Malaysia Airlines (MAS) has embarked on a major restructuring programme to cut operating costs. The project, expected to be completed by early November, is aimed at making the airline’s operations leaner, cutting unprofitable services and possibly downsizing the workforce. Some measures have already been put in place. One of the carrier’s two daily Boeing 747-400 flights to London has been downgraded to smaller 777-200 aircraft, while the twice-daily 777-200 service to Melbourne has been downgraded to Airbus A330-300s.
10th Nov 2011
William Dennis / Kuala Lumpur
MAS undergoing major restructuring
Malaysia Airlines (MAS) has embarked on a major restructuring programme to cut operating costs.
The project, expected to be completed by early November, is aimed at making the airline’s operations leaner, cutting unprofitable services and possibly downsizing the workforce.
Some measures have already been put in place. One of the carrier’s two daily Boeing 747-400 flights to London has been downgraded to smaller 777-200 aircraft, while the twice-daily 777-200 service to Melbourne has been downgraded to Airbus A330-300s.
Flights to Surabaya, Bandung and Jogjakarta in Indonesia were dropped in October, while Perth, Seoul and Haneda services operated from Kota Kinabalu using single-aisle Boeing 737-800 jetliners will be among flights that will cease operating from 31 December, with the end of the company’s business year.
The airline’s daily Kuala Lumpur-Kota Kinabalu-Taipei flights are also being reviewed.
According to a MAS official in Kuala Lumpur, speaking to Asian Aviation on condition of anonymity, Kota Kinabalu-Taipei services, which use 737-400 aircraft, may be reduced to five flights a week. The official adds that existing widebody international flights and 737-400/-800 domestic and regional routes out of Kuala Lumpur are under review.
MAS’s low-cost Firefly unit has ceased operating jet services from Johor Bahru to Kuching and Kota Kinabalu, and ceased services from Kuala Lumpur to Sandakan, Sibu and Kota Kinabalu. The company’s six daily Kuching flights from the Malaysian capital have been reduced to four daily and will cease completely in December.
Firefly and MAS’s regional unit MASWings will continue operating their turboprop fleets from their respective bases. Firefly’s fleet of 12 ATR72-500 turboprops will continue to fly out of the carrier’s two hubs, Sultan Abdul Aziz Shah Airport, 28km outside Kuala Lumpur, and Penang International Airport.
MASWings, which has a fleet of ten ATR72-500s, is based in Miri, Sarawak. It operates domestic flights in the two east states of Sarawak and Sabah.
As part of the restructuring plan, MAS – which has a widebody fleet comprising eight Boeing 747-400s, 17 777-200ERs and 22 Airbus A330-200/-300s – will focus on medium to long-haul international flights from January 2012, while domestic and regional operations using narrowbody 737-400/-800 jets currently operated by the flag carrier will be delegated to a new subsidiary, which is now being set up.
The 747-400s will gradually be phased out from the third quarter of 2012, a year earlier than previously planned.
The restructuring will be MAS’ second such effort since 2005, when the carrier posted a massive loss of RM1.3 billion (US$433.33 billion). Several routes were then axed and more than 2,000 workers were made redundant.
The government then appointed a new chief executive officer, Idris Jala, who executed operational changes and revamped the company’s corporate culture.
An analysis of the huge losses revealed a number of weaknesses in the airline’s operations. Among the problems were: the rising cost of labour, maintenance and repair; low yields per available seat kilometre, due to poor yield management; and an inefficient route network.
“These weaknesses don’t seem to have been rectified with changes in the administration of the airline,” the official says. He acknowledges that some loss-making routes continued to operate after the 2005 restructuring because of political interference. “MAS should be left to operate as a business unit with no political interference, if the objective is to be profitable.”
The airline’s current poor financial state has come about because the airline has lagged its competitors on yields. “Much of it is due to weaknesses in pricing and revenue management, sales and distribution, [and a] lack of brand presence in foreign markets,” the official says.
MAS has been hurt by inefficiencies arising from operating an aging fleet. “This increases maintenance cost and also pushes the fuel bill up,” he says.
MAS is still the target of criticism from observers for lagging behind its competitors in the region. This image has not been helped by the carrier’s relatively small investment in customer service, compared with rivals such as Singapore Airlines and Hong Kong’s Cathay Pacific Airways.
The move to separate the carrier’s regional operations into a separate unit from international has come in part because of the carrier’s share-swap deal with Kuala Lumpur-based budget carrier AirAsia. Tune Air, which manages AirAsia, will acquire a 20.5 percent stake in MAS, while the flag carrier will acquire 10 percent of the budget airline.
The share-swap has come under fierce criticism from the Malaysia Airlines Employees’ Unions and Air Transport Workers Union Sabah. A total of eight unions within the airline have given MAS an ultimatum to rescind its collaborative agreement with AirAsia within two months – by 7 November – failing which the unions are threatening action.
A strike has not been ruled out. The unions fear that the forming of the new company to handle domestic and regional operations may lead to hundreds of workers facing the axe.