Malaysia Airlines orders 50 Boeing 737 MAX jets to aid recovery

Struggling Asian flag carrier makes first major purchase since being taken private in 2014 as part of ongoing $1.5bn overhaul programme.

A Boeing 737 MAX miniature aircraft is displayed in front of the Malaysia Airlines chief executive Peter Bellew in Putrajaya, Malaysia. The airline on Wednesday announced a deal with the US plane maker for 50 737 MAX aircraft. Ahmad Yusni / EPShow less

Struggling Malaysia Airlines on Wednesday announced plans to purchase 50 Boeing aircraft for US$5.5 billion as it continues efforts to recover from devastating twin disasters in 2014.

Malaysia’s national flag carrier said it had placed firm orders for 25 Boeing 737 MAX jets for $2.75bn and had purchase rights for another 25. Deliveries are to commence in 2019.

The new chief executive Peter Bellew said the purchase of the aircraft, which are known for their fuel efficiency, would aid the airline’s recovery.

“This deal is a game-changer for Malaysia Airlines with much lower costs and greater efficiency which we will pass on to our loyal customers with lower fares,” Mr Bellew said in announcing the deal.

Malaysia Airlines currently operates 56 Boeing 737-800s as well as smaller numbers of Airbus aircraft.

The deal marked the first major purchase after the ailing national carrier was taken private after years of financial losses and further hit by two air disasters in 2014 – the disappearance of Flight 370 and the loss of another plane shot down over Ukraine.

The airline is undergoing a $1.56bn overhaul that included cutting 6,000 jobs and axing unprofitable routes.

Mr Bellew, Ryanair’s former director of flight operations, took over July 1 from Christoph Mueller, a turnaround veteran who recently resigned abruptly due to personal reasons.

Part of the management team under Mr Mueller, who was hired last year, Mr Bellew said the carrier is on track to become profitable by 2018 and that it aims to relist on the local bourse by March 2019.

The new 737 Max jets will cut fuel cost as much as 15 per cent, he said.

The planes will be used for routes to growth markets in China, India, Pakistan and South Korea, and their purchase will be financed using loans and internal funds.

Mr Bellew said the deal will not affect the turnaround programme and that it made more economic sense to buy rather than lease the planes.

“We will have a lot more to do in the next five quarters to make sure the airline gets back on track but we are there at the moment,” he said,

“Malaysia Airlines is now on a path to growth across the Asean region. This new aircraft order will set the stage for our continued recovery and success into the next decade,” he added.

The Asian carrier is ahead of schedule with its restructuring, having reached break even recently, putting it on course for a full-year profit in 2018 as targeted, if not earlier, Mr Mueller said in June.

This month, Boeing raised its long-term forecast for aircraft orders, saying the rise of discount carriers and growth in developing countries will fuel purchases despite recent economic turmoil from Brexit and a commodities slump. Airlines worldwide will order new planes valued at $5.9 trillion over the next two decades, it said July 11, up 4.1 percent from a year earlier. That would represent a total of 39,620 jetliners across the industry.

Late last week, officials of the three countries searching for the disappeared Flight 370 aircraft said the operation will be suspended once the current search area in the Indian Ocean has been completely scoured.

Follow The National's Business section on Twitter