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Malaysia Airlines’ Report Card Coming?

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MALAYSIA Airlines Bhd (MAB) is expected to release a progress report on how it has fared over the past three months of its existence.

The report card may come out this week or early next week.

It may want to tell the world that all is fine and dandy, so one can expect a positive spin.

However, is it really yielding the results it should?

Some are sceptical, as they do not see drastic and visible changes to its service offering, while there are pockets of its employees who remain disgruntled. However, the report card will provide clues as to what is essentially happening behind closed doors.

Malaysia Airlines (MAS) was delisted from Bursa Malaysia some time last year and had handed over its operations to MAB on Sept 1.

MAB started on a clean slate, with 7,000 fewer employees to 13,000 from 20,000 previously, while the number of suppliers was reduced from 20,000 to about 2,500.

The terms of its contracts with staff and suppliers were renegotiated to bring down cost.

Network-wise, the transformation is still work in progress. Thus far, it has cut capacity by 27% by axing some routes, including Frankfurt, Istanbul and Brisbane.

Passenger loads for certain flights are still below pre-crisis levels, although some progress has been made on some sectors by dangling attractive offers week after week to fill its planes. MAS’ image suffered badly after the airline was hit by two air disasters last year, giving rise to the need to migrate to MAB to give it a new perspective.

It has yet to recover in the China market and competition in the Australian market continues to be at boiling point.

It will take time before Chinese tourists return, but AirAsia is cashing in on MAS’ weakness in China as is Air China, which began mounting flights from Beijing to Kuala Lumpur recently.

With capacity cuts, some planes will need to be grounded and there is talk that the B777 will be returned sooner than March. The plan is to reduce usage of the B737 from the current 56 units. MAB has 93 aircraft at present.

All this means MAB needs fewer than 13,000 staff. Some are leaving while some more will go, as they feel they are not seeing a clear picture as to where the airline is headed.

Three months have passed and some have not even seen the business plan or its strategy yet, which doesn’t augur well for them as they need to plan their lives.

The general objective of MAB is to be a regional carrier with partnerships for global connectivity. But that alone does not give some staff much comfort; they want the details.

However, work is still in progress and the transformation journey will take up to three years.

Perhaps, in its report card, MAB will reveal what model it will take going forward. Will it remain a full-service carrier (FSC) that also brings to market premium economy capacity, or introduce an element of low-cost travel to spice things up?

To be a regional carrier where the flying time is up to six hours, it is in head-on competition with the numerous low-cost carriers (LCCs). For short distances, it has been shown that travellers prefer LCCs, as their pricing is about 20% lower than FSCs.

An FSC needs connectivity and point-to-point traffic. Since MAB is facing competition in the China, Australian, India and European markets, how will it get the volume it needs for its yields?

As for point-to-point traffic, it is up against the Middle-Eastern carriers which have deep pockets. How will MAB fight this game, as its long-haul traffic is tiny for now?

Regionally and domestically, there are just too many LCCs. So, how will it fill up its planes?

It is a volume game and MAB needs to get the right yields to keep it afloat. Most of its regional peers are losing money because of the emergence of LCCs, although Singapore Airlines has been able to stay afloat due to its premium business traffic. Can MAB get that kind of traffic too if it remains a pure FSC?

A suggestion which had been put forward to it some time ago was for the FSC to also have an LCC operation, either by buying an existing operation or creating a new one so as to be in both segments of the market. The LCC will give it the volume and profit, while the FSC will provide the diversity in its product range. These are the things that its staff would want to know. Towards this end, perhaps its report card will be most scrutinised by its own staff rather than its competitors.

Hopefully, there is enough transparency for them.-The Star/Text: B.K. Sidhu


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