Posted:
Saturday, 25 April 2015
THE restructuring of Malaysia Airlines (MAS) will probably leave the airline to be a shell of its former self.
Routes and jobs are being cut, and its pilots are looking to hop to other airlines as uncertainties loom.
The despair over the current situation has also led to its powerful union throwing in the towel to wind up operations.
Amid all this, there are questions as to whether what is being done now is part of the same cookie cutter model that did not work in the past where routes were cut and then reinstated, and planes filled at the expense of yields.
What puzzle many is who is really making all those decisions on route cuts at a time when MAS group CEO Ahmad Jauhari Yahya prepares to leave the airline at the end of the month. Christoph Mueller will succeed him on May 1 as MD and group CEO of MAS.
Many remain hopeful the airline might not need to cut the 6,000 jobs that MAS parent, Khazanah Nasional Bhd wants to slash, which has created uncertainty among its employees.
Amid the insecurity, Korean Airlines last week conducted a road show to offer pilots jobs and a “better future with security.’’
There was a big turnout, many from MAS. Even other airlines such as Qatar Airways and Etihad Airways have done roadshows of late because there is a demand globally for skilled pilots.
How many will leave before June 1 is not clear but the attrition has been going on for sometime now especially among engineering, cabin crew and pilots.
Amid all that, MAS’ biggest union, MAS Employees Union (Maseu) decided to throw in the towel.
It knows that with the new MAS, Maseu will no longer be relevant, hence it called for an EGM on April 18 to seek for its dissolution.
However, it could not be happen as there was not enough quorum to vote for the dissolution.
According to a Maseu spokesperson, there will be another AGM called after 14 days of the last AGM to seek votes for the dissolution.
“We want members to decide whether Maseu should be turned into a cooperative, or dissolved and its assets be sold and proceeds distributed to its over 6,000 members.
“The assets are worth about RM8mil to RM10mil, and the rough estimates is that members should get about RM1,000 to RM1,500 each,’’ he said.
With Frankfurt out, is Paris next?
That is the question many are asking.
MAS flies to four destinations in Europe and apart from those two, MAS’ other destinations are London and Amsterdam, where it has a long standing code-share with KLM.
Over the past years MAS expanded and withdrew from many places such as Vienna, Rome, Stockholm, Zurich and Cape Town. The reason it cited for stopping those routes was that it was uneconomical.
In comparison, MAS’ regional peers have maintained such destinations despite industry turmoils.
Singapore Airlines (SIA) flies to 13 destinations in Europe, four in the United States, one in South America, and two in South Africa, while Cathay Pacific plies nine European routes, five in the United States, adding Boston on May 2. It also flies to South Africa and Canada.
“They (MAS) are shrinking drastically and this will affect its network revenue and reach. Can’t make money because of defective cost structure.
“Aircraft financing and other engineering cosst are high,’’ says an aviation executive.
That is what Mueller needs to look at, does he want MAS to focus on regional routes or go beyond the region. There is already intense competition on the regional front and budget travel is an accepted norm for regional travel.
“Does MAS want to continue to drop rates at the expense of yields and still fight the regional boys?’’ asks an aviation executive.
Essentially, Mueller needs to re-jig the route network strategy, pricing policy and revamp the marketing, as these are three key areas that will determine how much money MAS can make.
MAS should not be quick to suspend routes but rather reduce frequencies for main stations as reinstating can be one trying experience as seen in the Dubai case.
“MAS should be looking at reducing frequencies rather than pulling out of points as reinstating them back later is not easy because the vacuum is often filled by an other airline and reinstating back can be a painful experience.
“Dubai is a classic example of how MAS suspended flights but Emirates added frequencies and even flew a A380 on that route, and later MAS entered the market again but gaining market share was not without a struggle,’’ adds the executive.
The places where it really should suspend flights are Krabi and Kunming as loads are low, he adds.
He adds that MAS should cut frequencies on Hong Kong, Jakarta, Sydney, Melbourne routes among others. But it should add routes and frequencies to India.
It should also work on code share with British Airways (BA) which is returning to Kuala Lumpur next month for the London-KL-Australia flights. And with Qatar Airways for the African and Middle East connections, work on something like the Emirates/Qantas alliance. BA, Qatar and MAS are members of oneworld alliance.
“BA will be a good connectivity into Europe and they should work with Cathay Pacific for the US connection. MAS needs to get back to the US markets,’’ says the executive.
“As for other markets, MAS has to ensure it flies to routes where it can compete effectively to drive the right mix of point to point and connecting traffic for the right average fares,’’ he adds.
“In this business you need to invest to make money and it needs to get the best product in terms of aircraft type and its utilisation.
“There is also a need to invest in a strong customer relationship management to drive repeat traffic and loyalty.
“MAS needs to get all that sorted out before it can price its fares and go to the market effectively,’’ says the aviation executive.
Source: The Star Online - Malaysia
http://www.thestar.com.my/Business/Business-News/2015/04/25/Malaysia-Airlines-undergoing-transformation-pains/?style=biz
