MARC Ratings has assigned preliminary MARC-1IS and AAAIS ratings to Malaysia Aviation Group Berhad’s (MAGB) proposed Islamic Commercial Papers (ICP) and Islamic Medium-Term Notes (IMTN) programmes, with a combined aggregate limit of RM1.0 billion. The outlook on the long-term rating is stable. MAGB is Malaysia’s national aviation group and is wholly owned by Khazanah Nasional Berhad (Khazanah), Malaysia’s sovereign wealth fund. Through its operating subsidiaries, MAGB provides passenger airline, air cargo and aviation support services.
The ratings primarily reflect MAGB’s strategic importance as the parent of national carrier Malaysia Airlines Berhad and Malaysia’s only integrated aviation group, as well as the expectation of extraordinary support from Khazanah, if required. This assessment is supported by Khazanah’s longstanding financial commitment to MAGB, most recently demonstrated by an equity injection of about RM500 million in 2025 despite the group’s return to profitability.
MAGB has made strong progress since its 2021 restructuring, supported by the recovery in passenger traffic, improved operating performance and sustained positive cash flow generation. Available seat kilometres increased 15.5% y-o-y to 53.2 billion in 2025, exceeding the pre-pandemic level of 48.7 billion, while passenger load factor improved to 81.1% (2024: 80.4%; 2019: 75.0%). MAGB accounted for an estimated 17% of national passenger traffic. Its extensive network, complemented by oneworld membership and strategic airline partnerships, supports connectivity and access to origin-and-destination and transit traffic. MAGB’s improved unit costs have supported continued profitability, although pressure on passenger yields and unit revenue continue to persist.
MAGB has maintained positive cash flow from operations (CFO) since its restructuring, providing an important anchor to its improving standalone financial profile. Net CFO remained strong at RM0.97 billion in 2025 (2024: RM1.2 billion), with the moderation mainly reflecting higher aircraft maintenance and redelivery-related payments. Its fleet renewal programme entails substantial investment, with cumulative capex estimated at RM26.0 billion through 2030, including RM22.3 billion for aircraft acquisitions and related pre-delivery payments. Operating leases and delivery financing are expected to moderate upfront funding requirements, although the programme will increase recurring financial commitments over the longer term.
MAGB’s financial profile remains constrained by sizeable lease-related borrowings and negative shareholders’ funds, although the latter has narrowed over the years alongside the group’s improved operating and financial performance. Total borrowings increased to RM10.9 billion as at end-2025 (2024: RM8.0 billion), mainly reflecting higher lease liabilities following additions to the aircraft and engine fleet. Borrowings are expected to remain elevated as fleet renewal progresses, given the predominantly lease-funded aircraft acquisitions. However, the financial impact should be partly mitigated by expected fuel and maintenance cost savings from a younger fleet. While MAGB’s shareholders’ funds stood at negative RM2.6 billion as at end-2025, largely due to historical accumulated deficit, MARC Ratings notes the improving trajectory of MAGB’s standalone financial position and its sustained positive operating cash flows in recent years.