Jump to content
MalaysianWings - Malaysia's Premier Aviation Portal
Sign in to follow this  
James Gota

Were in no rush says MH

Recommended Posts

MAS putting off long-haul fleet buy, 737 option conversion

Tuesday October 14, 2008

Malaysia Airlines is postponing its decision on its long-haul fleet renewal owing to current market conditions, CEO and MD Idris Jala told ATWOnline at the World Route Development Forum in Kuala Lumpur.

 

"It is clear that we will delay the process to look at a widebody aircraft order. We are not in a hurry," he said. MAS had anticipated analyzing future widebody requirements in the current quarter to complement its spring commitment for 35 737-800s plus 20 options (ATWOnline, April 1).

 

It will not defer deliveries scheduled to begin in September 2010. "By that time the present difficulties and crisis will have improved somewhat, so the timing is right," Jala noted. But it may not firm the options. "The 35 737-800s will replace our older narrowbodies, whereas the options were to secure future capacity expansion. If some airlines will go down or slim down their order for 737s, we might pick up some aircraft that way." MAS has reduced capacity by 7% year-over-year during the past six months in response to decreasing passenger demand (ATWOnline, June 30).

 

Jala also said the carrier "will be holding alliance talks soon, maybe next year," conceding that joining an alliance was impossible until recently. "We achieved a turnaround and built a hub-and-spoke. Now, we have something to offer." MAS posted a company-record profit of MYR852.7 million ($238.5 million) in 2007, reversed from a MYR133.7 million loss the previous year (ATWOnline, Feb. 26).

 

 

by Cathy Buyck

 

From

http://www.atwonline.com/news/story.html?storyID=14354

 

MH is stupid it could get 25 free A350's because of the dugong's delays :help:

 

If Mh is wating for 1920's conditions its no point as nobody would fly as they have no money :help:

 

Share this post


Link to post
Share on other sites

I regreted to say that by then MH will no longer have a product that is superior than some of the tip top airlines such as SIA and CX. The A330s and B777-200s will be outdated by then.

Share this post


Link to post
Share on other sites
I regreted to say that by then MH will no longer have a product that is superior than some of the tip top airlines such as SIA and CX. The A330s and B777-200s will be outdated by then.

 

Kenneth, the products are already outdated now, probably with the exception of C cabin on the B777's.

 

By 2010, MH is going to look like Royal Brunei back in the early 00's. <_>

Share this post


Link to post
Share on other sites

Which aircraft doesn't matter, as long as brand new. We've been and will still be flying in a 'tube' thru the sky. Only cabin design and noise may be different unless they really come up with something like B2 spirit.

Share this post


Link to post
Share on other sites
Kenneth, the products are already outdated now, probably with the exception of C cabin on the B777's.

 

By 2010, MH is going to look like Royal Brunei back in the early 00's. <_>

 

At this present momemnt, such aircraft are still acceptable provided that the cabin are refurbished. Forget about the smarties seat on the A330s which look ugly to me. Wake up Mr IJ!!

Share this post


Link to post
Share on other sites

More depressing news from MH.

 

As the competition moves forward MH continue to fudge fleet renewal plans.

Is there no vision within the organisation?

 

MH really are starting to look like a second rate carrier. :angry2:

Edited by Ken M.

Share this post


Link to post
Share on other sites

Are you guys serious?

 

Just because they are delaying the orders for a few months due to the obvious state of the world economy, you guys are bashing MH like crazy.

 

You have to take note that MH are just off some financial difficulties, and any rushed decision would not be wise.

 

They have to study each and every angle.

 

I, like all of you, would definitely want to see them get new WB's, but why should they rush and spend billions of dollars to realize in the future it wasn't the correct decision?

 

Whatever it is, we have lots of MH insiders here, just please tell us what are they considering? :(

 

77W ke, 787 ke, A330 ke, A350 ke.. apa? :D

Share this post


Link to post
Share on other sites

There is nothing to indicate that the deferment of the widebody decision is going to last only a few months . . . the is actually nothing to indicate it is going to happen anytime in the forseeable future.

 

Struggling on with MAS' current fleet of B744s, B777s and A330s will :

 

- penalise MAS in terms of fuel efficiency as these older aircraft are far more fuel-thirsty compared to the B773ERs that are already in the fleet of its keenest competitors (for more scarily are entering the fleet of airlines such as Philippine Airlines, Garuda Indonesia and Biman Bangladesh Airlines);

- penalise MAS in terms of passenger appeal as the lack of up-to-date cabin amenities becomes even more glaring as the competitors continue to improve their product

- penalise MAS in terms of operational efficiency as older equipment are less likely to function as well and could well see spend more on delays, maintenance and maintenance downtime

 

Even before the current economic downturn arrived, it was already clear that the Airbus A380s might be too big for MAS . . . that fact is now clearer than ever and surely Datuk IJ and his team must re-consider this order and perhaps look to converting it into an order for A350. Aircraft ordered today are only delivered years later and surely MAS is not waiting till everything is rosy and great to "begin to look at the widebody fleet re-equipment". Then it would once again miss riding the wave - as it did in the last few years when her counterparts in East Asia have enjoyed tremendous profitability.

 

I don't think a widebody aircraft decision today is going to bankrupt MAS - a spurt of delivery today might perform that trick - and a decision today will indeed secure MAS' future. MAS may regret its decision to defer this important re-equipment exercise and be caught flat-footed when the world's economies - and especially those of Asian countries - turn around and travel interest is re-ignited.

 

The same problem seems to plague Thai Airways International - except that the airline at least has its A340-600s. Its A300-600 fleet is so out-dated and unpopular that the airline has lost tremendous market share on the routes operated by these ancient aircraft.

 

I hope MAS does not wait forever to rejuvenate itself . . . because its competitors from near and far are not standing still. Other than Royal Brunei Airlines whose footsteps MAS surely does not want to follow, most of the rest have made their plans and put in their orders for a new generation of fuel-efficient game-changing wide-body aircraft.

 

KC Sim

 

 

Share this post


Link to post
Share on other sites

KC Sim - BI has a few B787s on order, slated to arrive in 2010 or 2011. So, MH is setting its own benchmark, as BI has moved on.

 

In that article by ATW, maybe IJ or the reporter didn't tell the full story but I see some gaps - 738 delivery timings are somewhat OK as turmoil has past by then - so why not order some widebodies now so that their delivery will coincide with the same market up-turn? Maybe MH is worried about securing the financing - the funds and rates - that it could secure for the widebodies. Not sure if it can still depend on the remaining internal funds from its last rights issues/ fund raising exercise as I'm sure a significant proportion has been allocated for the 738s. Or is MH waiting to pick-up somebody's unwanted orders from the likes of IT or 9W? (but this is like hedging your fortunes on somebody's misfortunes)

Share this post


Link to post
Share on other sites
Guest MarcosMD11

Well I am surprised of the decission MH will delayed there Long Haul Fleet Replacements. Rumour was for almost 1 year already that they will order some new aircrafts. I heard types like 77W and A350.

 

But I flew last month on MH 747-400 , there 747-400 still look very good, and cabin layout is still better then some other airlines.

 

Only I think like what KLM have is MH 747-400 can be going quick TEC.

 

100% 77W is perfect to replace the 747-400. KLM is very happy with 77W.

 

 

Share this post


Link to post
Share on other sites

Agreed with KC and wish to add the following;

 

Airlines business is cyclic, having boom and bust periods almost continuously.

 

Due to backlog of order and production delay, if ordered is placed today, earliest delivery for 787 or A350 is 2012/13. Unless IJ &co expect current financial crisis to last beyond 2012, not planning to place MH in a competitive position come next boom period, believe there isn’t a future for MH or in airline business.

 

Placing order for new aircraft may or may not strain MH cash flow as only deposit is paid, apart from internal cash flow, MH can source finance from either rights issue, bond, bank loan, leasing, etc.

 

If MH is not placing order for new aircraft for reason of unfavourable market conditions, don’t see how it will justify to takes up cancelled order from other airlines.

 

There is no doubt, IJ&co turned around MH but scarified long term interest for short term gain. If this trend is to continue, don’t see how MH can compete with EK, EY, SQ, CX or TG until 2015.

 

:drinks:

 

Share this post


Link to post
Share on other sites
Are you guys serious?

 

Just because they are delaying the orders for a few months due to the obvious state of the world economy, you guys are bashing MH like crazy.

 

You have to take note that MH are just off some financial difficulties, and any rushed decision would not be wise.

 

They have to study each and every angle.

 

I, like all of you, would definitely want to see them get new WB's, but why should they rush and spend billions of dollars to realize in the future it wasn't the correct decision?

 

Whatever it is, we have lots of MH insiders here, just please tell us what are they considering? :(

 

77W ke, 787 ke, A330 ke, A350 ke.. apa? :D

 

Finally, someone with some sense on the subject matter...

Share this post


Link to post
Share on other sites
The same problem seems to plague Thai Airways International - except that the airline at least has its A340-600s. Its A300-600 fleet is so out-dated and unpopular that the airline has lost tremendous market share on the routes operated by these ancient aircraft.

TG also has 20x A321-200 on order which is part of their compensation deal from Airbus. Another 8x brand new A330-300E are on its way and the first one is due to join TG this December. All the 8x brand new A330-300E will be powered by RR engines instead of PW. TG also has ordered 14x B787-9 which is slated for delivery starting year 2012.

 

Share this post


Link to post
Share on other sites
Well I am surprised of the decission MH will delayed there Long Haul Fleet Replacements. Rumour was for almost 1 year already that they will order some new aircrafts. I heard types like 77W and A350.

 

But I flew last month on MH 747-400 , there 747-400 still look very good, and cabin layout is still better then some other airlines.

 

Only I think like what KLM have is MH 747-400 can be going quick TEC.

 

100% 77W is perfect to replace the 747-400. KLM is very happy with 77W.

 

KLM may be happy with the 77W but a lot of their passengers are not.

10 abreast in the Y cabin with a 31" seat pitch for 10+ hour flight ain't my idea of acceptable comfortable travel.

Charging an extra €50 for exit rows seats is mean also.

Some travellers are already avoiding these aircraft.

 

I sure hope MH don't follow the KLM sardine tin Y cabin experience if they go for the 77W.

Share this post


Link to post
Share on other sites
Are you guys serious?

 

Just because they are delaying the orders for a few months due to the obvious state of the world economy, you guys are bashing MH like crazy.

 

You have to take note that MH are just off some financial difficulties, and any rushed decision would not be wise.

 

They have to study each and every angle.

 

I, like all of you, would definitely want to see them get new WB's, but why should they rush and spend billions of dollars to realize in the future it wasn't the correct decision?

 

Whatever it is, we have lots of MH insiders here, just please tell us what are they considering? :(

 

77W ke, 787 ke, A330 ke, A350 ke.. apa? :D

 

 

Finally, someone with some sense on the subject matter...

There is nothing "sensible" about those comments on the subject matter. Rather, it just cements the lack of a future vision / forward thinking / planning ahead. An acute business sense is to be able to make a decision in frightful times like these and be aware of the cyclical nature of these downturns. When there is a down, there will be an up.

Share this post


Link to post
Share on other sites
When there is a down, there will be an up.

 

Hence the reason they're keeping their A380 orders I suppose... :D

 

Well, it's more that I like comments like yours & jani's, as they contain more substance than just plain bashing/empty talk. A similar topic is now being discussed over at A.net and the comments are far more critical.

 

BTW, love all your TR's in A.net.

Share this post


Link to post
Share on other sites
There is nothing "sensible" about those comments on the subject matter. Rather, it just cements the lack of a future vision / forward thinking / planning ahead. An acute business sense is to be able to make a decision in frightful times like these and be aware of the cyclical nature of these downturns. When there is a down, there will be an up.

 

Do you really think that something seemingly as simple as ordering aircraft is something that the MH board cannot visualize/think/plan?

 

I'm sure there is a reason for them doing (or rather, not doing) this. If people like you and me on an internet forum can think of "solutions" to their problems, what makes you think the think-tank of MH cannot?

 

The way people talk here it is as if MH are doing all this on purpose. They are not stupid people.

Share this post


Link to post
Share on other sites
Do you really think that something seemingly as simple as ordering aircraft is something that the MH board cannot visualize/think/plan?

 

I'm sure there is a reason for them doing (or rather, not doing) this. If people like you and me on an internet forum can think of "solutions" to their problems, what makes you think the think-tank of MH cannot?

 

The way people talk here it is as if MH are doing all this on purpose. They are not stupid people.

Let time tell the outcome.

 

So far I predicted the downfall of LGW-KUL, LHR-Langkawi / Penang, KCH-PER and I have several more down the pipeline. I can even go into detail why they are in the red for cash cows like ZRH, LHR and LAX while others are making money.

 

STUPID is a very strong word to use and it should not be lashed around lightly.

 

Baseless bashing aside, those with inputs and with constructive comments to add are making them from a simple business standpoint. MH is an airline that SHOULD be run like a business and not a government stat board. I admit that things are changing but there are still several chunks of old schooled mentality from the yester-years preventing MH from going forward.

 

I am a firm believer in the investment of brand equity, which MH has so far flushed down the toilet with their tactic in recent months. 5-star value carrier? Hardly. PR spiel? Very much so. Best Cabin Crew? Heard it all before so let's move on... The award is a few years old already. Basking in one's old glory is a very sad form of publicity.

 

So no one is saying that MH is stupid. However, they are hardly showing themselves in a good light with every business decision that they are making.

Share this post


Link to post
Share on other sites
Do you really think that something seemingly as simple as ordering aircraft is something that the MH board cannot visualize/think/plan?

 

I'm sure there is a reason for them doing (or rather, not doing) this. If people like you and me on an internet forum can think of "solutions" to their problems, what makes you think the think-tank of MH cannot?

 

The way people talk here it is as if MH are doing all this on purpose. They are not stupid people.

 

 

Recent trends are leading to profit erosion in the industry

Key trends observed in the industry include the following:

 

Trend #1: Overcapacity i.e. massive additions to capacity by 2009.

Airlines, with their optimism fuelled by the strong profits currently being generated in Asia, are competing with

one another by placing large aircraft orders. The demand for new aircraft has been so good that Airbus and

Boeing are seeing record orders. Emirates alone will take delivery of their huge order of the A380s and most of

these planes will be deployed on the important Kangaroo route i.e. Australia – Europe. Any order made for an

aircraft today will generally see delivery beyond 2012.

 

Trend #2: Low-cost competition is on the rise

In nearly every market, we see low-cost (or at least low-fare) competitors dumping large numbers of very low

priced seats in core markets in the hope of stimulating demand. These airlines are attempting to generate new

pools of discretionary traffic. Even though these airlines do not explicitly target the business passengers from

which full service carriers make their living, they create a devastating residual effect.

When LCCs drop leisure fares, they also typically remove restrictions such as advance purchase requirements

or minimum stay. Because of this, full service carriers are faced with a choice: to either match these fares and

conditions and lose valuable premiums from business passengers, who now have access to these lower fares,

or to continue to take premium fares from business passengers and risk losing significant market share in the

leisure segment. Research shows that following the entry of a LCC on a route, the profits of the incumbent

carriers on that route decline by an average of 31%.

As for the Asian market, the threat from growing LCCs will mean a loss of market share for the traditional full

service carrier. Projections show that LCCs in the Asia Pacific region will increase their presence, resulting in

an increase of capacity share from less than 10% to 25% of the available seats. Furthermore, LCCs are

aggressively expanding beyond the traditional short-haul routes to medium-and long-haul markets. The few

that have started include Oasis from Hong Kong to London, and from the Kuala Lumpur hub, 2 other airlines

i.e. JetStar and AirAsiaX have started flying to Australia.

 

Trend #3: Rising factor costs — particularly fuel

Between January 2005 and December 2007, the crude oil price increased from USD38 per barrel to USD90

per barrel which is a massive jump of 135%. In January 2008, it touched USD100 per barrel. This is the highest

oil price that mankind has ever known. The increase in fuel prices alone has added nearly USD88 billion to the

industry cost structure, bringing the industry total fuel bill to USD149 billion. So severe was the impact of the

increased oil price that United Airlines announced in early November 2007 that it was contemplating grounding

100 planes within its fleet. Giovanni Bisignani, IATA’s Director-General and CEO, when asked to forecast the

outlook for the aviation industry, warned that the escalating price of jet fuel would seriously dent airline profit

margins, erode the yields and even cripple a number of airlines.

 

Trend #4: Increased public scrutiny on environmental issues

Based on data from the United Nations, aviation is responsible for only 2% of global carbon emissions – a small

quantum compared to ground transport and power plants that burn fossil fuels. IATA estimated that this figure

will grow to, at most, 3% by 2050.

With global warming and climate change being key topics of debate at world forums, attention is drawn towards

aviation’s role and its stand on the issue. Governments in various parts of the world are in unison in supporting

the global strategy i.e. to curb the increase of greenhouse gas emission. However, there is a lack of globally

accepted standards and solutions to the issue. There are governments or economic regions which are taking a

unilateral approach to address the issue. For example, EU is forging ahead unilaterally to design a legislation on

emissions trading - which is not in tandem with developments in other parts of the world e.g. Asia, Middle East,

South America, etc. Once this law is passed in EU, it will affect a lot of non-EU airlines which are unprepared,

causing these airlines to suffer financial losses as they will need to stop flying the European sectors overnight.

IATA is currently advocating a 4-pillar strategy: invest in new technology, operate efficient infrastructure, fly planes

efficiently, and introduce economic measures (tax credits for re-fleeting, offset programmes and emissions trading).

It has also made public its interim fuel efficiency target i.e. 25% improvement in fuel efficiency by 2020.

Many international airlines are rallying behind IATA’s strategy because it offers more structured and palatable

solutions to the environmental issues. In fact, IATA’s strategy has shown positive results to date: 15 million

tonnes of CO2 savings in 2006 and a further 10 million tonnes in 2007.

IATA is now working with the International Civil Aviation Organisation (ICAO - an international body representing

governmental representatives from various nations) to map out the options to achieving carbon neutral growth

and to develop a strategy to guide the efforts of governments, airlines and manufacturers. Most airlines,

including MAS, continue to be guided by IATA’s direction.

 

Trend #5: Possibility of slower global macroeconomic growth

While the Asia Pacific economy in 2007 remained positive, there are early indications of turmoil ahead. The

volatility of oil prices and the uncertainty of US economic growth due to a weakening housing sector may spill

over and impact Asia’s economic growth. This could amplify the negative impact on developments in the

aviation industry over the next couple of years.

There are also rising concerns among economists with regards to the possibility of “global shocks” due to the

continuous unrest in the Middle East and Africa, and an economic downturn in China post-Olympic 2008.

Historical events such as September 11, the SARS outbreak and the Gulf War have proven to have devastating

effects on the aviation industry, with short-term changes in demand in some regions exceeding 30%. While it is

arguable whether such global shocks are increasing in frequency, it is clear that when they do happen, these

events will have a greater impact on our industry. Today, as much as 70% of travel is purely discretionary.

Share this post


Link to post
Share on other sites
Sign in to follow this  

×
×
  • Create New...