HSLim

Seth K, thanks for the link to the source. The revised bilateral adds capacity but is still rather restrictive. There is no mention of passenger services into MXP (which TG already serves and SQ will shortly begin serving). This still doesn't look like a nod from AZ (and the Italian transport ministry) to really link up with MH at KUL. Maybe it is still in the works and a partnership might be announced a little later. By the way, what happened with the original FCO-KUL codeshare deal between AZ and MH? Meanwhile, I doubt that upping the frequency from 3x to 5x weekly without any co-operation with AZ would be a wise move. In response to Keno's comments: I, too, believe that having KL as the primary European partner works best for MH. However, the AMS link will start to saturate if KL connecting services are used for Scandinavia, BeNeLux, secondary UK airports, Germany, secondary French airports, Switzerland and (following your suggestion in another thread) transatlantic. There will be a need for a second connector and MXP or FCO have the geographical advantage (over CDG) of being less out of the way for southern and central Europe, and thus should work fine for Italy, Spain, Portugal, Austria and the western part of the Balkans. In the longer term, if MH sets its course for SkyTeam, SVO might even be a possibility. It does look like MH is still setting its sights on SkyTeam. The possibilities are there but MH needs to also maintain focus on rightsizing its capacity to match its true market and improving yield management to truly be an attractive candidate. In addition, more partnerships with SkyTeam-aligned Asia-Pacific airlines can only strengthen its case for alliance membership. That is also why I suggested exploring partnership possibilities with CZ and KE.

NRT/KIX/ICN flights via BKI full with passengers going to/from KUL or going to/from BKI? If the passengers are mostly KUL-originating/bound, then the BKI stop is not worth having.

I am happy to hear that the restriction on MH's pricing has been removed. If MH does successfully lower its operating costs and introduce better yield management, a portion of MH's inventory can be priced competitively. That said, I still hope for greater transparency in MH's and PMB's accounts. As it is, MH could potentially receive compensation, financing and concessions from PMB that are ostensibly for other purposes but may end up indirectly subsidising MH's domestic operations. Predatory pricing practices are hard to prove; I doubt there is an authority in Malaysia that could effectively serve as an unbiased competition watchdog. So, the protests from AK, however whiny they might sound, have some legitimacy.

It seems to be a challenge for MH to keep BKI as a secondary regional hub. While some international links will be maintained due to BKI's location (to avoid a significant backtrack to KUL), they have to be justified by sufficient BKI originating/terminating traffic. I'd imagine that HKG, MNL, CEB, TPE, KHH and CAN see a reasonable amount of traffic (as long as AirAsia is restricted from operating out of BKI into those markets), but I wonder if NRT, KIX and ICN are really needed? Could a regional partnership with CZ, CX/KA or CI provide a more sustainable solution for BKI, offering more frequencies (albeit not nonstop) to China, Korea and Japan? Could these potential partners also help to offer more options out of KUL connecting through their respective hubs to secondary destinations in China, Korea and Japan?

What is the source of this piece of news? So this means that MH is still not permitted to fly passengers into Milan?

By saying that it is willing to "give back" routes like JHB-KCH, BKI-MYY to MH, AK probably does not mean it will back away from those routes. After all, AK is allowed to compete on the 19 trunk routes. Why was interlining with BA ever brought up anyway? On the issue of baggage interlining, why was that decision not made as part of the rationalisation announcement? So what is the deal with the rationalisation? While I expressed in another thread "Not MAS' decision to drop routes" (http://www.malaysianwings.com/forum/index.php?showtopic=2844) that I was surprised by this revelation, I now vaguely recall Idris Jala offering to take back profit-and-loss (P&L) responsibility on the domestic routes from PMB during the weeks leading up to the govt's decision. I believe MH's original request was to be given the freedom to choose which routes it wanted to operate. Somehow, the govt arrived at the decision that MH should only be allowed 19 routes while AK was essentially granted full access to all routes. Furthermore, a pricing floor was imposed on MH. I believe it was also decided that PMB would hand the P&L back to MH. These rulings are lopsided, and in AK's favour. That's why I worry that the govt is also starting to coddle AK. This rationalisation is nowhere close to a deregulation and signals the govt's intention to continue interfering. And the whole business is sloppy. The govt has effectively given an advantage to AK that would result in additional bleeding at MH that the govt itself will inevitably help to plug. As long as the workings between PMB and MH are not transparent, AK will continue to argue that it needs protection from potential predatory tactics. As long as there is something about the dealings between the govt and MH that the govt does not want disclosed, it may continue to yield to AK in ways that are wasteful and detrimental to the domestic air transport market.

I certainly was under the impression that MH asked to be allowed to only serve these 19 trunk routes. So now it appears that the ministry of transport instituted new domestic air transport policies on its own counsel (or maybe there is another shrimp behind the stone?). If this is true, this whole domestic network overhaul (including the limits imposed on MH's domestic pricing freedom) smacks of sloppy policy-making if not outright bias. I fear what this hints at is AK's rising political clout. While I believe that low cost air traffic holds the key to Malaysia's commercial aviation future and that the government should be appropriately supportive, I do not advocate favouring one carrier over the other. Making life too easy for AK will ultimately dull its discipline and fighting sensibilties.

I agree that it is too early to tell. I had quick glance at MH's Q1 2006 (quarter ending on March 31) presentation which included comparisons with the corresponding quarter of 2005. Yield (calculated as revenue divided by flown revenue pax km (RPK)) has gone up. However, most of the yield increase came from fuel surcharges; the chart that compared MH's Q1 2006 yield (inclusive of fuel surcharges etc.) against that of SQ and TG without specifying if their figures included fuel surcharges. Capacity (in available seat km (ASK)) was trimmed 5% compared to Q1 2005 but RPK fell 10%, resulting in a reduction in load factor by a few percentage points. The impact of the attempt to raise revenue cannot be assessed over a single quarter; we don't know if the demand will continue to weaken in the face of higher prices. It is also unclear if large-volume advance sales stimulated by the likes of the MATTA fair were included in Q1 revenue. If so, perhaps the revenue of Q2, acknowledged as traditionally the weakest quarter, might have taken an extra hit. MH released the Q1 results at the end of May; does it mean we get to see the Q2 figures at the end of August? I wonder if MH can offset the fall in pax revenue with more cost reductions? I doubt we will see the effect of the mutual separation scheme until Q3 or Q4. Starting from Q3, it would be interesting to see the profit-and-loss of MH's downsized domestic network, what with the stipulated minimum fares etc. Meanwhile, for an accurate gauge of the viability of MH's operations, any concessions it might receive from its parent company - PMB, should be laid out. How much of MH's actual cost burden does PMB shoulder? Have PMB's accounts ever been disclosed?

Come to think of it, the main issue is probably not the charges for the use of the aerobridges. It was merely a convenient reason to give. Many LCC's worldwide do utilise aerobridges, even on a large scale at their respective bases. However, they tend to select secondary airports (which tend to be smaller and more compact facilities) and, in many cases, operate their own terminal to ensure near total control over ground handling. I doubt AirAsia was allowed that degree of control at the MTB; it had to rely on KLIA-employed gate operators, baggage handlers (along with the less-than-efficient baggage delivery system) etc. So AK did need the LCCT for the necessary control and flexibility in its operations. Meanwhile, I won't dispute your assertion that certain parties besides AK had vested interest in building the LCCT. I just think it was necessary for AK to have that sort of stripped-down and compact facility for its sizable KUL operations. Good point about the lack of space for retail and passenger amenities at the contact pier of the MTB. MAHB might want to consider renovating the contact pier (e.g. convert 2-4 nearest gates into spaces for outlets, lounges and other passenger services) before planning a new satellite building.

My take on the LCCT is that it is a fair "compensation" to AK for having forced it to relocate from SZB. I'm not sure, but it wouldn't surprise me if AK partially funded the construction of the LCCT. For a low cost carrier like AK where aircraft turnarounds are key to operational efficiency and stability, it needs almost complete control over all aspects of ground handling. Operating from the MTB affords AK less control and causes its staff to be spread over larger distances. I would imagine that many AK staff have to multitask all the way from check-in to gate operations and flight dispatch, which is more difficult to do when the walk from check-in to gate is a good 15 minutes. As AK operates so many flights out of KUL, little inefficiencies add up very quickly. Also, as I mentioned in my reply to Keno's post, MAHB can only give concessions to AK to a certain extent for operating from the MTB. Otherwise, it will be unfair to other operators. Even then, the costs may not be low enough for AK. All in all, the RM100+ million LCCT represents a marginal investment over the original cost of building KLIA (about RM9 billion?). It is sad that many gates are underutilised as Malaysia miscalculated KUL's hub potential, but should we hold AK hostage to those mistakes? Should AK end up paying for those mistakes?

All a matter of cost. How much discount can MAHB give to AK on airport charges before other operators yell "not fair!"? In order for AK to survive, it has to be very aggressive on maintaining low costs. It is important for the government to be supportive of that venture (without taking sides) because it is likely to be the path towards solidifying KUL's position in the region. All of AK's itineraries are meant to be point-to-point. That said, how is anyone going to justify asking AK to favour feeding MH connections over its own?

Thanks for the greeting Tony. I think there is a bus gate somewhere under the skytrain ports at the MTB but it is probably not for large scale operations. When KLIA was designed, there wasn't much AirAsia to speak of. The airport planners envisioned a more premium traveller mix. IIRC, it wasn't until about 2 years after KLIA opened that AK was forced to move in.

The GE-powered combis have been disposed of to Boeing for some time now. Ethiopian appears to have decided on an A332 and an MD-11 for a short term solution before moving on to 777s and more 767s.

Wait a minute... I thought MAS had already sold the building to PMB under WAU in 2001 or 2002? So now is it really PMB selling the building to PNB to raise cash for MAS? What next? PMB selling aircraft to raise cash for MAS? Double WAU! In honour of the government and people of Malaysia, MAS might want to put an extra wau decal on the aircraft tails. By the time the third WAU takes place, they should adopt this wauwauwau (multiple wau) design: http://www.cardatabase.net/modifiedairline...php?id=00000430

I agree. It's a strange restriction to impose on MH. Anyway, with the August 1 switchover date a month away, I wonder what the status is with regard to the following: Is AK introducing some form of baggage interlining service (at a fee or free of charge) for domestic markets where MH will no longer operate? Will there be AK/MH baggage interlining for international-to-domestic transfers? The 19 trunk routes probably accounted for over 70% of MH's domestic capacity up until now. In any case, since AK will be allowed to compete head-to-head, MH will be forced to reduce capacity. What will happen to the surplus MH 737s and personnel (did the MSS include some flight/cabin crew)? How many staff have been signed over to AK? Have the rumoured Fly Asian Express flight crew shortage been resolved? When is FAX expected to receive its operating certification? Are there any issues at AK that might affect the introduction of additional domestic capacity from August 1? Any ticketing bottlenecks, considering the passengers originally booked on MH for flights that MH will no longer serve?