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* Expects yields to fall due to "irrational competition"
* Sees 400 mln ringgit cost reduction in 2017
* Load factor up 11 ppts to 81 pct in Q4
KUALA LUMPUR, March 1 (Reuters) - Malaysia Airlines Bhd on Wednesday said it expects a decline in passenger yields in the second half of this year due to competition and a weak domestic currency, as the national carrier works to return to profitability by 2018.
The airline also said it would continue to focus on cost control, and that it has identified 400 million ringgit ($89.99 million) worth of cost reductions for 2017 to offset strength in the U.S. dollar.
"We expect yields to decline in the second half of the year due to irrational competition but our focus will be on reducing costs to maintain our financial position," the airline said in a statement.
Passenger yields refers to the average fare paid per mile, per customer.
"We have delivered a solid 2016 but a weak Malaysian ringgit, overcapacity in the Malaysian market and any potential price war will make 2017 a challenging year," it said.
The airline said 2016 ended 49 percent ahead of its budgeted loss. It did not specify amounts but previously said it expected to book a loss.
It recorded an 11 percentage-point increase in its load factor - or capacity used - to 81 percent in the October-December quarter, as bookings increased.
The carrier has been struggling to turn around its business since 2014 when flight MH370 disappeared in what remains a mystery, and flight MH17 was shot down over eastern Ukraine.
It also said it may seek wide-body aircraft from either Airbus Group SE or Boeing Co for introduction in the first quarter of 2018, to increase its number of seats and improve quality on existing routes.
The airline previously targeted a return to profitability by 2018 and stock market listing the year after. ($1 = 4.4450 ringgit) (Reporting by Liz Lee; Editing by Christopher Cushing)