MAG improves, but financial constraints persist

Malaysia Aviation Group (MAG) has shown positive growth since its 2021 overhaul, driven by higher passenger numbers, better financial performance, and stable cash flow, according to MARC Ratings. While MAG's ratings of MARC-1IS and AAAIS for its Islamic commercial papers and medium-term notes programmes are supported by its strategic significance, the group still faces financial challenges due to substantial borrowings and negative shareholder equity.

MAG, owned by the sovereign wealth fund Khazanah Nasional Bhd, is Malaysia's sole integrated aviation company, encompassing passenger airlines, air cargo, and aviation support services. In 2025, MAG's available seat kilometres increased by 15.5% to 53.2 billion, surpassing pre-pandemic levels, and its passenger load factor improved to 81.1%.

Despite these improvements, MAG accounts for nearly 17% of Malaysia's passenger traffic. However, the group's operating cash flow declined to RM970 million in 2025 from RM1.2 billion in 2024, primarily due to increased aircraft maintenance and redelivery costs. MAG's capital expenditures for fleet renewal are estimated at RM26 billion through 2030, including RM22.3 billion for aircraft purchases and pre-delivery payments.

Borrowings have risen to RM10.9 billion at end-2025 from RM8 billion a year earlier, mainly due to higher lease liabilities from fleet expansions. While fuel and maintenance savings from a newer fleet may alleviate some financial burdens, MAG's negative shareholder equity, totaling RM2.6 billion at end-2025, reflects accumulated losses from previous years.

Nonetheless, the ratings agency acknowledges the group's improving financial position and ongoing positive operating cash flow.