Malaysia Airlines (Kuala Lumpur) reported a larger second quarter net loss of RM307 million ($97.4 million) for the three months ended June 30, 2014.

The company continues to suffer as a result of the March 8, 2014 disappearance of flight MH 370 and the shooting down of flight MH17 on July 17, 2014.

Here is the complete financial statement by the company:

The disappearance of Malaysia Airlines flight MH 370 in March 2014 continued to impact the airline’s second quarter financial results with Malaysia Airlines’ reporting a net loss of RM307 million for the three months ended June 30, 2014. Adding to the earlier loss of RM443 million in first quarter, the national carrier’s first half 2014 results stood at a loss of RM750 million, 65% more than the previous corresponding period in 2013.

For the three months ended June 2014, Group revenue fell 5% to RM3.59 billion compared to one year ago as a result of lower yield and seat factor following the MH 370 tragedy. The lower revenue coupled with a marginal 2% increase in cost, principally due to fuel cost for the quarter, resulted in a net loss After Tax of RM307 million after taking into consideration depreciation (RM223 million), finance costs (RM119 million) and unrealized forex gains (RM52 million).

Having lost substantial potential revenue from the popular MATTA Fair in early March and the decision by MAS to impose a deliberate advertising black-out in March and April due to the tragedy of MH 370, more aggressive marketing activities picked up in May and June.

The market responded positively to the Malaysia Airlines Travel Fair (MATF) held in May which saw sales increase 29% and higher than average daily sales compared to previous fairs that ran earlier in the year. MATTA Sabah, MATF Penang plus a greater push in all markets around the world further helped sales and restored confidence in MAS.

Seat factor which fell 9.5 points in May to 68.9% was seen to pick up in June to return to above the 80% levels again.

For the second quarter 2014, capacity rose 9% year-on-year based on improved aircraft utilization; however traffic remained the same year-on-year. Consequently, the airline’s seat factor recorded a fall of 6.7 points for the Quarter to 73.7% compared to 80.4% in the previous year. Malaysia Airlines carried 4.2 million passengers in the months of April to June 2014.

Fuel expenditure in second quarter 2014 rose 10% to RM1.53 billion compared with the previous corresponding period due to a rise in fuel price and weakening of the Ringgit against the US Dollar.

In an effort to reduce fuel costs and increase productivity, Malaysia Airlines brought forward the retirement of its older Boeing 737-400 fleet from end 2014 to mid-June. As at mid-August, the Group’s fleet comprised 127 aircraft. Of this, Malaysia Airlines’ operates 88 aircraft, which includes 54 Boeing 737-800s, 15 Airbus A330s and 6 Airbus A380s. The average age of the fleet for the Group as at June 30, 2014 is 5.28 years.

For the first half of 2014, total revenue fell 2%, however total expenditure grew 4%. Fuel costs, representing 43% of total expenditure, was 12% higher. Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) stood at negative RM134 million for the first half of 2014 against a positive RM258 million in the same period one year ago. Depreciation charges (RM460 million) and finance costs (RM241 million) continued to remain high.

Despite increases in capacity and revenue as well as cost saving measures and productivity improvements, the Group has continued to report weak financial performance.

The weak financial performance has made Malaysia Airlines acutely aware of the need to restructure the Company’s operations, even prior to the double tragedies of MH 370 and MH 17. The occurrence of the two incidences within a short span of 4 months served to worsen the situation further.

“We operate in a harsh business environment of stiff competition from regional and global carriers and high operational costs. Coupled with the impact of the two tragedies which have damaged our brand, the need to restructure the Company was accelerated. The full financial impact of the double tragedies of MH 370 and MH 17 is expected to hit Malaysia Airlines in the second half of the year”, said Ahmad Jauhari.

“Our Company has had to undergo a thorough re-examination and re-evaluation in order to reposition ourselves as a stronger and more sustainable Malaysia Airlines for the future”, said Ahmad Jauhari.

On August 8, 2014, majority shareholder, Khazanah Nasional Berhad, announced its intention to take full ownership of Malaysia Airlines and delist it from Bursa Malaysia. If approved, it will put into action a plan to restructure the airline group towards returning it to profitability.

Yesterday (August 29) the airline issued this statement about the recovery plan for the national airline:

The Board of Malaysia Airlines welcomed the release by Khazanah Nasional Berhad (“Khazanah”), its majority shareholder, of “Rebuilding a National Icon: The MAS Recovery Plan” – a plan to facilitate the airline’s achievement of sustained profitability and competitiveness. It also acknowledged receipt of a letter from Khazanah relating to Khazanah’s planned investment in MAS to facilitate its delisting from the main market of Bursa Malaysia and restructuring, and the terms of such funding.

At its last Annual General meeting on June 25, Chairman of MAS, Tan Sri Md Nor Yusof, and Managing Director and Group Chief Executive Officer, Ahmad Jauhari Yahya, made clear that even before the disappearance of MH370, radical change was already firmly on the Board’s agenda. The urgency for change, evident through our continued poor performance, was also accelerated by the loss of MH 17.

The publication of the Recovery Plan follows the formal request by Khazanah to the MAS Board of Directors to undertake a Selective Capital Reduction (“SCR”) exercise made on August 8, 2014. The SCR will be put to shareholders’ vote at an Extraordinary General Meeting to be convened in due course.

In parallel, MAS’ senior leaders have been engaging with almost 2,500 staff at multiple locations across the Group, to hear their views and concerns resulting from plans to take the Company private and restructure.

We, together with representatives of the employees’ unions, met this morning with Khazanah. We will continue this process of engagement with all parties including directly with employees and with representatives of the employees’ unions.

In the meantime, there will be no disruption to our current service. We will continue to fly, honor existing reservations, and plan future travel. The announcement on August 8 and this Plan will have no impact on the current fares we offer our customers and corporate accounts nor our membership in the oneworld alliance.

We are an award winning airline– including having won World’s Best Cabin Crew numerous times. It is our duty and honour to serve and we will continue to do so with pride and care.

In his foreword to the Recovery Plan, the Prime Minister called on Malaysia Airlines, all those who work with Malaysia’s national carrier and all Malaysians to play their part in ensuring today’s Plan becomes an enduring success. We look forward to playing our role and being a part of this effort to ensure that Malaysia Airlines becomes a profitable and sustainable national carrier of which all Malaysians can be truly proud.

Copyright Photo: Ole Simon/AirlinersGallery.com. Malaysia Airlines retired its last Boeing 737-400 in mid-June 2014. Boeing 737-4H6 9M-MMA (msn 26443) arrives in Singapore.

Malaysia Airlines: