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?

Slightly off-topic, but what is going to happen with the 734 utilisation after August 1 when MH has scaled down to 19 trunk routes in the domestic market? What is going to happen to the 734 fleet, the flight and cabin crew etc.?

I recall that this former MD was quoted months ago as saying that MAS should not only be concerned with profitability and neglect its national duties. Back then, it seemed easy to dismiss those comments as coming from someone stuck in the past. Then again, he might have been misquoted or quoted out of context. This time around, his comments contain a few sound bites in my opinion. For one thing, the domestic network restructure leaves MAS in the odd position of competing with AirAsia on the 19 trunk routes without full pricing freedom. It's one thing to make sure that MH does not take advantage of its PMB backing to practise predatory pricing. However, maintaining a lower limit on MH fare levels is simply asking for MH to operate flights with many empty seats. Other than that, MH is still clearly being bailed out by the government. Who is footing the bill for the mutual separation scheme? What is the state of PMB's accounts? I also agree with his view that the key is to cut costs because raising yield is a tricky business. MH has been unrealistic about its market strength for the past decade. The most recent quarterly report mentions increased yield. If the yield is measured by revenue over available capacity, then it is promising if MH can maintain that. On the other hand, if the yield is defined as revenue over sold capacity, then one has to check if there is a drop in load factor. In any case, the trend has to be monitored over the next few quarters to assess the impact of recently introduced fare increases.

Possibly 4 or 5 still in old config. The last one they plan to reconfigure is MPN. That leaves MPA, MPG, MPK and MPM; looks like these 4 will be withdrawn from service. The A333 conversion cannot happen until Airbus defines the A330-300 converted freighter as a subtype and receives certification from the relevant aviation authorities worldwide. So far there seems to be interest only in a freighter version for the shorter fuselage / longer range -200. The last I read was that Ethiopian has decided to go for other types instead of the 744combis. I can't remember what they are but it might even be something surprising like the MD-11. Thanks for the welcome S V.

Yes indeed, since they were originally SWISS and SABENA aircraft. I guess many of us remember that prior to Idris Jala's arrival, the mantra was pretty much "our aircraft need more premium seats because that's where the money is"... yeah, if they were filled with real paying passengers. I recall that the A333 was introduced with a F12C56Y213 cabin configuration!

Punished for breach of contract? (I assume that's what you meant) I imagine that commercial aircraft customers are bound to the deal by the progressive payments that have to be made as the airframe moves down the production line. Basically, PMB loses whatever it has paid so far per the agreement if it chooses to back out of the deal. My description here is probably an oversimplification of the transaction but, aside from the investment that PMB stands to lose, what else could Airbus (and the other suppliers for the A380) potentially claim from PMB in damages for this breach of contract? Does anybody know how much (approximate percentage of purchase price) PMB has already paid out to Airbus and the other suppliers for the A380? Too bad that MH, PMB and MAHB have already committed funds to the upgrade of infrastructure earlier than necessary; nevertheless, these improvements, while driven by the preparation for the A380, can benefit other aspects of the operations.

How is the BDSF structurally different from the BCF? Looks like CX and JL have had 747-400 passenger-to-freighter conversions performed at Xiamen (TAECO?). Made (or actually Modified) in China!

The A332 type (all of them leased) was for routes that are too thin to support the A333/B772. It was probably originally envisioned for launching medium haul regional destinations in MH's effort to jump on the "China" and "India" bandwagon, although it ended up serving Middle East as well. I understand that the A333 only did the KUL-DXB-IST-MAD route briefly in the mid-1990s. Since then it has only been sent as far as IST. When the A333 flew into MAD, MH either had yet to receive or had just begun receiving the B772. As "ill equipped" as the A333 may seem to you now, the DC-10s are likely to have been worse.

As far as the AMS station is concerned, the suitability of the current 747 configuration (12P41J306Y) is questionable. KL does not offer first class. If MH follows through on the reconfiguration of its fleet to better match the business:leisure pax ratio, most of its 747s would be two class with a smaller premium cabin translating to 400+ pax or at least 15% increase with existing equipment. Furthermore, if KL launches a CGK nonstop, it could potentially free up a lot of seats for its AMS-KUL leg moreso if the service becomes de-linked from CGK and made into a dedicated KUL service. For example, removing the CGK tag from the current daily AMS-KUL-CGK and using the same equipment could double (100% increase) the seats on KL metal into KUL. If all of that capacity can be absorbed profitably within the next couple of years, then there may be a need for a larger-sized aircraft. Then again it might be just as good for MH to supplement the capacity with extra flights using existing aircraft like the 777. In general, introducing a new aircraft type for only the couple of destinations in the network that can sustain it doesn't make a very convincing case.

AFAIK, SQ metal is still not allowed in YYZ according to the bilateral. My guess is that there is enough SIN-YYZ vv premium traffic to support the SQ/AC codeshare via LHR. If that is true, then the choice of LHR over YVR as a connecting point makes sense as it has fewer stops and avoids the reportedly non-premium AC domestic experience on the YVR-YYZ leg. The SQ/VS transatlantic partnership is also interesting. Perhaps VS is among the most cost effective European majors. It would be great if unit costs for VS and KL on transatlantic operations can be compared. If KL's costs are low enough, the MH/KL transatlantic co-operation that you proposed could happen. I am also thinking about the west coast of U.S.A. and Canada. The reason I think KE is very attractive is that its coverage of North America is extensive (YVR, YYZ, HNL, SEA, SFO, LAX, ORD, DFW, IAD(?), JFK, ATL and just recently announced LAS); these destinations would be reachable with a single transit (ICN) through this one partnership. However, KE's transpacific flight schedules seem a little spread out so the transit times may be less than optimal. As for AF, I guess the AF/KL group is amenable to the maintenance and/or expansion of the MH/KL co-operation. Based on what was reported on the alliance talks, I speculate that AF's position was, "Let's wait and see about SkyTeam membership. Focus on working with KL at AMS. We will be watching the progress on your turnaround plan."

My (layperson's) take on the MH A380 order: I believe that the introduction of the A380 is inconsistent with MH's turnaround plan which calls for higher density aircraft of smaller size. First of all, it is unclear if the current traffic on MH's so-called flagship intercontinental services comes at the expense of yield. Second, this will add a whole new aircraft type. Furthermore, the management has already acknowledged that the airline's customer base is more budget than premium. Therefore, a two-class 747 with 400+ seats (rather than the current 12P41J306Y config) would already provide a significant increase in capacity; an A380 with comparable seating density would have at least 520 seats (!). It has not been reported how much MH/PMB money has been sunk into service development and deposits for the aircraft. Is it really too late to walk away? Anyone with more details on the deal that PMB signed with Airbus on the A380?