Should MAS has seperate domestic subsidiary?

[Should MAS has seperate domestic subsidiary?]

Load factor does not mean profit....... the revenue / cost per km counts; i.e. YIELD,

MH domestic services has a very low YIELD and cost is high. Amongst the key reasons are:

1 Fare - unrealistic - controlled by the government. Especially premium C - class fares , short flights like KUL - AOR / TGG / KBR and Sabah / Sarawak are much lower than EY (in some cases LCC) flights of the same distance in Europe / US.

2 They have "senior"/ elderly staff to take care at these stations, unlike AK, New staff , pay can be slightly lower. - Automated / self check in facilities may be a solution.

3 Night stops at almost all major towns ( perhaps for connectivity reasons) additional cost for crew. - Late / Early - Departures / Arrivals may need to be reintroduced (e.g. 0545 Dep. KUL - KBR and 2330 KBR - KUL in the 1980s)

 

Politically and socially are good national service for MALAYSIA but commercially it does not sound viable.

 

 

 

[Should MAS has seperate domestic subsidiary?]

"subsidiary" , I think is now the old method of "getting rid of wanted but unwanted stuff"; This may no longer work.

 

However, "franchise" could be a better option. Just like Maersk Air of BHX,

( became a BA franchise partner by late 1990s) maintains the quality and standards of BA ( with full BA uniforms / livery and identity) but the holding company is a different group entirely. In this case, the benefits are

1 Feeder services (i.e. Intl. to Domestic) is maintained

2 Cost is low as it is a small company

3 Intl. quality and standards maintained.

4 Considered as one form of alliance.

5 Staff and Overhead Costs can be reduced as these franchises staff are specifically employed for this small company.

6 As it is small, every little effort will be done to ensure that it will remain profitable .... i.e. routes will be cut if it does not give any returns.

 

BUT....when the local Malaysian scenario and politics being added in this case, I'm not sure .... that it will work...... In this context, it is for PMB and our Government to think about.

[MH's Most Profitable Route(s)]

Agreed with the KUL - MAA. Something like what has happened on KUL - BKK, LHR/LGW - JFK.

These are classic example of more flights / open sky - affects the YIELD.

 

But controlled, demanding and restricted routes, e.g. KUL - JED or KUL - SIN are more likely profitable.

 

Although MH is the sole carrier on the Kangaroo KUL - LHR, KUL - SYD/MEL/ADL/PER/....etc., Great competition still happens via BKK/SIN and to a certain extent HKG and DXB.

[MH's Most Profitable Route(s)]

KUL - SIN, may be attractive and very profitable for MH - SQ. ........because

1 Profits shared 50 - 50; no competition.

2 Traffic Rights by other carriers - fully controlled (That's why no AK)

3 Fare - extremely high - comparable to full service flights within EUR and US - but cost / km much lower ( as crew, and catering / service rates lower) therefore high YIELD

4 High Demand for Premium Passengers / high business traffic

5 No demand, flights can easily be cancelled and transfered to another, high demand , aircraft can easily be upgraded or even added within 24 hours ( time utilisation / sector on this route is low)

6 Unsold EY seats can easily be filled - especially during peak periods - Shuttle tickets.

 

 

But...... things will soon change.....

[Decision On MAS 737-400 Replacement Before Year En]

If they need something different and as domestic flights may be reduced; As a local - regional frequent business traveller , I would prefer that they would opt for 787s in the long run. After all, I'm sure the cost/km is better (higher YIELD), more comfortable - wide body particularly for key domestic routes such as BKI, KCH, PEN and later perhaps LGK, JHB, KBR and TGG.....etc. as well. At least twice daily - for business meeting purposes.

 

The narrow bodied should be minimal order, only for extremly low demand routes like regional MES,PADANG, CEB and AOR, KUA, and off peak JHB, LGK, KBR...etc.

 

Personally, For narrow body category, I prefer the airbuses (321/320/319/318). Because: -

1 Quicker turn around - cargo / luggage in Pallets

2 Wider cabin - wider aisle and wider seats

3 Newer design ; Airbuses (from late 1980s) compared to 737s (late 1960s)

 

But for the B787 - A350 category, the boeing is better, fresh and new design. The A350 is something like an improvement from A330.

 

 

[MH's Most Profitable Route(s)]

More Frequencies does not necessarily mean better.

Otherwise there will be .... over capacity and that's when one starts to slash fares. Thus yields affected.

 

However, additional flights must only be added when there's suffiecient demand. Back to basic A-levels Economics. " Supply should never exceed Demand". When there's more demand, and not much supply, that's when one can get good returns.

 

Not sure about DXB, but I think KUL - JED is good as it's just thrice a week and up to say daily or more during peak season such as Ramadhan and Hadj.( excluding Hadj charters)

 

However, key cities should be conveniently served at least twice a day and be more focussed for business travellers. They would normally opt for C or F class. Although MH does that, Efforts should be made to encouraged full paying pax.... and not free government upgrades / staff travel.

 

In the case of LH mentioned previously, their main focussed is Business Class. That's why one will see it occupies almost half of the aircraft on main routes and they didn't bother having PTV's in EY as Economy it's not their core business.

 

Perhaps a daily single C class with full paying pax. on 738 / 320 on SYD - KUL - LHR ( something like Privatair) may give better returns than daily A380 with 4 classes on the same route (with discounted fares).

 

 

On a lighter note : I remembered having to pay a lot more for KUL - JED (Ramadhan '04) than KUL - LHR ( Summer '05) , although it's bad for individuals, but it's good for airline business.

 

 

 

 

 

[MH's Most Profitable Route(s)]

Guys,

Profitable route would normally relate to YIELDS.... In this case full EY does not mean profitable. A Full J/C class and F /P class are much better that EY.

 

LH made hundredrs of millions in Euros coz. their J class is doing very well. FRA / MUC - US WEST Coast is a gold mine for them. I remember reading in Airline Business a few years back the senior chap from LH said.... "to make money in airline industry is to just concentrate on filling Club / Business class with full fare pax. thats it".

 

Back to MH, although LHR and SYD may be full, I would imagine middle east routes such as JED and ocassinally DXB are profitable as they need not have any speacial fares / offers on these routes. Mind you the C and F fares (particularly to JED) is really high, unlike LHR / SYD ... where you can get ocassional triple miles / miles offers and free upgrades.