is a member ofthe Chartered Institute of Logistics and Transport (CILT) andholdsaMasterofBusinessAdministrationfromtheUniversityofStrathclyde,Scotland.
HejoinedMASin1975after5yearsofservicewiththeRoyalMalaysianAirForce.Throughouttheyears,hehasprogressedthrough several senior positions in the airline, including therole of Senior General Manager of Flight Operations prior tobeingappointedtohiscurrentposition.Dato’Nawawihasalsorepresented MAS in a number of industry-level committees,includingattheIATAOperationsCommitteefrom2001to2004andcurrentlyspearheadstheairline’seffortsto‘WinCoalitions’,proactivelyengagingwithitsstakeholders,namelygovernmentministries and agencies, state governments, members ofparliaments,suppliersandbusinesspartners.
He also leads the airline’s commitment towards ProjectPINTAR, a GLC-concerted effort in nurturing human capital,which is part of the airline’s Corporate Social Responsibilityinitiatives. He is also the President of Malaysia Airlines SportsClub (Kelab Sukan MAS) since 2004 and manages 23 sportssub-committeesintheCompany.
Senior Management Profile
Annual Report 2009 SENIORMANAGEMENT
23
Indira NairSeniorGeneralManager,Communications
Indira joined Malaysia Airlines in February 2006 and hasplayed a key role in the turnaround/transformation of thenational carrier as oneof the seniormanagement team.HercurrentremitcoversthefullspectrumofCommunicationsi.e.InvestorRelations,MediaRelations,Issues/CrisisManagement,Internal Communications, Community Relations, Advertising,Promotions & Sponsorships, Visual Identity and CustomerRelations.
Prior to joiningMalaysiaAirlines, shewas responsible fordrivingthetalentagenda,regionally,atOgilvyPRWorldwide.InherroleasChiefTalentOfficer,AsiaPacific,overaperiodof5years,shehelpedthenetworkattract,growandretaintheright people in the right roles. Her role included identifyingand recruiting senior talent,developingand leading strategictrainingprogrammes,internalcommunicationsandknowledgemanagement.
Indira has worked with a number of networks, includingEdelmanWorldwide,Burson-MarstellarandMDKConsultants.She also worked with the Berjaya Group, where she helpedset up Inter-Pacific Communications, the Group’s in-housemarketingcommunicationsagency.
Her experience ranges from leading integratedcommunications campaigns and running successful/profitableconsultancy operations to running workshops and trainingprogrammesforseniorexecutives.
Dr Amin KhanSeniorGeneralManager,Network&RevenueManagement
Dr Amin Khan graduated from the Cranfield School ofManagement,UK,withanMBAandPhDinManagement.HeisalicensedaircraftengineerandacertifiedSixSigmaBlackbeltholder.
Hehasheldvariouskeypositions in thecompany,namelyinEngineering,InternalAudit,NetworkPlanningandRevenueManagement, HR (Training and Development), Sales andRegionalManageroftheChinaregion.
Prior to his appointment to his current position, he wasdouble hatting as the Senior General Manager for TransitionManagementthatleadsthedevelopmentandimplementationof the Passenger Services System including eCommerce andtheManagingDirectorofMASwings,asubsidiaryofMalaysiaAirlines that provides rural air services in East Malaysia. Hecurrently heads the Network, Revenue Management andDistributioninMalaysiaAirlines.
Dato’ Bernard FrancisSeniorGeneralManager,Sales&Marketing
Dato’ Bernard Francis, aged 40, holds a Bachelor degreefrom Universiti Kebangsaan Malaysia and Masters in BusinessAdministration (InternationalBusiness) fromUniversitiMalaya.HewasentrustedwiththenewroleofSGMSales&Marketingin overseeing the entire sales function systemwide and alsodirectlymanagestheregionalofficeforMalaysia&ASEAN.
PriortotheappointmenttohiscurrentpositioninNovember2008, Bernard headed Network, Revenue Management andDistribution andplayed apivotal role in the rationalisationofboththeInternationalandDomesticnetworks,institutedmanystructuralchangestoRevenueManagementOptimisationsince,includingFareClassRealignmentandFareDistributions.
Before joining MAS, he was the Regional Director, RouteRevenue and Distribution with responsibilities covering AirAsia Malaysia, Thai Air Asia and Indonesia Air Asia. His pastexperience with YTL Group included Project Financing andMergersandAcquisitions relatedtoenergy,cement,property,hotelsandinformationtechnology.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)24
Muzzaffar bin OthmanSeniorGeneralManager,MD’sOffice
Muzzaffar is currently Senior General Manager in the MD’soffice.Hisportfoliocoverssupportfunctions(i.e.IT,Property),purchase & lease of aircrafts, strategic procurement, productdevelopmentandgovernmentandindustryrelations.
Prior to the current assignment, he was in StrategicProcurement. More recently, his procurement team facilitatesStucturalCostSavingsinitiativesinMAS.
Before joiningMAS,hedidBusinessProcessRe-engineer-ing inCitibankandprior to thathewaswith IBM’sBusinessConsultingServicesinitsSixSigmaandSupplyChainManage-mentspace.
Shahari bin SulaimanManagingDirector,MASkargo
Shahari Sulaiman, aged 47, graduated from the Universityof Southern California with a BSc in Aerospace Engineeringin 1985. He subsequently joined Malaysia Airlines in theEngineering Division and had served 15 years in Engineeringcovering Technical Services, Structural Engineering, AircraftEvaluation,ReliabilityAnalysisandfreighterconversions.
Inearly2001,hewasbroughtintoMASkargoasaSeniorManagementteammembertoturnaroundthecompany.Theteammanagedtoturnaroundthecompanyinoneandahalfyears and has been profitable ever since. In MASkargo, hehas accumulated experiences in Freighter Planning, BusinessPlanning, Sales, Revenue Management and Operations bymanaging the respective departments at some point overthe last7years.Hewasappointed to thecurrentposition inSeptember2007.
Mohd Roslan bin IsmailSeniorGeneralManager,Engineering&MaintenanceManagingDirector,MASAerospaceEngineering
Mohd Roslan Bin Ismail, aged 54, graduated with a MasterofScience(MSc)(TransportPlanning)fromUniversitiTeknologiMalaysia(UTM),Skudai,Johor,in1996andholdsaMalaysianDCAAircraftMaintenanceEngineer’sLicense.
He started his career in Malaysia Airlines as a LicensedAircraftMaintenanceEngineerandhasmorethan29yearsofworkingexperienceintheEngineeringDivision.HeiscurrentlyamemberoftheBoardofDirectorsofMASGMRAerospaceEngineeringCo. Ltd, India, PanAsia PacificAviationServicesLtd, Hong Kong, (PAPAS), Honeywell Aerospace Services(M)SdnBhd,GEEngineServicesMalaysiaSdnBhd (GEESM)and Hamilton Sundstrand CSC (M) Sdn Bhd. He is also theManagingDirectorofMASAerospaceEngineeringSdnBhd,awhollyownedsubsidiarycompanyofMalaysiaAirlines.
Effendi bin Abdul RahmanSeniorGeneralManager,HumanResources
EffendibinAbdulRahman,aged54,holdsaBachelordegreein Computing Science from Imperial College London andMastersinBusinessAdministrationfromOhioUniversity,USA.HewasappointedSeniorGeneralManager,HumanResourcesinApril2006andhasinstitutedmanychangesintheairline’shuman resource operations and strategy since, includingthe organisation-wide implementation of the PerformanceManagementSystem.
BeforejoiningMAS,hewastheHumanResourceDirectorinDutchLadyMilkIndustriesBerhad.PriortoDutchLady,EffendiheldasimilarroleatTexas Instruments.Healsohasextensivebusinessrelatedexperienceinothermanagementrolesatotherorganisations such as Northern Waste Industries, Proton andTimeTelecommunications.
Annual Report 2009 SENIORMANAGEMENT
25
Captain Dr Ooi Teong SiewGeneralManager,CorporateSafety,Security,HealthandEnvironment
Captain Dr Ooi, aged 57, joined Malaysia Airlines as a cadetpilot in 1972. He has held various key management pilotpositionsforthelast30years.HeholdsaMastersofBusinessAdministration from the University of Bath and a Doctor ofBusinessAdministrationfromtheUniversityofNewcastle.
Shahjanaz binti Kamaruddin CompanySecretary
Shahjanaz graduated in 1985 with a BA Hons. (Law) degreefromtheUniversityofKent,CanterburyinEngland.Shestudiedthe Bar Finals at the Council For Legal Education in LondonandwascalledtotheEnglishBar ,Lincoln’s Inn, in1987.Shechamberedwiththeeminentlawfirm,Messrs.ShookLin&Bok,beforebeingcalledtotheMalayanBarin1988.
She started her career as the Assistant Secretary at arenowned plantation-based company before joining MalaysiaAirlinesinJune1995astheCorporateSecretaryandCounsel.In2003shewasappointedastheGroupGeneralCounsel toheadtheGroupLegalPracticeDepartment.ShewastransferredtoGroupSecretarialPracticetoserveastheCompanySecretaryinMarch2009.
Esther Yap Siew YenChiefInternalAuditor
EstherYap,aged37,graduatedfromUniversityMalayawithanHonourClassII(UpperDivision)DegreeinAccountancy.BeforejoiningMAS in2002,sheservedArthurAndersen&Cofor4years.
SheisaCharteredAccountant(CA)ofMalaysianInstituteofAccountants(MIA)andMalaysianInstituteofCharteredPublicAccountants (MICPA).She isalsotheDeputyChairmanoftheInternationalAssociationofAirlineInternalAuditors(IAAIA)andtheChairmanoftheWhistleblowerIndependentCommittee.
She was appointed to her current position in July 2009.During her tenure in Malaysia Airlines, Esther was activelyinvolvedininternalcontrolprocessmappinganddocumentationprojects named Systemwide Station Internal Control Manual(SSICM) andSystemwide StationApprovingAuthorityManual(SAAM).EsthersetuptheFinancialAuditandCommercialAuditTeams in Malaysia Airlines and initiated the Internal QualityAssuranceCollaborationProgrammewithintheorganisation.
Dato’ Eddy Leong Chin TungManagingDirector,Firefly
Dato’Eddy,aged37,graduatedwithaBachelorofBusinessinAccounting fromtheRMITUniversityofMelbourne,AustraliaandalsoamemberoftheInstituteofCharteredAccountantsinAustraliaaswellasforMalaysianInstituteofAccountants.
PriortojoiningMASin2003,hewasintheAudit&BusinessAdvisoryandBusiness&RiskConsultingunitsinArthurAndersen(whichmergedwithErnst&Youngin2002)from1997to2003.HehasheldvariouskeypositionswithinMASincludingProjectDirectorofMASHotels&BoutiquesSdn.Bhd.,HeadofProjectManagement Department, Assistant General Manager forAirport&InflightOperations(QualityAssurance),andAssistantGeneralManager,TurnaroundManagementOfficeuntil2007.
Currently,EddyholdsthepositionofManagingDirectorofFlyFireflySdn.Bhd.,asubsidiaryairlineofMAS.
Dato’ Mohd Salleh bin Ahmad TabraniManagingDirector-MASwingsGeneralManager–TransitionManagement
Dato’MohdSalleh,aged47,graduatedin1985withanHonorsBachelor Degree in Economics from University of Waterloo,Ontario, Canada. He joined MAS in 1986 as a ManagementTraineewithintheSalesDivision.Sincethen,hehasheldseveralmanagementpositionsatvariouslocationswithinthedomesticand international network of MAS which includes posting inMalaysia,Brunei,Germany,Holland,USAandAustralia.
Over the last 23 years, given his wide internationalexperience,hehasprogressivelyassumedhighermanagementpositions and responsibilities within MAS. His currentmanagement responsibilities include being Board of Directorfor MAS subsidiaries such as MASwings Sdn. Bhd., GoldenBoutiqueSdn.Bhd.,GoldenHolidaysSdn.BhdandSeriPacificCorporation Sdn. Bhd. In addition, he is a member of IATAStB (Simplifying the Business) Steering Committee Group.Dato’MohdSallehisalsoafacultymemberofMASLeadershipDevelopmentProgramme,andlecturesregularlyattheMalaysiaAirlinesAcademy.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)28
FINANCIAL *
TotalRevenue (RM’000) 11,574,456 15,503,714 15,232,741 13,407,240 9,181,338
TotalExpenditure (RM’000) 12,287,239 15,259,027 14,404,400 13,641,880 10,434,634
Taxation (RM’000) 31,116 (19,086) (29,590) (60,618) (18,657)
Profit/(Loss)afterTaxAndExceptionalItem (RM’000) 493,106 245,697 852,743 (133,737) (1,251,603)
Shareholders’Funds (RM’000) 735,727 4,185,698 3,934,893 1,873,425 2,009,857
Profit/(Loss)asa%ofRevenue (%) 4.3 1.6 5.6 (1.0) (13.6)
ReturnonShareholders’Funds (%) 67.0 5.9 21.7 (7.1) (62.3)
Earnings/(Loss)PerShare (sen) 29.3 14.6 58.0 (10.9) (100.2)
PRODUCTION
NetworkSize (KM) 366,908 387,987 421,075 525,784 505,376
TimeFlown (Hours) 355,641 364,013 356,295 381,134 314,087
DistanceFlown (000KM) 219,961 236,031 239,699 249,925 207,117
AvailableCapacity (000TKM) 7,366,845 8,503,203 9,579,101 9,525,623 7,716,059
AvailablePassengerCapacity (000SeatKM) 48,761,794 53,378,580 56,227,787 58,923,735 49,785,977
TRAFFIC
PassengerCarried (000) 13,870 13,760 14,213 15,466 13,852
PassengerCarried (000PaxKM) 33,455,303 36,176,166 40,162,186 41,099,612 35,604,763
PassengerLoadFactor (%) 68.6 67.8 71.4 69.8 71.5
CargoCarried (000TKM) 2,065,120 2,445,021 2,621,597 2,593,332 1,948,761
MailCarried (000TKM) 7,674 8,965 4,721 4,309 2,131
OverallLoadCarried (000TKM) 5,110,924 5,750,376 6,305,358 6,359,430 5,205,283
OverallLoadFactor (%) 69.4 67.6 65.8 66.8 67.5
STAFF
EmployeeStrength 19,147 19,094 19,423 19,596 22,835
RevenuePerEmployee (RM’000) 605 812 784 684 402
AvailableCapacityPerEmployee (TKM) 384,752 445,334 493,183 486,100 337,905
LoadCarriedPerEmployee (TKM) 266,931 301,161 324,634 324,527 227,952
*As per Audited Financial Statements for the financial year under review. ^For 9 months ended 31 December 2005 as a result of change in financial year end to 31 December.
Five-Year Statistical Review of The Group
31-Dec
2009
31-Dec
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31-Dec
2007
31-Dec
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31-Dec
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29Annual Report 2009
Performance Highlights
FINANCIAL&STATISTICALHIGHLIGHTS
31-Dec 31-Dec Change 2009 2008 %GROUPFinancialTotalRevenue RMMillion 11,574.5 15,503.7 (25.3)TotalExpenditure RMMillion 12,287.2 15,259.1 (19.5)ProfitafterTax RMMillion 493.1 245.7 100.7Shareholders’Funds RMMillion 735.7 4,185.7 (82.4)EarningsPerShare Sen 29.3 14.6 100.7DividendPerShare Sen 0.0 0.0 0.0CashFlowPerShare RM (0.9) (0.4) 136.1 Operating Statistics AvailableTonneKilometres Million 7,366.8 8,503.2 (13.4)LoadTonneKilometres Million 5,110.9 5,750.4 (11.1)OverallLoadFactor % 69.4 67.6 2.7AvailableSeatKilometres Million 48,761.8 53,378.6 (8.6)PassengerKilometresFlown Million 33,455.3 36,176.2 (7.5)PassengerLoadFactor % 68.6 67.8 1.2 Staff and Productivity EmployeeStrength 19,147 19,094 0.3AvailableTonneKilometresPerEmployee 384,750 445,334 (13.6)LoadTonneKilometresPerEmployee 266,930 301,161 (11.4) COMPANY Operating Statistics AvailableTonneKilometres Million 6,110.7 6,815.3 (10.3)LoadTonneKilometres Million 4,280.3 4,723.3 (9.4)OverallLoadFactor % 70.0 69.3 1.1AvailableSeatKilometres Million 47,838.3 52,868.0 (9.5)PassengerKilometresFlown Million 32,894.2 35,868.4 (8.3)PassengerLoadFactor % 68.8 67.8 1.4AircraftUtilisation(Average) HoursPerDay 10.7 11.1 (3.5) Staff and ProductivityEmployeeStrength 16,454 17,571 (6.4)AvailableTonneKilometresPerEmployee 371,381 387,869 (4.3)LoadTonneKilometresPerEmployee 260,137 268,811 (3.2)
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)30
Expenditure
31-Dec 31-Dec Change 2009 2008 RM MIL RMMIL %
GROUP StaffCosts 2,089.2 2,171.9 (3.8)Depreciation 315.9 327.9 (3.7)FuelandOil 3,497.3 6,531.6 (46.5)Handlingandlandingcosts 1,635.3 1,717.3 (4.8)Hireofaircraftandequipment 1,866.8 1,906.0 (2.1)Financecharges 84.5 60.8 39.0Commissionandincentives 440.7 507.7 (13.2)Others 2,357.4 2,035.9 15.8 12,287.2 15,259.1 (19.5)
COMPANY StaffCosts 1,870.1 1,960.9 (4.6)Depreciation 286.3 294.1 (2.7)FuelandOil 2,874.5 5,732.1 (49.9)Handlingandlandingcosts 1,502.7 1,544.0 (2.7)Hireofaircraftandequipment 1,488.5 1,569.7 (5.2)Financecharges 84.0 59.3 41.7Commissionandincentives 418.9 484.7 (13.6)Others 2,153.5 1,819.0 18.4 10,678.5 13,463.8 (20.7)
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
StaffCosts
Depreciation FuelandOil
HandlingandLandingCosts
HireofAircraft&Equipment
Financecharges
Commissionand
incentives
Others
Group Expenditure31Dec2009
31Dec2008
%
13.3
19.2
3.33.6
0.40.7
12.515.2
11.313.3
42.8
28.5
2.12.6
14.217.0
31Annual Report 2009
31-Dec 31-Dec Change 2009 2008 %Route Revenue (RM Mil) Malaysia 1,596.1 1,388.4 15.0Asia 1,275.1 1,641.0 (22.3)EuropeandMiddleEast 2,202.5 3,148.7 (30.1)AustraliaandNewZealand 1,105.5 1,649.5* (33.0)AfricaandSouthAmerica 175.7 249.7 (29.6)OrientandNorthAmerica 1,609.9 2,270.9 (29.1)
* Restated 7,964.8 10,348.2* (23.0)
Passenger Load Factor (%)Malaysia 69.1 67.8 1.9Asia 65.6 60.7 8.1EuropeandMiddleEast 71.3 74.9 (4.8)AustraliaandNewZealand 74.0 73.6 0.5AfricaandSouthAmerica 66.8 72.6 (8.0)OrientandNorthAmerica 63.5 60.6 4.8
68.6 67.8 1.2
Overall Load Factor (%)Malaysia 64.7 64.1 0.9Asia 69.3 65.2 6.3EuropeandMiddleEast 72.5 71.1 2.0AustraliaandNewZealand 72.4 68.6 5.5AfricaandSouthAmerica 58.6 64.2 (8.7)OrientandNorthAmerica 68.2 64.3 6.1
69.4 67.6 2.7
Analysis of Airline Operations (Including Freighter) By Geographical Route Region
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Malaysia Asia EuropeandMiddleEast
AutsraliaandNewZealand
AfricaandSouth
America
OrientandNorth
America
Revenue Composition by Route31Dec2009
31Dec2008
%
20.0
13.4
16.0 15.9
27.730.4
13.915.9
2.2 2.4
20.2 22.0
FINANCIAL&STATISTICALHIGHLIGHTS
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)32
31-Dec 31-Dec Change 2009 2008 % RM MIL RMMIL GROUPPassengerandExcessBaggage 6,772.6 8,726.8 (22.4)CargoandMail 1,192.3 1,616.6 (26.2)AirportServices 243.5 420.3 (42.1)Charters 227.0 197.6 14.9Other 3,139.2 4,542.4 (30.9)
11,574.5 15,503.7 (25.3)
COMPANYPassengerandExcessBaggage 6,548.5 8,604.8 (23.9)CargoandMail 651.5 1,032.5 (36.9)AirportServices 219.0 408.4 (46.4)Charters 166.0 165.2 0.5Others 2,530.8 3,486.7 (27.4)
10,115.8 13,697.6 (26.1)
Revenue Composition By Category
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Revenue Composition by Category
31Dec2009
31Dec2008%
Others
27.129.3
Charters
2.0 1.3
AirportServices
2.1 2.7
CargoandMail
10.3 10.4
PassengerandExcessBaggage
58.556.3
33Annual Report 2009
Group Financial Highlights
0.0
0.5
1.0
1.5
2.0
2.5
Dividends Per Share
31 Dec 05
31 Dec 06
31 Dec 07
31 Dec 08
31 Dec 09
Sen
2.5
-1.0
-0.5
0.0
0.5
1.0
1.5
31 Dec 05
31 Dec 06
31 Dec 07
31 Dec 08
31 Dec 09
(0.9)
(0.4)
(0.1)
(0.4)
1.4
RM
Cash Flow Per Share
31 Dec 05
31 Dec 06
31 Dec 07
31 Dec 08
31 Dec 09
0.4
2.42.3
1.4
1.6
RM
Net Tangible Assets Per Share
0.0
0.5
1.0
1.5
2.0
2.5
31 Dec 05
31 Dec 06
31 Dec 07
31 Dec 08
31 Dec 09
-150
-100
-50
0
50
100
Earnings/(Loss) Per Share
Sen
(100.2)
(9.8)
58.0
14.629.3
FINANCIAL&STATISTICALHIGHLIGHTS
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)34
Corporate Charts
12,000
10,000
8,000
6,000
4,000
2,000
0
Overall Capacity and Demand
RevenueTonneKilometres
AvailableTonneKilometres
Million
31Dec05
31Dec06
31Dec07
31Dec08
31Dec09
5,11
1
7,36
7
5,75
0
8,50
3
6,30
5
9,57
9
6,35
9
9,52
6
5,20
5
7,71
670,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Passenger Capacity and Demand
RevenuePassengerKilometres
AvailableSeatKilometres
Million
31Dec05
31Dec06
31Dec07
31Dec08
31Dec09
33,4
55
48,7
62 53,3
79
40,1
62
56,2
28
41,1
00
35,6
05
49,7
86
36,1
76
58,9
24
70.0
69.0
68.0
67.0
66.0
65.0
64.0
Overall Load Factor
%
31Dec05
31Dec06
31Dec07
31Dec08
31Dec09
69.4
67.6
65.866.8
67.5
3,000
2,500
2,000
1,500
1,000
500
0
Cargo Carried
MillionTonne
Kilometres
31Dec05
31Dec06
31Dec07
31Dec08
31Dec09
2,065
2,4452,622 2,593
1,949
35Annual Report 2009
Fleet Status
B747-400P 10 13
B747-400F 2 0
B747-200F 4 7
B777-200 17 17
A300-600F 0 1
A330-300 11 11
A330-200 3 3
B737-800 3 0
B737-400 37 37
ATR72-500 14 6
F50 7 9
DHC6 4 5
Total 112 109
No. of Aircraft in Malaysia Airlines’ Operation
as at 31 December 2009
No. of Aircraft in Malaysia Airlines’ Operation
as at 31 December 2008
LeasedAircraft
FINANCIAL&STATISTICALHIGHLIGHTS
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)38
Chairman’s Statement
Dear Shareholders,
The past year was extremely challenging for the aviation industry. The International Air Transport Association (IATA) declared 2009 as the toughest year in the history of aviation, worse than post 9/11 and SARS.
Theindustryrecordeda3.5%declineinpassengertrafficanda10.1%declineinfreighttraffic.InAsiaPacificalone,passengertrafficdeclinedby5.6%comparedtothepreviousyearwhilefreightdeclinedby9.2%.Asawhole,theindustrywasprojectedtoloseUS$9.4billion.
Needlesstosay,MalaysiaAirlineswasadverselyaffectedbythedecline.Forthefullyear2009,werecordedanoperatinglossofRM628million.However,withthemark-to-marketderivativegainofRM1.16billion,thecompanywasabletorecordafullyearpositivenetincomeaftertax(NIAT)ofRM490million.Hence,ourfocusgoingforwardwillbeonoperationalperformancewhichreflectsthetruestateofourbusiness.
The operational loss we recorded in 2009 was mirrored by similar losses, in many instancesworsethanours,ofmostotherairlines.WeourselveswouldhavefaredmuchworsehadwenotcontinuedtopursueourBusinessTransformationPlan(BTP2)aggressively.
Duringtheyearunderreview,wecontinuedtorelentlesslycontrolourcosts–wereducedcostbyanadditionalRM677millionin2009alone,andRM3billioninthelastfouryears.Wealsomaintained a healthy cash position with prudent capital management, which was crucialgiventheacceleratedcashburnratethattheindustryexperiencedunderthetoughoperatingenvironment.
Close on the heels of cost containment exercises, we introduced Dual Pricing where we re-engineeredourpricingmechanism.Throughahighlycompetitiveanddynamicpricing,wewereabletomaximiseouryieldsonpeakflightsandexpandourmarketshareonnon-peakflights.Despite theglobaldownturnanddecliningdemand for air travel,weaggressively stimulateddemandthroughvariouspromotionsincludingEverydayLowFares,Get-the-Dealandlocal/globalTravelFairs.
Theglobaleconomicrecoveryinthelatterhalfof2009,ledbythereboundofemergingAsianmarkets, drove strong growth in passenger load factors, both for Malaysia Airlines and theindustryasawhole.Bytheendof2009,wesawahugeimprovement inourpassenger loadfactors – from 55.7% in January to 80.4% in December. Yields, however, were slower torecoverasdemandremainedfragile.Nevertheless,inthefourthquarterof2009,MalaysiaAirlinesreturnedtooperatingprofitabilitywithaRM3.8millionprofit.Althoughmarginal,theoperatingprofitsignalledthattheworstwasoverandencouragedustowardsenhancingoureffortstotakeMalaysiaAirlinestothenextlevel.
Despitetheharshoperatingconditions,Iampleasedtonotethatourservicestandardsremainedstrong.Intheyear2009,SkytraxawardedMalaysiaAirlineswith“5-StarAirline”statusforthefifthconsecutiveyear,aswellasthe“BestCabinStaff”recognition.Wewerealsorecognisedas“Asia’sLeadingAirline”attheWorldTravelAwards.MASkargowasawardedthe“BestAirCargoCarrierinAsia”atthe2009AsianFreightandSupplyChainAwards.MalaysianAerospaceEngineering(MAE),ourMaintenance,RepairandOverhaul(MRO)arm,wasawardedthe“2009BestAsia-PacificAirlineMROOperationAward”byAviationWeekandOverhaul&Maintenance,twooftheindustry’s leadingmagazines.MAEwasalsorecognisedasthe“BestMaintenance,RepairandOverhaul(MRO)CentreinAsiaPacific2009”byFrostandSullivan,Asia-Pacific.
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)40
Theseawardsandmanyotheraccoladesthatwereceivedoverthe year were testament to the quality and consistent levelsofservicesthatweprovidedtoourpassengersandcustomers.
The awards for engineering and maintenance standards areespecially significant. Safety continues to be of paramountimportance. We remain committed to protecting the wellbeingofourpassengers,workforceandstakeholdersthroughthe effective and stringent implementation of best industrypractices in all our business operations. A monthly safetyperformancereportispresentedto,anddiscussedat,theBoardofDirectors’meetingasthefirstagendaitem.
In2009,theCorporateSafety,Security,HealthandEnvironmentteamfocusedonsafetyactionplanstominimisetheoperationalrisksinouroperations.Openreporting,safetyinvestigationandqualityauditsprovidedlessonsandcontinuousimprovementtoour safety performance. We also registered our participationin the European Union Emission Trading Scheme (EU ETS) inOctober2009.Thisformalisedthesystemsandprocessesusedat Malaysia Airlines to track the fuel burn in revenue tonnekilometresforflightsfromKualaLumpurtoEuropeancities.Inaddition,greenpracticessuchasreduce,recycleandreuseandenergyconservationinitiativeswereintroducedaspartofMAS’GreenJourneyprogramme.
GLC TransformationFor the year under review, we achieved “on target” statusin overall business performance on our Corporate Scorecardunder the Government-Linked Companies Transformation(GLCT)Programme.OurnetprofitofRM490millionwaswellwithin the “exceeding” range on our performance indicator.Asmentionedbefore,werecognisethatthisnetprofitincludesunrealisedgains/lossesfromourfuelhedgesandisnotentirelyrepresentative of our business performance. In our 2010corporate scorecard, we have included a new performanceindicatori.e.operatingprofit,foramoreaccurateassessmentofourbusinessperformance.
IntermsofcostcontainmentKPIs,wewere“ontarget”,asweaggressivelymanagedourcosts throughout theperiodunderreview. We were “on target” in other operational measuresincluding baggage delivery (3.4 cases per 1000 passengers),and achieved “outstanding” in the implementation of aperformance-based culture. The positive move towards aperformance-basedculture inMalaysiaAirlinesmarksagreatmilestone.Unlike inthepast,eachandeverymemberofour19,000-strongworkforcenow realises the importanceofhis/her individualcontributiontowardsachievingacommongoalforthecompany.
The year 2010 will be exciting for us as we take delivery ofthefirstbatchofournewaircraft.Withbetterproductsandconsistent 5-star services supported by enhanced systemsand infrastructureboth internallyandexternally,weaspiretoachieveevenbetterresultsinour2010corporatescorecard.
Project PintarThe PINTAR project is a joint community programme byGovernment-Linked Companies at promoting education asa vehicle to address socio-economic imbalances amongstunderprivileged children. To date, Malaysia Airlines hasadoptedatotalof17schoolsinruralareas,andhasorganisedanumberofactivitiesthatwouldhelppropelstudentstowardsacademic and extra-curricular excellence. The CorporateSocialResponsibilitysectiononpages84to87providesmoreinformationonourinvolvementinthisproject.
Industry OutlookIn January 2010, IATA forecast that the industry wouldcollectively lose an approximate US$5.6 billion for the fullyear.InFebruary2010,IATAhalveditsearlierforecasttoalossof about US$2.8 billion following encouraging signs of solidrecoveryinbothpassengerandcargotraffic.InFebruary,globalpassengerdemandwasupby9.5%year-on-year,whilecargotraffic improved by 26.5%. In Asia Pacific alone, passengertrafficgrewby13.5%whilecargotrafficpostedasubstantialgrowth of 34.5% year-on-year. This strong industry-widerecoveryindicatesthattheworstmaybeoverforairlines,andthe industrycan lookforwardtobrighterskiesahead,exceptthatunanticipatedeventssuchasclosureofEuropeanskiesonaccountofplumesofvolcanicash,willoccurinourindustry.
Nevertheless, the otherwise positive developments augurwellforMalaysiaAirlines.Wearecautiouslyoptimisticontheindustry.Oilpricescontinuetobevolatile,andtheuncertaintyof theglobaleconomicoutlookaddstothechallenge.WhiletheAsiaPacificregionisplayingakeyroleinleadingtheworldoutofthedebilitatingaftermathofthe2008GlobalFinancialCrisis (GFC), the economic outlook particularly in Europeremainsuncertainfornow.Fragilegrowthindemandex-AsiaPacific inevitablymeans slowerpick-up inyields.Additionally,aftermorethanayearofcuttingcapacity,inresponsetoweakdemandsincetheGFC,airlinesareanticipatedtoaggressivelyadd the cut capacity back, and potentially add even morecapacity above and beyond their pre-crisis capacity. Moreandmoreaircraftaregettingdeliveredthisyearandbeyond,and the additional capacity will continue to put tremendouspressure on yields. Another challenge comes in the form ofhigher costs attached to security and environmental policies,whichhavebecomemorecomprehensiveinresponsetocurrentindustry-wideissues.
41Annual Report 2009
proudof.Weareindeedprivilegedtohavehadtheopportunitytoworkwithhimintherelativelybriefperiodhewaswiththecompanyandare all proudofhis appointment as aMinisterinthePrimeMinister’sDepartmentandChiefExecutiveOfficer(CEO) of the Performance Management and Delivery Unit(PEMANDU).
Ontheotherhand,IwouldliketointroduceTengkuDato’AzmilZahruddin, who assumed the role of Managing Director andChiefExecutiveOfficeron28August2009.TengkuDato’Azmilwas previously the Chief Financial Officer and worked hand-in-handwithDato’Sri IdrisonthenumerousinitiativesunderBTP1andBTP2.TheBoardisconfidentthatTengkuDato’Azmilandthemanagementteamwillcontinuetodeliverexceptionalresultstothecompanyanditsshareholders.
To each and every one of our employees who has remainedloyalanddedicatedtothecompanyandcontinuestoperseverewith the company throughout the years, I would sincerelylike to thank you. Our utmost appreciation must also go tothe government, our regulators and business partners fortheircontinuedsupportinseeingusthroughoneofthemostchallengingperiodsofourbusiness.MydeepestappreciationalsogoestomyfellowBoardmemberswhohavebeeninstrumentalinprovidingguidanceandvaluableinsightstothemanagementthroughouttheyear.Toourshareholders,passengersandcustomers,wethankyoufor your loyalty and support, and continuous feedback. Wehave built our business strategies with you in mind and willcontinuebuildingvalueforshareholdersandcustomersmovingforward.
Ilookforwardtoyourcontinuingsupportintheexcitingtimesahead,aswestrivetomakethecompanyprofitableandgrowourselvesintotheworld’s5-StarValueairlineofchoice.
Tan Sri Dr Mohd Munir bin Abdul MajidChairmanMalaysia AirlinesApril 2010
It is important to note that though challenges have grownin complexity, they are certainly not new to the industry ortoMalaysiaAirlines.Wehavedealtwithall thesechallenges,andmore,inthepastandhaveremainedresilientthroughouttheyears.Wewill continuetoconfront thesechallengesandremaincommittedtoourvisionofbecomingtheworld’sFiveStarValueCarrierassetoutinourBTP2.
Moving ForwardAfteryearsofhardwork,wenowmoveontothenextphaseinBTP2:Growth.Ourturnaroundandtransformationinitiativeshavepreparedusandlaidthefoundationforgrowthandfutureexpansion.Afterhavingwonthefighttosurvive,wemustnowinvestinourfuture.
Intheyearunderreview,weannouncedtheacquisitionofupto 55 new Boeing 737-800s, up to 25 Airbus 330-300s, upto4Airbus330-200freightersand6Airbus380superjumboaircraft, the last having been long ordered. In 2010, we willtake delivery of 2 Boeing 737-800s, and we expect to starttakingdeliveryofourA330sin2011andtheA380stheyearafter.By2015,wewillhavetheyoungestfleetinAsia.
Wecontinuouslystrivetoimprovecustomers’experienceatourfivemaincustomer touchpoints–Purchase,Pre-embarkation,Embarkation, Inflight and Disembarkation. The PassengerServicesSystem(PSS)thatweimplementedin2009allowsustoconvergeconveniencewithfar-reachingcommercialplatforms,ensuring faster service delivery, quicker online purchase,miles redemptionoptionsonlineandothernewservices.MHMobile,ourmobiledistributionchannelmadepossiblewiththeimplementationofthenewPSS,offersthemostcomprehensivemenu of mobile phone functionality available to airlinepassengersanywhereintheworld.
In early 2010, with the approval from our shareholders,we raised RM2.67 billion through a rights issue to furtherstrengthenourbalancesheet.Allthesearedonewithonethinginmind–weareinvestinginourfuture.Wecontinuetoremainfocusedonourvisionofprovidingour customerswith5-star products and services ataffordableprices.In2010ourambitionistogearourselvesforgrowth.Withprofitablegrowth,wewillbeabletoachievethisvision.
AcknowledgementsOn behalf of the Board, I would like to extend my heartfeltgratitudetoDato’SriIdrisJalawhosevisionaryeffortshadbeenvital in turning around Malaysia Airlines and in starting theprocessoftransformingthecompanyintoonethatwecanbe
CHAIRMAN’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)42
Managing Director’s Statement
Year 2 of BTP 2
Dear Shareholders,
Year 2 of our Business Transformation Plan (BTP2) was an extremely tough one for Malaysia Airlines. In addition to weaker demand resulting from the global economic downturn and the H1N1 pandemic, Malaysia Airlines also wrestled with overcapacity and the ensuing heavy discounting of airfares. Throughout the year, fuel prices continued to be volatile. While jet fuel prices have fallen from a high of USD182 per barrel in July 2008 to an average of USD70 per barrel in 2009, existing fuel hedging positions have inevitably prevented airlines from realising the gains from lower fuel prices. Consequently, many airlines still recorded losses or lower profits despite the easing of fuel prices. In fact, over 40 airlines have gone bankrupt in the year under review and more financially weak airlines are expected to follow suit.
Nevertheless,theharshmarketconditionsin2009provideduswiththeidealplatformtoreassessandrealignourfocus.WiththeBTP2inmind,wesetoutadefinitiveactionplantomakethemostoutofthecrisisathandandatthesametimegearourselvesforfuturegrowth.
1. MAINTAIN 5-STAR PRODUCTS AND SERVICES
Theyear2009sawmanyprocessimprovementsandchangesinstitutedtoensureweconsistentlydeliver5-Starproductandservicestoourpassengers.Weembarkedonanumberofinitiativesto improveonourproductandservicesbothonthegroundandonboard includingspendingsubstantiallymoreonfoodandbeverageofferingsperpassenger.
The cutover to Phase 2 of the Passenger Services System(PSS) from our old reservations system (KOMMAS 4) wassuccessfully concluded in November 2009. This involved themigrationandintegrationof52underlyingsystemstotheSITAReservationsplatformresultinginourabilitytoofferpassengersa more convenient and efficient travelling experience. Theinitiative leverages on technology and streamlines processesto reduce complexity and costs while ensuring moreconvenient transportationofpassengersand freight. Todate,the implementation of the PSS has been a critical catalystin the company’s customer service improvements, revenueenhancementandcostsavingsinitiatives.
Inaddition,thissecondphasehasenabledtheroll-outofmorechannels for self-service technology. This includes MHmobilewhichnotonlyprovidesgreaterconveniencetoourcustomersbutisalsoexpectedtobeadominantsalesandservicechannelwithinthenext10years.Itofferscomprehensivemobilephonefunctionalityandallowseasyaccesstoinformationconcerningflight bookings, status, schedules and even a baggage tracer
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)44
applicationfortracinglostandmishandledpassengerbaggage.PSS also provides a platform for enhancing Enrich offeringsincludingtheredemptionofEnrichmilesonline.
The full integration of the PSS with our operations marks asignificantmilestoneandisamajorpartofourongoingeffortstoimprovecustomerexperienceatalltouchpoints.
2. STIMULATING DEMAND
Tostimulatedemandthatwasseverelyimpactedbytheglobaleconomic downturn, we stepped up our sales and tacticalpromotionswiththeintroductionofinnovativeproductsforbothbusinessandleisuretravellers. Intheyear2009,welaunchedtheMASStimulusPackage,encompassingpromotionslikeGet-the-Deal, Balik Kampung, Business Companion, Kids Fly Freeand Weekend Getaway to complement our hugely popularEverydayLowFarespromotion.Thesepromotions,whichwerecarriedoutprimarilythroughourwebsite(www.malaysiaairlines.com)shiftedmoretraffictodirectsaleschannels.Ourinternetpenetrationraterosefromonly4%in2007to25%in2009,and the value of sales rose a phenomenal 470% to RM1.3billionin2009fromamereRM275millionin2007.
The year 2009alsomarked amoredynamicpresence in thedigital sphere. In addition to online advertising and searchenginemarketingcampaigns,wealsobuiltupourpresenceonFacebookandTwitter.
Theannual10-dayMalaysiaAirlinesTravelFair(MATF),offeringdiscounts of up to 70% on our products, also helped instimulatingdemand. Thepromotional fareswereofferednotonly at the booths set up for the fair, but were also offeredthroughourinternetbookingengineandcallcentre.ThemoreintegratedapproachofsalesgeneratedmorethanRM90million
45Annual Report 2009
inrevenues.BesidestheMATF,wealsoparticipatedinvariouslocalandglobaltravelfairsthroughouttheyeartoencouragepeopletotravel.
In line with the decline in fuel prices, we moved towardsabolishing fuel surcharges for domestic travel and loweredfuelsurchargesfor internationaltravel intheyear2009.Asaresult,airtravelbecamemoreaffordableforourcustomersandboostedthedemandforbothleisureandbusinesstravel.
In the year2009,wealso continued to expandournetworkby signing new codeshare agreements with Air Mauritius,TurkishAirlinesandJetAirwaysandexpandedourcodesharepartnershipswithSriLankanAirlinesandRoyalBruneiAirlines.Besides boosting revenues, these codeshare partnershipsfurther complement our expansive hub-and-spoke networkstrategyandprovidegreaterchoicetocustomers.
3. LOWER COSTS
The tough operating environment meant that we had torelentlesslymanageourcosts.Weintensifiedausteritymeasuresincludinga7%budgetcutacrosstheboard.Ablanketfreezeonallrecruitmentanddiscretionarytrainingandtravellingwasestablished to further contain costs. Projects carriedoutoverthe course of the year were prioritised based on importanceandcriticalitytothebusinessandalldiscretionaryexpenditurewerereviewedrigorouslyandputonhold,onaneedsbasis.
Inaddition,wecontinuedtopursueourstringentstructuralcostreductionmeasuresassetoutinBTP2.Thefullimplementationofe-TicketingsavedusafurtherRM87million.AnadditionalRM80 million savings in distribution costs were recordedfollowingthenotableshift insales todirectchannels.ProjectDeltarecordedsavingsofsomeRM137million.AremarkableRM262 million cost savings were achieved through the 7waves of the Procurement Revamp initiative, which includedinitiativesinvolvingprocurementoffuel,reducingF&Bwastage,advertisingandpromotionsaswellasoverflightcharges,airportfeesandtraffichandling.AfurtherRM111millionsavingswererecordedthroughthe“Engineering2Business”initiativewhichencompassestheintegrationofsupplychainandmanagementof costs in the Engineering and Maintenance area. In total,RM677million in structural cost savingswas recorded in theyear2009,whichbringsthetotalcostsavingsachievedinthepastfouryearstoaboutRM3billion.
Inthecourseofcarryingourstructuralcostreductioninitiatives,thesafetyofourpassengersremainsparamountandinnowayweresafetyandourcustomervaluepropositioncompromised.
FINANCIAL REVIEW
For the year under review, we recorded a net income aftertax (NIAT) of RM490millionwhich includes aderivativegainofRM1.16billion.The inclusionofderivativegains isaresultoftheearlyadoptionofthenewFinancialReportingStandard139(FRS139).FRS139establishestheprinciplesforrecognisingandmeasuringfinancialassets,financial liabilitiesandcertaincontracts tobuyor sell non-financial items. The FRS139wasmademandatoryinMalaysiaeffective1stJanuary2010andissimilartotheInternationalAccountingStandardIAS39,whichis already adopted by many international airlines. Our earlyadoption of FRS139 ensures compliance with the Malaysianaccountingstandardson topofensuringourfinancial resultsareeasilycomparablewithotherairlines.
We recorded a contraction of about 25% in group revenue,whichcanbeattributedtothe12%overallreductionincapacityaswellas loweryields.Whendemandforairtravelcollapsedin 2009, we made a conscious decision to cut capacity andrealignournetworkstrategy.Wecutbackoncapacityonourinternationalroutesandinthelatterpartoftheyear,redeployedsome capacity to our domestic and regional routes. At thesame time, we embarked on aggressive sales and marketingcampaigns to stimulate demand. As a result, we recordedremarkable improvements inourpassenger loadfactorwhichincreasedto76.5%inthefourthquarteroftheyear,up11.2percentagepointsyear-on-year.ForFY09,thepassenger loadfactorincreasedby0.9percentagepointsfromFY08,to68.8%.
MANAGINGDIRECTOR’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)46
Aswewerecognisantofthepressuresonrevenues,wedoubledoureffortsincontainingcosts.OilpricesdeclinedsignificantlyfromahighofUSD182per barrel in 2008 to an averageofUSD70per barrel in 2009. The lower averageprice, coupledwith lower consumptionof fuel, resulted in a46%decreasein our fuel expenditure. Overall, we managed to reduce ouroperatingexpenditureby20%forFY09.
Asaresultoftheglobaldownturnandsubsequentcollapseinairtravel,werecordedanoperatinglossofRM628million.Theyear 2009posednumerous challenges to airlinesworldwide,andmanydidnotsurvive.Anumberofairlinespostedbiggerlosses and some even filed for bankruptcy. Malaysia Airlines,however, remained resilient and emerged poised for futuregrowth. We were aggresive in terms of generating revenueand cutting costs. Indeed, in the fourth quarter of the year,werecordedamodestRM3.8millionoperatingprofit,whichistestamenttotheeffortsweputinplacethroughouttheyear.
Ourcargooperationsalsosawlowerrevenuesandyields,bothdown 33% and 20% from FY08 respectively as a result ofnotablylowerdemands.However,demandsignificantlypickedupinthesecondhalfoftheyear,andMASkargohasbeenagileincapitalisingontheeconomicrecoveryinemergingmarketsledbyChina.As a result, cargo load factor rebounded from67.5%inFY08to70.3%inFY09.
Intermsofthebalancesheet,wehadRM2.95billionincashand negotiable deposits at the end of FY09. Prudent capitalmanagementandcashconservationpracticesensuredthatthebalancesheetremainedstrongandhealthy.
SAFETY REMAINS PARAMOUNT
Safetyremainsanintegralpartofour5-StarMHdeliverytoourcustomersandwecontinuetoensurethatthe“NoCompromisetoSafety”approachisfullyunderstoodandstronglysupportedby people, policies and processes across the Company. OurBoard-endorsed Safety Management System (SMS) seeks tosafeguardthesafetyandsecurityofouroperationsinallareasthroughoutthecompany.
In theyearunder review,weemphasisedanumberofsafetyactivitiestoaddresskeysafetyrisks.The“RaisetheSafetyBar”(RSB) initiative was implemented under the Safety SecurityHealthandEnvironmentfor2009Programmetoaddresstheserisks.Inaddition,safetydevelopmentplanswereimplementedtocontinuouslyenhanceourproactivesafetycapabilities.Flightdata analysis, risk assessments and line operations changeprogrammeswerereviewedfortimelyandinsightfulfeedbackfrom relevant units. The monitoring of safety managementprocessesinflightoperations,engineering,security,cargoandgroundoperationsweredonecontinuouslytoensurethattheseareinlinewiththecompany’squalitystandards.
47Annual Report 2009
AWARDS AND RECOGNITION
Despite the challenges we faced in FY09, we are proud tonote that we did not compromise on our high standards ofproducts and service delivery. In the year 2009, we won the‘5-StarAirline’awardforthefifthconsecutiveyearaswellasregainedthepositionasthe‘World’sBestCabinStaff’,bothbySkytrax.Wewerealsorecognisedas‘Asia’sLeadingAirline’bytheWorldTravelAwardsaswellasthe‘BestAirlineinSoutheastAsia’bytheGlobalTravellermagazine.
In addition, Aviation Week accorded us third place for its‘2009TopPerformingCompanies’andJaneTransportFinanceawardeduswiththe‘AircraftLeasingDealoftheYear(Asia)’.
MASkargomeanwhilewas recognisedas the ‘BestAirCargoCarrier in Asia’ at the 2009 23rd Annual Asian Freight andSupplyChainAwardswhileMalaysianAerospaceEngineering(MAE),ourMaintenance,RepairandOverhaul(MRO)armwasawarded the ‘2009 Best Asia-Pacific Airline MRO Operation’bytwoleadingmagazinesintheindustry,AviationWeekandOverhaul & Maintenance. MAE was also recognised as the‘2009BestMaintenance,RepairandOverhaul(MRO)CentreinAsiaPacificbyFrost&Sullivan.
Firefly, our community-airline subsidiary, was recognised asthe Best Value Airline of The Year Award (Commercial AirTransportation Category) at the 2010 Frost & Sullivan AsiaPacificAerospace&DefenceAwards.
Alltheseawardsandmorearetestamenttothefactthatwecontinuetodeliverexceptionalproductsandservices,notonlytoouresteemedpassengers,butalsotoourbusinesscustomers.
MOVING FORWARD
Brighter Skies Ahead
2010 prospects are bright for Malaysia Airlines and theindustryingeneral.AccordingtotheInternationalAirTransportAssociation, the industry has seen remarkable recovery inpassenger and cargo traffic at the end of FY09 and earlyFY10.Growth indemand is fairly significant in theemergingmarkets of Asia, Latin America and the Middle East. In AsiaPacific alone, passenger traffic continued to grow by 6.5%in Januaryand13.5% inFebruary,year-on-year.AsiaPacific’stravellersnumbered647millioncomparedto the638millionwho travelled within North America. By 2013, an additional217milliontravellersareexpectedtotaketotheskieswithinAsiaPacific.
The2010prospectsarealsobrightforMASkargoandtheMRObusiness.WithareboundincargodemandinQ409ledbytheAsia Pacific region,MASkargo is lookingatgrowing capacityby more than 10% in 2010. It is currently developing itspartnershipwithHNAGroupinChina.MASkargoisalsolookingintogrowingitsfreighternetworkandupgradingtheAdvancedCargoCentreatKLIA. With thefirstof twonewA330-200freightersexpectedtobedeliveredinthethirdquarterof2011,MASkargowillbeingoodpositiontocapitaliseonthestrongeconomicgrowthinAsiaPacific.In January 2010, MAS’ JV MRO company, MAS-GMRAerospaceEngineeringCompanyLtd,signedaMemorandumofUnderstandingwithJetAirways.Thisistoprovideexclusiveheavy maintenance services to Jet’s fleet over the next 10yearswithanoptionofanother5years.Inaddition,MAShasalso sealed a 3-year deal to provide maintenance support toSpiceJet,India’slowcostcarrier.
MANAGINGDIRECTOR’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)48
Whileeconomicrecoveryhasbeenstrong,particularlyinAsia,theEuropeaneconomyislagging.Asaresult,globalrecoveryremainsfragileandtheuncertaintyinthelonger-termoutlookmayimpedefurthergrowthindemandforairtravel.Inaddition,a hugenumber of newaircraft are expected tobedeliveredworldwide. This additional capacity will put more pressureon prices and yields, and yield recovery may be slower thananticipated.
Nevertheless, with these challenges in mind, in year 2010MalaysiaAirlineswillstrengthenallareasforgrowth.WewillcontinuetopursuethestrategiesandinitiativeslaidoutinBTP2andcontinuewiththegroundworkthatwehavelaidoverthepastyearintransformingMalaysiaAirlinesintoa5-Starcarrier,capable of delivering the highest standards of products andservicestoitscustomers,atexceptionalvalue.
Fleet Renewal Programme
Wefirst embarkedonourfleet renewalprogramme in2008with a firm order of 35 Boeing 737-800 aircraft with theoptiontopurchase20more.Weexpecttostarttakingdeliveryin October 2010 and will progressively replace our existingBoeing737-400fleet.Intheyearunderreview,wecontinuedourfleetrenewalprogrammewiththeorderofupto25newAirbus330-300passengeraircraftandupto4Airbus330-200freighteraircraft.AMemorandumofUnderstandingwassignedon22ndDecember2009 for thefirmorderof15A330-300aircraft,withpurchaseoptions for another10. Theseaircraftwillbedeliveredfrom2011to2016andwillcomplementthein-comingfleetof 35B737-800aswell as the6Airbus380aircraftwehaveonorder.
Thewide-bodyA330-300aircraftisexpectedtoserveAustralia,South Asia, China, North Asia and Middle East while theB737-800 will strengthen domestic and regional routes. Ontheotherhand,theA380aircraftwillbeusedtoreplaceourexistingBoeing747-400aircraft,andwillservekeylonghauldestinationssuchasLondonandSydney.FireflyandMASwingshave recently completed their fleet renewal exercise, bothoperating7and10ATR72-500aircraftrespectively.By2015,alltheaircraftorderedwillbeinoperationandweexpecttohaveoneof theyoungest,most fuelefficientandenvironmentallyfriendlyfleetsinAsia.
Theaimof thefleet renewalprogramme ispredominantly tophase out older aircraft in favour of newer aircraft models.Newer aircraft models developed with the latest technologywillhelpusimproveourproductofferingsandstrengthenourcompetitive position in the industry. These aircraft will alsoallow us to better align our products with what the market
demands. A newer, younger fleet will provide better fuelefficienciesandreducedmaintenancecosts,whichinturnwillallowustooperatemoreefficientlyandwithaloweroperatingcoststructure.Theincreasedcapacityandrangeofeachoftheaircraftwehaveonorder,willhelpusbettermatchdemandwiththecapacitywedeployinourroutes.Forexample,giventhe range and capacity of the existing B737-400 aircraft,these aircraft are currently deployed only to domestic andcloseASEANroutes.HoweverthenewB737-800canflyonalongerrangeandwithmoreseatsperaircraft.ThisfleetwillbedeployedbeyondASEANtoservemedium-haulrouteslikeintoChinaandIndia.
Tocapitalizeonthegrowthinairtravelaswehaveseeninearly2010,wehavestartedaddingfrequenciestokeydestinationsstartingMarch2010toJakarta,Bangkok,SaigonandBangalore.There will also be additional flights to Perth, Auckland, Parisand Johannesburg. In addition,passengersflying toBrisbanewillenjoydirectflights.Astheneweraircraftstartarriving,wewillprogressivelyincreasecapacityacrossournetwork.
In March 2010 we concluded a one-for-one rights issue toraiseRM2.67billiontofundworkingcapitalandrepaymentofdebtsaswellasaircraftacquisitions.Thisexercisewas timelyconsideringtheeconomicrecoveryandimprovedcapitalmarketconditions.Italsoputsusinastrongerpositiontosupportourfleetrenewalprogramme.
A 100% leasing model is not optimal in the long term asoperatingleasesaregenerallymoreexpensivethanon-balance
49Annual Report 2009
sheet financing. Hence, upon embarking on the major fleetrefreshexercise,wehavedecidedthatwewillshifttoamoreoptimalmixofleased/ownedfleet.Thiswillseeapproximately1/3aircraftbeingowned,1/3beingleasedandtheremaining1/3 eitherbeing leasedorowned. This flexibilitywill dependon prevailing market conditions, our cash and balance sheetpositionsaswellastheavailabilityoffinancing.
Improved Pricing
For2010,withstrongerloadfactorstoleverageon,thefocuswillbeonincreasingyields.Tothiseffect,wewillcontinuewiththedualpricingstrategyandmanagingourseat inventory. Inaddition, we will aggressively benchmark our pricing againstourpeersandrespondmoredynamically.Wewillfurtherdrivesales across all channels, including to direct sales channels,i.e. through our website and mobile channels, to ensure wecapitaliseonthegrowingdemandforairtravelwehaveseeninQ1of2010.
Lower Unit Cost
Althoughweexpecthighervariablecostswithfuturegrowthincapacity,wecontinuetoexploreavenuestofurtherreduceourfixedoperatingcosts,withoutcompromisingonsafetyorthequalityofourproductsandservices.By2015,weaimtoreduceour Cost per Available Seat Kilometre (CASK) by 15%. Thisaggressivetargetwillbemadepossiblebythecostefficienciesweexpecttoachievewithrenewedfleetsaswellasthesavingsfrom owning at least 1/3 of our aircraft (as opposed to thecurrent100%-leasedstructure).TheimplementationofthePSSand Enterprise Resource Planning (ERP) platform will simplifyourbusinessprocessesandhelpusreducecostsfurther.
We also continue to hedge our fuel requirements. Oil pricessteadilyincreasedtowardsthelatterpartof2009,andtradedclose toUSD90perbarrel inDecember2009.Therisingcostof fuelandtheanticipated longertermvolatility inpricesarepartiallymitigatedwiththehedgingwehaveinplace.Investing in our Future
ItookoverthehelmofMalaysiaAirlineson28thAugust2009fromDato’SriIdrisJalawhotaughtusthatacrisismustneverbewasted.Thus,wedidnotfalterfromthechallengeswefacedin2009butinsteadfoundopportunitiestobemoreefficientandproductiveinourbusiness.
Throughouttheyears,wehaveembarkedonmanyinitiativestohelpusreducecost,increaserevenues,improveourproductsandservicesandotheroperationalimprovements.Thesewerealldoneasgroundworkbeforeweembarkonthenextphaseofgrowth.
We will soon start taking delivery of new aircraft, we haveimplemented new systems and infrastructure both internallyand externally and our balance sheet is well-capitalised tosupportourgrowth.
All these have been and are being done for our future. Wehavesetouttotransformintotheworld’s5-StarValueCarrier,andwearewellonourwaytoachievingthat.Together,wewillworktowardsbecomingaregionalandglobalchampionintheindustry,onethatwewillallbeproudof.
Tengku Dato’ Azmil Zahruddin bin Raja Abdul AzizManaging Director and Chief Executive OfficerMalaysia AirlinesApril 2010
MANAGINGDIRECTOR’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)50
Airport and Flight Operations
Fortheyear2009,AirportOperations(AO)managedtoachievesavingsofaboutRM30millionandalsocontributedaboutRM50millioninexcessbaggagecollections.TheFlightOperations(FO)departmentidentifiedandimplementedatotalof27initiativesunderProjectDelta,including11initiativesonfuelefficiency,andgeneratedsavingsofaboutRM65million.
Inthesameyear,AOalsostartedthe‘Tagless’bagprojectunderwhichnewrigidtagsaswellasnewtechniquestotagbagswere introduced.This initiativereducesthe instances inwhichbagtagsaretornandthusreducestheamountofmishandledbags.In2009,totalmishandledbagsdroppedfrom3.9incidentsperthousandpassengersin2008to3.3incidentsperthousandpassengers,whichisbetterthantheindustrybenchmarkof3.4casesperthousandpassengers.
ProjectEDGEwasalsolaunchedin2009toimprovetheservicelevelofcustomerserviceagents.Undertheproject,trainingwasconductedthroughout2009toinculcategoodhabitsandserviceexcellenceamongstthefrontlinegroundstaff.
Operational Review
To enhance flight safety, the FO training arm together withthe Flight Safety department introduced initiatives to reviewtrainingfootprintsfortheentirefleetinlinewiththelatestintheindustry.
Ground Handling Management (GHM) undertook acomprehensive review of all ground handling contractsexpiring in2009.The reduction ingroundhandling rates fornewcontractsconcludedin2009wasintheregionofRM130million,mainlycoming fromAustralia, IndiaandHongKong.In order to ensure that ground handlers provide the highestservicestandards,ServiceLevelAgreements(SLA)withpenaltiesforservicefailures,weremademandatoryforallnewcontracts.Inaddition,thedepartmentalsomanagedtosecurethegroundhandling contracts for all new airlines operating into KualaLumpurin2009,namelyAirAstana,AirZimbabweandUnitedAirwaysofBangladesh.GHMalsomanagedtowinoverEtihadAirwayswhowaspreviouslyservedbyanothergroundhandler.
51Annual Report 2009
Inflight Services
In2009,InflightServicesfocusedonimprovingserviceandfoodandbeverageofferingstopassengers.
Withtravellers’increasingsophisticationinfoodandbeverage,Malaysia Airlines strives to meet customer expectations byoffering route specific meals through passenger profiling.Several workshops were conducted between our local chefsandchefsfromIndia,China/HongKong,JapanandSwitzerlandto enhance the authenticity of dishes while maintaining the‘Halal’qualitybenchmark.NewAsianmenusaswellasWesterncuisinesweresuccessfullyrolledoutduringtheyear.
million in2009. InFebruary2009,MAEmarkeditsfirstforayoverseas by signing a 50:50 joint venture agreement withGMR Hyderabad International Airport Ltd. The joint venturecompany,knownasMAS-GMR(MAG)AerospaceEngineeringCompanyLtd.,willbuildanMROfacilityontheeasternsideoftheRajivGandhiInternationalAirport,Hyderabad.Thefacility,cateringtobothnarrowandwidebodiedaircraftchecks,willbeupandrunningbythefirstquarterof2011.BuiltspeciallytoserviceaircraftintheIndiansubcontinent,MAS-GMRwillhavethe capacity to service between 60-80 aircraft annually. Thisgives thecompanyaheadstartwhentheeconomyrecovers,andnewcapacitywillbeaddedasneeded.
On13May2009,MAEandEADSSECA,aPratt&Whitney(PW)designated aircraft engine repair and overhaul facility of theEADSGroup,signedaMemorandumofUnderstanding(MoU)towardstheestablishmentofa jointventure (JV)company inMalaysia to create a world class PW100 series engine MROfacilityinMalaysia.Thefacilityispositionedasaone-stopcentreforengine,airframe,andcomponentsupportforPW100seriesengines,andexpectstobeoperationalinend2010.
On 17 June 2009, Alenia Aeronautica and MAE sealed anagreementtocreateajointventurecompanyfortheprovisionof MRO services for turboprop commercial aircraft. The newcompany, MAS-Alenia Aeronautica Aerospace Engineering(MAAE), is 51% owned by MAE and 49% by AleniaAeronautica.MAAEaimstoofferMROservicesforATRaircraftwithinASEAN.
On 2 December 2009, MAS Engineering sealed 2 MoUs,one with PW, and another with KRAUSS GmbH AviationTechnologies,initspursuittobeattheforefrontofnewaircrafttechnology.
Inconjunctionwith2009MerdekaDaycelebrations,wepaidtributetoTunAbdulRazak,Malaysia’ssecondPrimeMinister,byofferinghisfavouritedishesonselectedroutes.Thisinitiativeis part of our on-going efforts in promoting the country’ssignature dishes onboard. In addition, our signature Sataydishandpremiumbrandedice-creamandchocolatewerealsoofferedintheeconomyclassmealboxtogivemorepassengersatasteofourmostpopularF&Bofferings.
Engineering and Maintenance (E&M)/ MAS Aerospace Engineering (MAE)
Intheyearunderreview,MASEngineeringrecordedthirdpartyMaintenance,RepairandOverhaul(MRO)revenuesofRM385
MANAGINGDIRECTOR’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)52
TheMoUwithPWwillseebothpartiesexploringpossibilitiesofsettingupaJVcompanyfornacelleandcompositerepairandoverhaul. TheMoUwithKRAUSS is aimedatprovidingpartsrepairforengines,landinggears,andairframe.
In terms of cost savings, MAS Engineering achieved RM103million of savings through the E2B Cost Management andIntegrated Supply Chain portfolio without compromising onsafety and quality. A total of 42 Key Performance Indicators(KPIs)wereusedtomeasureandmonitorsafetyperformanceandvarioussafetyactionplanswereidentifiedandappropriateprocess put in place for different reporting levels to themanagementandtheboardthroughouttheyear.
MASkargo
MalaysiaAirlinesCargoSdnBhd,MASkargo’scorebusinessisthesellingofspaceonbothMalaysiaAirlinespassengerflightsandMASkargofreightersaswellascargogroundhandlinginthreemajorairports inMalaysia.MASkargohandlesgeneral cargo,expresscargo,perishables,liveanimals,transshipmentofcargoonbehalfofMalaysiaAirlinesaswellasothercustomerairlines.Through MASkargo Logistics (MLSB), MASkargo also offersTruckFlight servicesof truckingpalletizedcargo fromvariouspoints for connection on board MASkargo flights at KLIA.MLSBalsoprovidesfullCustomsbondedtruckingfacilitiesand
securityescort services throughoutMalaysianhubs.Equippedwith leadingcargohandlingsystems,MASkargo’sbase is theAdvancedCargoCentre(ACC)-a108-acrecomplexcovering92,900sqmofprocessingareaandisabletohandleupto700tonnesofcargoannually.Italsofeaturesasophisticatedsecuritysystemandthelatesttechnologytostreamlineproceduresandcommunication.
In the year under review, MASkargo has initiated severalrevenue enhancement programs which include a cargovolumetricprojecttoeliminaterevenueleakageandback-endcontainer project for last minute upliftment of containerizedcargo.Inadditiontothis,costcontrolmeasuresthroughplasticrecyclingprojecthaveprovedtoenhanceMASkargo’sbottomline.Asagroundhandlingagent,MASkargofurtherimprovedits efficiencyby improving themishandling rates to0.048%,downfromthepreviousyear’sof0.056%.
Todate,MASkargohasachievedtheISO9001,ISO14001andOHSAS18001certifications.Thecompany’ssuccessinacquiringthe prestigious certifications is a formal recognition that thequalitymanagement,environmentmanagementaswellastheoccupationalhealthandsafetymanagementsystems inplaceareofinternationalstandards.
2009 was an incredibly tough trading environment for theglobal airfreight industry andMASkargowasnot immune tothis.Thefirsthalfoftheyearprovedtobechallengingasairlinesaggressivelyadjustedcapacitytoaddresslowerdemand.Infact,itwasnotuncommontoseefreightersbeinggroundedglobally.Inlinewiththeindustrytrends,thetotalcargorevenuedroppedby29.4%fromFY08mainlyduetoareduction incombinedyieldandtonnage.TotalcargothroughputatKLIAdecreasedto536,636tonnesfrom623,314tonnesinthepreviousyear.However, this reduction of only 13.9 percent is in line withother cargo operators operating in this region. Nevertheless,theairfreightmarkethasmadearemarkablerecovery inthefourthquarteroftheyear.ThisrecoverywasprimarilydrivenintheAsiaPacific region,andMASkargomanagedtocapitaliseon the sudden increase in demand from this region. Due totheremarkableimprovementindemandduringthelastquarterof FY09,MASkargomanaged to end thefinancial yearonastrongerfooting.
MASkargowasrecognisedastheBestCargoAirlineinAsiaattheAsianFreight&SupplyChainAwardsin2008andhassincemanagedtoremainasoneofthetopthreeaircargocarriersinAsia,proving itsmettleasastrongcargoplayer in region,capableofhandlingthemostcomplexanddelicateofcargo.
53Annual Report 2009
Firefly
Duringtheyear,Fireflytookdeliveryof2additionalATR72-500aircraft.Withatotalfleetof7aircraft,Fireflyadded7newroutesnamely Subang-Kerteh, Subang-Alor Setar, Subang-Batamand more importantly Subang-Singapore, Ipoh-Singapore,Kuantan-Singapore and Kuala Terengganu-Singapore. With abiggerfleetsize,Fireflyhasalsoextendeditsservicestoincludecharter flights. Some notable charters undertaken includedthe humanitarian flights to Padang, Indonesia, during theearthquakeinOctober2009andalsoadiplomaticmissionforaEuropeannationtoBandaAceh.
Passengers of Firefly enjoyed several product enhancementsin 2009 namely online purchase of travel insurance, seatselection, excess baggage as well as carriage of sportsequipment. Additionally all Firefly flights are now code-sharewith Malaysia Airlines which gives passengers the increasedflexibility of purchase channels, interlining and connectingflights.Furthermore,asanaddedbonusforregularpassengers,FireflynowoffersaCorporateTravelProgrammeforcorporatetravellers as well as a Government Travel Programme forgovernmentofficials.
To enable ease of booking, Firefly now has airport ticketingoffices at all its destinations as well as the KLIA Low CostTerminal. Additionally, Firefly has ticketing offices in the cityofKualaLumpur(KLSentral),Penang(KOMTAR),MedanandSingapore.Forthecomfortandconvenienceofitspassengers,FireflyalsointroducedFireflyCustomerLoungesattheSkyparkTerminalandChangiBudgetTerminal.
2009alsomarkedthecommencementofsocialmediamarketingby Firefly particularly on Facebook (http://www.facebook.
com/Firefly), blogosphere (http://blog.fireflyz.com.my), andTwitter (http://twitter.com/FlyFirefly). This new and excitingcommunicationsmediumisfastbecomingaveryefficientanddirect method for Firefly to interact with its passengers thusenablingittorespondmoredynamically.
Thepinnacleof2009 forFireflywasbeing recognisedas the2010AsiaPacificBestValueAirlineoftheYearawardbyFrost&Sullivan.FireflycameouttopsintheAsiaPacificregionforitsproductmatchtoclients’need,featureandeaseofuseaswellaspriceandvalue.
MASwings
MASwingsprovidesavitalandreliableairtransportlinktothepeopleofSabah,SarawakandtheFederalTerritoryofLabuan.Asawholly-ownedsubsidiaryofMalaysiaAirlines,MASwingsiscapableofprovidinggreaterconnectivitytotheglobalnetworkalready serviced by Malaysia Airlines, with full interliningcapacity.
Intheyearunderreview,MASwingsreceivedatotalof6newATR72-500 aircraft. The cost efficient ATR72-500 aircraftshaveboostedMASwings’capacityby40%comparedtoyear2008 and allowed MASwings to increase flight frequenciesthroughout its network of 22 destinations and 39 routes. In2010,MASwingsadded3moreATR72-500aircrafttoitsfleet,thereby further increasing its capacity in meeting the needsof thepeoplewithinSabah,SarawakandFederalTerritoryofLabuan. InApril 2010,MASwings received its10thandfinalATR72-500 aircraft, marking the completion of the phasingout of its Fokker 50 aircraft. With the 10 ATR72-500 and 4TwinOtteraircraft,MASwingscustomerscanlookforwardtoincreasedcomfortandconnectivity.
MANAGINGDIRECTOR’SSTATEMENT
MALAYSIANAIRLINESYSTEMBERHAD(10601-W)54
Kota Kinabalu
Manila
Cebu
Canberra
Sydney Newcastle
Coffs Coast
Ballina Byron
Gold Coast
Sunshine Coast Fraser Coast Rockhampton
Mackay Hamilton Island
Townsville Cairns
Brisbane
Port Elizabeth
Durban
Bahrain
Athens
Rome Madrid
Barcelona
Geneva
Brussels
Frankfurt London
Gothenburg
Stavenger Oslo
Stockholm
Helsinki
Copenhagen
Bergen
Sandefjord
Aberdeen
Manchester
Edinburgh
Dublin
Belfast Glasgow
Medan
Phuket
Perth Adelaide
Melbourne
Amsterdam
Langkawi
Denpasar
Launceston Habart
Darwin
Broome
Beijing Seoul
Tokyo
Fukuoka
Kansai
Vienna
Munich
Nagoya
Guangzhou Cairo
Bangalore
Mumbai
Delhi Abu Dhabi Doha
Muscat
Mauritius
Tashkent
Shanghai
Kuwait
Chennai Hyderabad
Penang
Jakarta
Colombo
Bandar Seri Begawan
Yogyakarta
Koh Samui
Tehran
Istanbul
Male
Johannesburg
Mataram
Kristiansand
Guiling Chongsha
Chengdu
Wuhan
Nanning
Banda Acheh
Beirut
Amman
Legend - Operated by Malaysia Airlines - Operated by All Nippon Airways - Operated by Alitalia - Operated by Cathay Pacific - Operated by South African Airways - Operated by Etihad Airways - Operated by Virgin Blue - Operated by Garuda Indonesia - Operated by British Midland - Operated by Air Mauritius - Operated by Gulf Air - Operated by Qatar Airways - Operated by KLM - Operated by Uzbekistan Airways - Operated by Egypt Air - Operated by Firefly - Operated by Jet Airways - Operated by China Southern - Operated by Thai Airways - Operated by Sri Lankan - Operated by Iran Air - Operated by Turkish Airline - Operated by Oman Air - Operated by Royal Jordanian
Cape Town
KUALA LUMPUR
Surabaya
Pekan Baru
Batam
Yangon Hong Kong
Bangkok
Hub and Spoke Network