New Malaysia Airlines Regime Faces Down Challenges

Overcapacity in the market and declining yields will continue to challenge the new Malaysia Airlines Berhad (MAB) management, as the carrier moves forward with its plan to return to profitability by 2019.

In an interview with AIN, newly appointed CEO Izham Ismail acknowledged that managing yield proved the carrier’s biggest problem in the past, not unlike for for most airlines in the region.

Izham

said competition is fierce and poses a serious challenge in particular for shorter haul flights. Despite tough market conditions and stiff competition, MAB has weathered the turbulence that hit the carrier in 2014 with two disasters within a span of four months. It claims to have regained market confidence and plans to resume flying to Brisbane starting June 6, operating four times weekly using an Airbus A330-300.

Perth, Melbourne, and Sydney account for MAB’s other Australian destinations.

While Izham says MAB does not plan immediately to add any other European destination, various news outlets report it would like to resume flying to Amsterdam if it can secure a slot at Schiphol Airport.

MAB expects to have taken delivery of six new A350-900s by early April. Plans call for it to operate four on the twice daily Kuala Lumpur-London route and the other two on Kuala Lumpur-Narita service.

Powered by Rolls Royce XWB-84 engines, the aircraft operate on a 12-year dry lease from U.S.-based Air Corp Lease. MAB has taken delivery of two aircraft. Their three-class layout consist of four seats in first class, 35 in business, and 247 in economy.

Izham described the UK and Japan as two markets that generate a high premium for business- and first-class demand.

Seperately, the six A380s scheduled for release from the airline’s operations will resume service with Project Amal, the special Haj and Umrah Unit. MAB has started the process of applying for the air operator's certificate to commence operations in October.

Meanwhile, six A330-200s leased from AerCap will arrive on a staggered basis starting from the second quarter through the third. The airline will deploy them on routes to Mumbai, Delhi, Cheenai, Bangalore, Dhaka, Perth, Kathmandu, Shanghai, Denpasar, and Auckland. Previously used by the now defunct Air Berlin, the A330-200s are on dry lease for six years and will replace six 737-800s now scheduled for return to their lessors.

“The aircraft are of high quality and are being leased at incredibly competitive rates, much to our advantage,” Izham pointed out.

The A330-200s will come configured in a two-class layout, similar to the airline’s fleet of 15 A330-300s. Pratt & Whitney PW4101s power both.

On the average daily utilization of the 737-800 and A330-300, Izham said the airline could not share the data but that both fleets operate in line with industry benchmarks.

MAB has undergone five restructuring exercises since 2000. Since then its owners have axed 36 international destinations from the network. London remains its only European destination.

With the price of oil increasing, MAB has opted to hedge fuel up to 24 months on a staggered quarter-by-quarter basis.

On the overall outlook, Izham stressed that supply and capacity pressure will continue while the group will practice prudence in controlling capacity through, for example, scaling back domestic route frequencies.