Malaysia Airlines Berhad restructuring continues to show positive results

Sepang 4 March 2016 - Malaysia Airlines Berhad is pleased to announce the latest
quarterly update of its restructuring, which saw sustained progress amidst a
backdrop of external macro-economic fluctuations.

Group Chief Executive Officer of Malaysia Airlines Berhad, Christoph Mueller said
We have seen a challenging quarter but I am pleased to see continued progress
made in all key areas such as on-time performance and costs. Malaysia Airlines has
been operating for six months now and although we have a long way to go and
areas for improvement, we are making steady progress in the restructuring.

We are focused on building momentum with our restructuring in 2016. Diligent

execution on efficiency and tighter cost controls has already produced results which
have seen us emerging leaner and more focused. There is still plenty to be done but
the group is working hard to ensure that Malaysia Airlines succeeds and prospers for
the years to come, added Mueller.

Leveraging alliance and strategic partnerships

Malaysia Airlines officially began its global aviation partnership agreement with
Emirates Airlines (Emirates) in the quarter with both carriers placing its codes on
the Kuala Lumpur-Dubai route, as well as other routes under the agreement. The
codeshare is an integral part of the airlines future network plan as it focuses on
getting customers connected globally, opening up a host of new destinations for
customers by providing unprecedented access to Emirates network. The first phase
of the agreement will see 11 destinations introduced, including Rome, Paris, Madrid
and Frankfurt, with the rest being added progressively over the next few months
subject to regulatory approvals. Once complete, Malaysians will have access to over
30 destinations in Europe, Middle East, Canada, and Africa.

The codeshare is an important element towards Malaysia Airlines proposition of

being the preferred way to fly to, from and around Malaysia as it seamlessly opens

up new destinations to our customers whilst feeding new customers into Malaysia
and ASEAN. Malaysia Airlines will also be looking to leverage other partnerships and
collaborations more, such as the existing oneworld alliance, to provide our
customers access to untapped markets whilst further encouraging passengers to
experience Malaysia.

Malaysian flavour to customer-centric products

The quarter saw the introduction of new menus showcasing Malaysias diverse and
unique flavours. Alongside the new menus, a personalised dine-on-demand
service, where guests are able to have meals at their convenience, was introduced
for First class passengers in the quarter. The service will be rolled out to Business
class over the next few months. Hot meals were also introduced for short haul
economy passengers, which have already garnered very positive responses from
customers. Moving forward, the airline will be taking the five star Malaysian
experience further by collaborating with top- ranked hotels and culinary
personalities.

The airlines new customer proposition of bringing the Malaysian experience to

customers will be introduced at all points of the travel experience. This starts at the
lounges which now showcase Malaysian dishes together with a brand new Laksa
bar which reflects the airlines aspiration to be the ambassador of Malaysia to the
world.

Other product enhancements will be the new A330 lie-flat-bed business class seats
which will commence operations at the end of March 2016 to Sydney. A cabin
refresh programme will also be completed on all A330s along with the new seats by
31 August 2016.

Performance and product improvements

Revenue per available seat kilometre for the quarter improved 10% year-on-year on
the back of the route optimisation exercise conducted earlier. Seat load factor is

also showing improvements with over 350,000 passengers traveling with Malaysia
Airlines over the Chinese New Year holiday.

Improving punctuality and on time performance (OTP) is a core goal for the
operations team. Malaysia Airlines needs to win on customer service and this is
being benchmarked against our competitors , who are operating at 85% OTP at the
highest end and 57% OTP at the lowest. Numerous initiatives were put in place in
the last quarter, which led to a marked improvement in on time performance. After
a dip in December, due to adverse weather conditions and constraints in availability
of aircraft, punctuality reached 85% in February 2016. On 17 February 2016, the
airline hit a record 95% punctuality across all flights with 100% on domestic
operations.

The quarter saw continued progress on revamping the experience for Malaysia
Airlines customers. Over the next quarter, new initiatives will be introduced to
improve service quality and to shorten waiting times for passengers. Other
improvements include refreshed aesthetics in the lounges showcasing Malaysian
creative talent, new Business Class seats on our A330s, and new on-board cuisine.

Consolidation at KLIA Main Terminal Building

To ensure convenience and improved connectivity for passengers, Malaysia Airlines

is also planning a move to concentrate most of its operations in KL International
Airports (KLIA) main terminal. The plan will mean quicker connections for ASEAN
passengers between international and domestic flights. This will improve flight
connection times, provide faster and more reliable baggage transfer and ultimately
ensure better customer satisfaction. With a successful trial conducted earlier this
year, the airline is working closely with Malaysia Airports Holdings Berhad to realise
the consolidation.

Fleet optimisation

The partnership with Emirates will contribute to Malaysia Airlines fleet consolidation
and has enabled the airline to retire the B777-200s completely. The consolidation
will drive down complexity in maintenance, engineering and flight operations.

Malaysia Airlines has ordered four brand new Airbus A350-900s aircraft. The aircraft
will deliver great performance and is able to operate non-stop from Kuala Lumpur to
London and throughout Asia. Deliveries will start in October 2017 but major work
has already been completed with the seats, layout and technical specification all
now finalised. The manufacturing of major parts of the new aircraft has already
commenced at Airbus plants globally. Beyond this, the airline is evaluating
additional A350s in order to reach a critical fleet size, allowing standby aircraft for
any scheduled maintenance and enabling future network expansion. Malaysia
Airlines actively assesses new route opportunities on an on-going basis and is
currently evaluating the possibility of serving unique and new destinations that
would require new equipment.

The airlines A380s are due for scheduled maintenance at the beginning of the
second quarter this year, which will mean an average of one A380 aircraft being out
of commission for the remainder of 2016. In anticipation of this, the airline is
exploring reinstating a former flagship aircraft to ensure minimal interruptions on
the London route.

Cost savings

Managing costs is a key component in reaching the projections under the approved
Malaysia Airlines Business Plan. A key performance indicator for the entire
organization is now centered around cost management with a focus on managing to
budget and improving procurement.

The quarter saw the successful renegotiation of contracts with a majority of

operating lessors with revised lease rates that are significantly lower and on
economically feasible terms. The revised lease rate, now at market rate and at
levels consistent with Malaysia Airlines Business Plan, has enabled the airline to
enter into Letters of Intent with lessors to take on the underlying aircraft.

The overall review and renegotiation of supply contracts with key vendors, crucial
towards setting the airline on the right path to recovery and sustained profitability,
also continued in the quarter.

Malaysia Airlines will also be investing in new ground service equipment that will
improve on-time performances and turnaround times.

IT as an important enabler

The quarter saw the launch of a new software upgrade programme which includes
new collaborative platforms to enable staff to work in a more connected manner.
This is part of the planned over-haul of the entire technology framework and
infrastructure to remove unnecessary complexity and improve seamlessness. This
includes the transformation of our data centre into a pay per-use, secure and agile
cloud facility which will improve time to market.

Further progress was also made in the quarter in transitioning the data centre to a
cloud environment

for better mobility, collaboration, ease of use and security. IT security capabilities
have been tightened to mitigate any advanced security threats.

Enhancing corporate governance

The new Corporate Approving Authority Policy (CAAP) has now been approved. The
airline is further strengthening its internal governance with the hiring of a Head of
Investigation and Head of Business Integrity department, responsible for ensuring
better compliance and transparency whilst minimising fraud and illegal practices.

The Works Council, promoting dialogue between employees and management,

moved into its next phase in the period under review, with active participation from

staff who have nominated council representatives across all the divisions. The full
formation of the council is expected to be operational by the second quarter of this
year with the first Works Council expected to sit in April 2016.

Investing in a talent pipeline

People development and succession planning, an integral part for the organisations
sustained success, remains a key focus in 2016. To this end, the quarter saw the
introduction of the revamped Performance Management System, which will
encourage productivity by providing clear targets as well as a clearer path for
career progression. The system will enable us to spot skills gaps and escalate
retraining programmes.

To address skills gaps, the airline will also be exploring joint ventures with
established international organisations to provide training and specific skillsets.
Whilst being beneficial for the airline, the venture is also very much in line with the
Governments Economic Transformation Programme.

The airline has been working hard in closing the skills gap via the Malaysia Airlines
Academy which will be based in KLIA, providing a centre of aviation skills for
Malaysia. The newly revamped academy will ensure future generations of leaders
for the airline will be groomed entirely from within. To this end, Malaysia Airlines has
successfully recruited 20 management trainees towards building a talent pipeline as
well as growing the aviation skillsets in Malaysia. The trainees will be assigned and
rotated across the various divisions in Malaysia Airlines to ensure exposure across
all functions of the organisation and to inspire passion for the industry.

The quarter saw further strengthening of the leadership team with the
announcement of a new Head of Revenue Management and Head of Engineering.
The new team is an important strategy of having world class and diverse talent to
reflect the companys global business and operations.