FINANCIAL REVIEW

For the year under review, we recorded a net income after

tax (NIAT) of RM490 million which includes a derivative gain
of RM1.16 billion. The inclusion of derivative gains is a result
of the early adoption of the new Financial Reporting Standard
139 (FRS139). FRS 139 establishes the principles for recognising
and measuring financial assets, financial liabilities and certain
contracts to buy or sell non-financial items. The FRS139 was
made mandatory in Malaysia effective 1st January 2010 and is
similar to the International Accounting Standard IAS39, which
is already adopted by many international airlines. Our early
adoption of FRS139 ensures compliance with the Malaysian
accounting standards on top of ensuring our financial results
are easily comparable with other airlines.
We recorded a contraction of about 25% in group revenue,
which can be attributed to the 12% overall reduction in capacity
as well as lower yields. When demand for air travel collapsed
in 2009, we made a conscious decision to cut capacity and
realign our network strategy. We cut back on capacity on our
international routes and in the latter part of the year, redeployed
some capacity to our domestic and regional routes. At the
same time, we embarked on aggressive sales and marketing
campaigns to stimulate demand. As a result, we recorded
remarkable improvements in our passenger load factor which
increased to 76.5% in the fourth quarter of the year, up 11.2
percentage points year-on-year. For FY09, the passenger load
factor increased by 0.9 percentage points from FY08, to 68.8%.

As we were cognisant of the pressures on revenues, we doubled

our efforts in containing costs. Oil prices declined significantly
from a high of USD182 per barrel in 2008 to an average of
USD70 per barrel in 2009. The lower average price, coupled
with lower consumption of fuel, resulted in a 46% decrease
in our fuel expenditure. Overall, we managed to reduce our
operating expenditure by 20% for FY09.
As a result of the global downturn and subsequent collapse in
air travel, we recorded an operating loss of RM628 million. The
year 2009 posed numerous challenges to airlines worldwide,
and many did not survive. A number of airlines posted bigger
losses and some even filed for bankruptcy. Malaysia Airlines,
however, remained resilient and emerged poised for future
growth. We were aggresive in terms of generating revenue
and cutting costs. Indeed, in the fourth quarter of the year,
we recorded a modest RM3.8 million operating profit, which is
testament to the efforts we put in place throughout the year.
Our cargo operations also saw lower revenues and yields, both
down 33% and 20% from FY08 respectively as a result of
notably lower demands. However, demand significantly picked
up in the second half of the year, and MASkargo has been agile
in capitalising on the economic recovery in emerging markets
led by China. As a result, cargo load factor rebounded from
67.5% in FY08 to 70.3% in FY09.

In terms of the balance sheet, we had RM2.95 billion in cash

and negotiable deposits at the end of FY09. Prudent capital
management and cash conservation practices ensured that the
balance sheet remained strong and healthy.