Malaysian Air Plans $1 Billion Rights Issue After Profit

Malaysian Airline System Bhd. (MAS), the nation’s largest long-haul carrier, plans to raise as much as 3.1 billion ringgit ($1 billion) from a rights issue after posting its first profit in seven quarters.

Malaysian Air will use part of the funds raised from the offer for working capital and to reduce debt, the company said in a stock exchange filing in Kuala Lumpur yesterday. It has yet to decide on the issue price and entitlement basis of the rights, the carrier said.

The airline also plans to use the funds from the share sale to make pre-delivery payments to Boeing Co. (BA) and Airbus SAS in the next two years. Malaysian Air is cutting unprofitable routes and adding fuel-efficient planes as it contends with competition from budget operator AirAsia Bhd. (AIRA) and slowing travel demand.

“Revenue initiatives have started to gain traction,” Chief Executive Officer Ahmad Jauhari Yahya said in a separate statement. “Our focus remains to increase revenue and manage our costs.”

The carrier, based in Subang Jaya, Malaysia, posted a net income of 37.1 million ringgit in the three months ended Sept. 30, compared with a loss of 477.6 million ringgit a year earlier, it said. Revenue fell 2 percent to 3.47 billion ringgit.

Malaysian Air closed unchanged at 1.01 ringgit in Kuala Lumpur trading before the announcements yesterday. The stock has lost 22 percent this year, compared with a 24 percent drop for AirAsia, the country’s biggest carrier by market value. The benchmark FTSE Bursa Malaysia KLCI Index has gained 4.4 percent.

Par Value

The airline, which had accumulated losses of 8.2 billion ringgit as on Sept. 30, also proposes to restructure its capital by cutting the par value of its existing shares to 10 sen each from 1 ringgit, according to the filing. The carrier also plans to pare its share premium account.

The capacity reduction helped Malaysian Air cut its fuel costs by 9 percent, it said in the statement. Yields, a measure of average fares, rose 3 percent while passenger numbers fell 1.5 percent to 3.3 million in the quarter. Average jet fuel price was $131 per barrel in the period, or 4.4 percent lower, the company said.

The carrier started flying Airbus A380s to London in July. The superjumbos have helped lure lucrative business travelers, Duncan Bureau, senior vice president for sales, said in an October interview. 

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