With renewed concern over spiralling fuel prices, Malaysia Airlines has had to moderate its expansion plans, focusing on the most promising markets, writes William Dennis.
Malaysia Airlines (MAS) says it intends to add capacity on routes within Asia, with particular focus on China and India, two of the world’s fastest-growing markets.
With a strong presence in both markets already, the carrier has firmed up plans to fully utilise its traffic rights to the countries. In China, MAS operates to Shanghai, Beijing, Kunming, Xiamen and Hong Kong, while its Indian network covers Delhi, Mumbai, Chennai and Bangalore.
According to MAS Managing Director and Chief Executive Officer Azmil Zahruddin, the airline had been planning an overall 10 percent capacity increase in 2011, before jet fuel prices began to surge once again.
“Due to the spike in jet fuel prices, we have to look at growth of less than 10 percent,” Azmil said in an interview in Kuala Lumpur.
The Malaysian flag carrier increased its fuel surcharges more than 10 per cent in April to help offset rising costs, as jet fuel price hovered close to US$140 a barrel. Should the price continue to rise, it could seriously hurt the global aviation industry, Azmil said.
[Subhead:] Australian market
MAS is confident that it will be able to maintain its strong footing in the Australian market, despite the competition it faces from Kuala Lumpur-based long-haul low-cost carrier (LCC) Air Asia X on routes to Perth and Melbourne. Azmil said MAS is ready to deal with intensified competition, should AirAsia X be granted rights to operate to Sydney.
“We are not going to let it trouble us,” Azmil noted, pointing out that MAS can feed traffic from the Sydney route to the rest of its global network, increasing its appeal to travellers.
AirAsia X has been pressing the Ministry of Transport in Kuala Lumpur for almost a year for rights to Sydney, but has yet to receive a response.
In Europe, MAS operates to London, Frankfurt, Paris and Amsterdam, but plans for expansion in the market have been put on hold due to the region’s weak economies. MAS has no plans to resume services to Stockholm, which it previously served three times a week using Boeing 777-200 aircraft. The carrier suspended the service, along with its New York flights, in 2009 during the global financial crisis.
According to Azmil, the carrier is constantly reviewing market conditions in considering whether to reinstate its suspended routes.
MAS is considering the possibility of resuming New York flights via the Middle East or Europe, but Azmil has ruled out operating the service via Dubai because of competition from Emirates, which offers multiple daily frequencies including one using its largest aircraft, the Airbus A380.
According to one Kuala Lumpur-based analyst, it would be difficult for MAS to secure the right to operate to New York via a major European hub.
MAS has set itself a five-year goal of becoming one of Asia’s preferred airlines by 2015. To achieve this, the carrier is trying to enhance passenger service and has embarked on a major fleet renewal programme.
The carrier’s ageing single-aisle fleet of 35 Boeing 737-400 jetliners is gradually being phased out and replaced by Next-Generation 737-800s. MAS has outstanding orders for 35 737-800s and purchase rights for another 20.
[Subhead:] Single-aisle deliveries
Four aircraft have already been delivered, configured in a two-class layout seating 16 in business class and 144 in economy class. Another two will join the fleet later this year, with the remaining 29 to be delivered on a staggered schedule through to 2015.
Boeing has offered MAS the choice of converting some of its 737-800 orders or options to 737-900ERs, and Azmil does not rule out the possibility that the carrier may do so. “We are looking at our options,” the MAS chief said.
A proposal to configure some of the narrowbody aircraft in a single-class layout for domestic operations is still being considered.
The first of 15 Airbus A330-300 widebody twinjets that the airline ordered in 2010 was delivered in April, with another scheduled to be handed over in May and three more later this year. The remaining ten are expected to arrive from 2012 through to 2015.
MAS has said the new A330-300 fleet will offer its passengers a new level of luxury in flight. Passengers will enjoy wider seats and a new in-flight entertainment (IFE) system, which the existing fleet lacks.
To give business class passengers more space, the number of seats in the premium cabin has been reduced from 44 in the airline’s current A330 fleet to 36, allowing a 15-inch increase in seat pitch to 60 inches.
MAS expects to save RM300 million (US$100 million) a year in operating costs with the introduction of the new aircraft, thanks to reduced fuel-burn and maintenance requirements. The new aircraft will take over all routes now operated by the carrier’s existing A330 fleet.
MAS has ordered six A380s from Airbus, five of which will be delivered in 2012, with the last arriving the following year. The high-capacity, double-deck aircraft will be deployed on MAS’s twice-daily Sydney and London services.
[Subhead:] 747 replacement
The A380s will replace the airline’s remaining fleet of 11 Boeing 747-400 jetliners. From an initial fleet of 17, three of the 747s were sold to an unidentified foreign airline and three more leased to Alwafeer Air, a Saudi Arabian charter carrier based in Jeddah.
MAS has no immediate plans to replace its fleet of 17 Boeing 777-200 twinjets, which have a daily utilisation rate of between 14-16 hours. The first aircraft was delivered in 1997 and the last in November 2004.
“There have been no concerns with the 777 and it has proven to be a good aircraft,” Azmil said.
MAS plans to keep operating the aircraft for another five to seven years on long-haul services to Tokyo’s Narita airport and Shanghai, China. The airline has looked at Airbus’s proposed A350 and Boeing 787 ‘Dreamliner’ as potential future replacements for the 777s, but no formal evaluation process has yet begun.
“We will get into the process when the time is right,” Azmil said.