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Malaysia Airlines new business plan targets premium sector, following strategies of Cathay and SIA

 

Malaysia Airlines (MAS) has unveiled a new business plan aiming to restore profitability by significantly cutting capacity and increasing focus on the premium sector, which includes the launch of a new regional premium carrier in 1H2012. Several business units including maintenance, cargo and ground handling are to be spun-off, most likely in 2012, as part of a bid to free up capital required to fund rapid fleet renewal and the reinvigoration of MAS’ core business. MAS will swiftly phase out its B747-400 and A330-200 fleets over the next year, leading to a 12% reduction in total capacity.

 

The decision to draft yet another new business plan at MAS, which has made multiple turnaround attempts over the years, hardly comes as a surprise following the landmark partnership agreement forged in Aug-2011 with long-time rival AirAsia. The agreement, which included an equity swap and the appointment of AirAsia Group CEO Tony Fernandes to the MAS board, inevitably required MAS to downsize and abandon its attempt to compete with AirAsia at the low end of the market.

 

MAS will now focus entirely on the premium sector and adopt a strategy already deployed at leading Asian airline groups Cathay Pacific and Singapore Airlines (SIA). But MAS has a long and tough road ahead in winning premium customers and achieving the sustained profitability it hopes the new business plan will generate. MAS’ vision “to become the preferred premium carrier” will certainly lead to vigorous attempts by Cathay and SIA to defend their turf, positioning MAS as the underdog once again.

Without drastic measures, MAS will be bankrupt in 2Q2012

 

MAS clearly had to do something after slipping back into the red for the first three quarters of 2011, putting MAS into what it refers to as “crisis” mode. The Malaysian flag carrier, which turned a profit in 2010 on the back of its previous turnaround plan, incurred net losses of MYR1.247 billion (USD392 million) through the first three quarters of this year.

 

MAS expects to post another loss in the current quarter and end 2011 with a loss of about MYR1.3 billion (USD410 million). The carrier claims its situation is even more dire than its last crisis in 2006 and if it does not reverse the current “unsustainable” trajectory it will be out of cash and bankrupt in 2Q2012.

 

By cutting back loss-making routes and slashing overall capacity (ASKs) by around 12%, MAS is confident it can significantly reduce its losses in 2012. These immediate steps, which will be implemented as part of the first phase of the new business plan, are expected to improve the bottom line in 2012 by between MYR1.2 billion (USD380 million) and MYR1.5 billion (USD470 million). The carrier now expects to incur only a small loss in 2012 – likely less than MYR200 million (USD60 million) – and be cash flow positive by the end of next year. It is confident the new business plan will allow it to return to profitability in 2013.

 

MAS believes sustained profitability is feasible once it completes all the initiatives identified in the new business plan, including collaboration on several levels with AirAsia, new partnerships with foreign carriers which will come as MAS joins oneworld in 3Q2012 and the spin-off of several non-core businesses. The carrier aims to have an annual after tax profit of MYR900 million (USD280 million) by 2016.

 

Several long-haul routes to be cut, starting with South Africa and Argentina

 

The initial “recovery plan” will result in the discontinuation of MAS’ highly unprofitable routes to South Africa and Argentina, its only destination in Latin America. Other long-haul routes will also be axed but have not yet been identified by MAS’ new management team, which is led by new CEO Ahmad Jauhari Yahya. Most of the routes will likely come from MAS’ unprofitable European network because the carrier’s Middle East and Asia-Pacific networks are performing relatively well and its North American network was already slashed to only three weekly flights and one destination (Los Angeles) in the previous restructure.

 

MAS acknowledges that over 40% of its current routes are unprofitable. While several long-haul routes will be dropped, MAS plans to increase capacity within Southeast Asia by adding frequencies to core markets in the region. MAS is hoping to cash in on the expected doubling of passenger demand in the Southeast Asian market by 2020.

 

While MAS operates only five weekly flights to South Africa and Argentina (including two on a Kuala Lumpur-Cape Town-Buenos Aires routing and three between Kuala Lumpur and Johannesburg), they account for over 5% of MAS’ total international ASKs. MAS will also need to cut about 25% of its European capacity in order to achieve the goal of a 12% system-wide capacity reduction. This figure could be reduced slightly if MAS opts to also trim back its Australia/New Zealand operation.

 

MAS now serves five destinations in Australia and Auckland in New Zealand but it is unlikely to cut back this operation significantly if at all because it is now seeking to forge a close partnership with Qantas, which is sponsoring MAS’ entry into oneworld. Qantas, which does currently not serve Malaysia, is one of several potential joint venture partners for MAS. The carrier says it is now “exploring JVs with selected partners” as part of its new focus, as identified in the new business plan, on alliances and partnerships.

 

Australia and New Zealand now account for 22% of MAS’ international ASKs, while Europe accounts for 29%. Asia, where a slight increase in capacity is expected, accounts for 39% of total international ASKs. The carrier also has a large domestic operation, accounting for 48% of total seats, but on an ASK basis the domestic flights only account for 12% of total capacity.

 

MAS expects the network changes alone will improve the carrier’s bottom line by MYR220 million (USD69 million) to MYR302 million (USD95 million) annually, starting in 2012. Some of the suspended routes may later be reactivated once the business is stabilised and the new premium carrier, which will feed the long-haul network, is fully up and running.

 

With its smaller long-haul network MAS will focus primarily on the premium segment, leaving Malaysian long-haul low-cost carrier AirAsia X to focus on the budget sector. MAS’ new management team believes the carrier in recent years has lost its focus on the premium segment, resulting in a decline in the quality of its product. As a result, the carrier’s unit revenues have slipped significantly below leading Asian carriers such as Cathay and SIA.

Full-service cost base but with LCC revenues

 

Not only have MAS' revenues dipped below premium Asian carriers, MAS' revenues are closer to those of AirAsia and Tiger Airways (USD 2.2 cent difference) than full-service carriers like SIA and Cathay (USD 4.8 cent difference). MAS' costs, however, are much closer to SIA and Cathay (USD 1.4 cent difference) than LCCs. MAS' costs are 2.5 times those of AirAsia and twice those of Tiger.

 

While MAS can achieve cost cutting, any gains will be far from matching AirAsia and Tiger, underscoring the need for MAS also to drive revenue increases and improve its premium positioning.

 

MAS accelerates phase out of B747-400s

 

MAS will now invest in trying to win back premium long-haul passengers, primarily through a major revamp of its product. A rapid phase-out of MAS’ ageing widebody will be pursued and simultaneously new passenger amenities will be introduced.

 

By the end of next year the carrier will be operating only three types of modern widebody aircraft – A330-300s, B777-200ERs and A380s. A330-200s and B747-400s will be phased out by the end of 2012.

 

MAS expects the average age of its fleet will decrease over the next four years from 13 years to only five years, giving it a younger fleet than Asian leaders AirAsia, Cathay Pacific and SIA.

 

A380 will help MAS improve yields on key London route

 

Additional A330-300s and MAS’ first batch of A380s will be delivered in 2012. MAS, in its new business plan, confirmed its first A380s will be deployed on the Kuala Lumpur-London route. MAS says the A380 will be configured with a “best-in-class product and key innovations in customer service” which will help drive improvements in its yield and load factor.

 

MAS’ London route, which is now served with double daily B747-400s, has suffered over the last several months from low load factors and yields. The A380 will result in more capacity at a time market conditions in Europe are worsening. But MAS is banking on the A380 allowing it to woo more premium passengers, having noticed the impact the A380 has had at other carriers in attracting new clients.

 

MAS is also now pursuing a tie-up with oneworld member British Airways (BA), which currently does not serve Kuala Lumpur, leading to a potential joint venture in the UK-Malaysia market and beyond. Qantas, which already operates A380s to London and has an existing joint venture with BA on the UK-Australia kangaroo route, could also end up in this partnership.

 

While the new modern widebodies come with higher acquisition costs, fuel and maintenance expenses will be significantly reduced. MAS points out that swapping the B747-400 for A380s will improve fuel costs per ASK on the London route by 20%. The replacement next year of A330-200s with A330-300s will result in a per ASK fuel burn improvement of 29%.

 

Banking its new focus on the premium end of the business will lead to significantly higher unit revenues for MAS while its unit costs, which are already lower than most other Asian full service carriers, are further reduced. MAS now benefits from lower labour costs than nearly all its peers in the Asia-Pacific region but productivity improvements are required.

 

MAS will also separate its widebody and narrowbody operations, following the model used by SIA and Cathay which use their SilkAir and Dragonair subsidiaries, respectively, to operate the group’s narrowbodies. Thai Airways also recently adopted a similar strategy, using its planned new regional unit Thai Smile to operate narrowbodies while Thai mainline plans to phase out its remaining narrowbody aircraft.

 

New premium carrier to focus on international destinations within Southeast Asia

 

MAS will begin to shift early next year all of its B737-800s to its new regional premium carrier, which has not yet been formally named, although could be called Sapphire. The new carrier will initially operate regional international routes within four hours of Kuala Lumpur, including to destinations in Southeast Asia, the Indian subcontinent and greater China.

 

A preliminary initial route map for the new carrier includes five big ASEAN destinations – Singapore, Jakarta, Manila, Hanoi, Ho Chi Minh City and Bangkok – as well as the east Malaysian domestic destinations of Kuching and Kota Kinabalu. But MAS says, domestic routes will at least initially continue to be operated under the MAS brand with B737-400s (expected to be phased out by 2015).

 

MAS states that the new premium regional carrier will have a separate management structure, allowing it to focus on the “unique needs of regional premium passengers”. High frequency services will be offered to ensure a convenient schedule for business passengers.

 

The use of B737-800s will allow MAS to significantly increase frequency on its regional international routes because MAS now uses widebodies on these routes alongside B737s. MAS says the switch to B737-800s will also result in cost improvements because the B737-800 is 26% more efficient on a fuel cost per ASK basis than the A330-200 and 23% more fuel efficient on a fuel cost per ASK basis than the B737-400.

 

MAS says the new premium carrier will be the exclusive operator of its B737-800 fleet. CAPA data shows MAS now operates 14 B737-800s with 40 more of the type on order. Several additional B737-800s will be delivered next year as MAS now plans to take delivery of a total of 23 aircraft in 2012 – a mix of B737-800s, ATR 72s, A330-300s and A380s.

MAS expects premium focus will result in immediate 19% improvement in yields

 

MAS is confident that the new regional carrier, with its modern fleet and high product standards, will better meet the needs of Asia’s regional premium passenger. While most of the growth in Asia in recent years has been at the budget end of the market, MAS sees growing demand for premium short-haul services as income levels in Asia are on the rise. It also sees a need to provide an improved regional product for premium passengers coming off its long-haul flights.

 

MAS is banking on the combination of a revamped premium product on long-haul flights and the new regional premium carrier will enable it to win back premium customers lost in recent years as its fleet aged and its product languished. Yield management improvement, membership in oneworld and new sales initiatives, aimed primarily at growing corporate revenues and ending its practice of putting tactical sales promotions ahead of brand-building, will further aid in these efforts.

 

MAS expects this "win back customers" portion of its new business plan to generate a profit impact of MYR394 million (USD124 million) to MYR477 million (USD150 million) annually. This will be achieved by improving yields by 19% in 2011 while unit costs are expected to remain flat.

 

Another MYR309 (USD97 million) million to MYR392 million (USSD123 million) in annual profit improvements have been identified through cost reductions. Some of this will be generated by closing stations and improving productivity. Procurement costs will be reduced as MAS begins to pursue joint purchasing opportunities with new partner AirAsia. MAS has already identified MYR100 (USD31 million) million worth of savings from joint purchasing initiatives with AirAsia.

 

AirAsia and MAS to start offering connection product on non-overlapping routes

 

The new partnership with AirAsia is also expected to have a big impact on the revenue side as MAS begins to use AirAsia to improve its network connectivity. MAS, in its new business plan, reveals that a connection service will be launched on non-overlapping routes.

 

The new connection product with AirAsia will allow MAS to gain access to over 24 cities which MAS does not serve, resulting in additional feed to MAS’ long-haul network. MAS also points out that linking the two airline groups’ networks will help advance the vision of the Malaysian Government, which still owns a majority stake in MAS, of creating a major aviation hub.

 

A final MYR255 million (USD80 million) to MYR337 million (USD106 million) in annual profit improvement has been earmarked through MAS’ “keep it simple” initiative. This will primarily be driven by the spinning off of several divisions including catering, training, ground handling, maintenance and cargo. For training and ground handling, joint ventures with AirAsia will be pursued while some of the other business units could be sold, contingent on market conditions, providing cash to help MAS finance its investment in new aircraft.

 

At least for now MAS expects to keep its frequent flyer programme and holiday division as fully owned subsidiaries. MASwings, which operates turboprops on subsidised routes in rural east Malaysia, will also remain a fully owned subsidiary.

 

Regional subsidiary Firefly, which operates turboprops in west Malaysia, is already in the process of being merged with MAS’ new narrowbody operation. In forging its partnership with AirAsia in August, MAS decided to drop Firefly’s B737 low-cost operation, which was launched last year and posed a new competitive threat to AirAsia.

Dropping Firefly and new premium focus represents major shift in MAS strategy

 

Firefly was a major component of MAS’ previous strategy of having a second budget brand help the group compete against AirAsia in the domestic and regional international markets. But while Firefly’s turboprop operation, which was launched in 2007 and followed a hybrid regional low-cost airline model with some frills, was profitable, the newer jet operation was racking up big losses until it was shut in September.

 

MAS’ new management team says the previous strategy of focussing on Firefly was a mistake because it diverted resources away from its premium business. Firefly, which was growing fast and had been allocated 30 B737-800s from MAS’ order book, left MAS mainline with one of the oldest fleets in Asia. MAS claims the result was its mainline product languished, leading to lower yields and a decline in customer loyalty.

 

In reality, MAS pulled the plug on the Firefly B737 operation too quickly to call its previous strategy a failure. Having a separate brand for the larger budget sector of the market could have proven to be profitable in the long run. Most of MAS’ peers including Garuda, SIA and Thai continue to pursue multi-brand strategies with separate brands for full service and low-cost operations.

 

MAS, in some respects, is still pursuing a similar strategy, having traded its Firefly brand for a tie-up with AirAsia. This was probably a smart move given the strength of AirAsia in its home market of Malaysia. But Firefly could have potentially been successful and MAS could have potentially invested simultaneously in both its premium and budget products. After all, this is what Garuda, SIA and Thai are now doing.

 

Overall the new business plan at MAS represents a major change and bold strategic shift. The Malaysian flag carrier, while always striving to offer a top notch product, has struggled over the years to compete with Asia’s leading carriers for premium business. MAS is finally now committed to investing in the products needed to compete with the likes of SIA and Cathay.

 

It is a huge gamble. Wooing premium passengers and securing new corporate accounts is always an uphill battle. Membership in oneworld and brand new aircraft with industry-leading products will help. But MAS will also need to be transformed as a company and be relentless in its drive “to become the preferred premium carrier”. MAS has an unenviable track record of failed turnarounds and transformations. Its rivals will be watching closely as MAS takes a stab at yet another new strategy.

 

http://www.centreforaviation.com/analysis/malaysia-airlines-new-business-plan-targets-premium-sector-following-strategies-of-cathay-and-sia-64235

 

--------------------

Flee was faster!

Edited by alberttky

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CEO sets in motion business plan to bring airline to profitability by 2013

About 40% of MAS' network is unprofitable but beginning next year it would cut capacity by 12% and save about RM302mil by suspending flights to Dubai, Cape Town, Johannesburg, Buenos Aires and some European cities.

 

EK is serving DXB/KUL double/triple daily, EY is serving KUL-AUH daily, is MH implying there is a lack of demand and yield on this route and EK/EY are doing charity work for pax? If ex-KUL pax to DXB/AUH are mostly transit to EUR, then what is MH plan to capture this pax? What about ex-DXB/AUH pax to AUS, MNL, CGK?

 

:sorry:

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According to AJ this year’s statistics, MAS’s RASK was at a mere 20 sen while its CASK was at 25.6 sen, indicating a loss of 5.6 sen per kilometre. Compared to Emirates Airlines RASK was at 29.4 sen and CASK only at 28.5 sen.

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The Middle Eastern airlines like EK are more about volume than yields. They are a sort of a hybrid business model - with LCC characteristics (new, fuel efficient aircraft, high pax volume) but FSC services.

 

MH must seriously be looking to lease some B787s to replace the B772s for better efficiency on their thin European routes. It should also place a new order for B787s for the longer term, to replace the A333s. They should not bother with the A350 yet as delivery dates are still uncertain.

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The Middle Eastern airlines like EK are more about volume than yields. They are a sort of a hybrid business model - with LCC characteristics (new, fuel efficient aircraft, high pax volume) but FSC services.

 

MH must seriously be looking to lease some B787s to replace the B772s for better efficiency on their thin European routes. It should also place a new order for B787s for the longer term, to replace the A333s. They should not bother with the A350 yet as delivery dates are still uncertain.

 

EK, EY are low down in class for premium MH to consider as competitor?

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Don't forget we have an upcoming regional player in guise of MASWings - can sponge up some of the excess ? :p

 

 

 

Perhaps Captain Nik can verify if the powerpoint brigade is still intact within ? :D

 

Some guys are really teflon coated.....s#1t don't stick....

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doubt MH's so called new strategy will work - as already MH has bleeded rm1.3 BILLION loses to date for this year - and now MH wants to start a new regional premium with its 738s?. MH must have lost close to rm10 Billion since its existence through the few bailouts. Its better to shut it down and start with a fresh new paper and pen for a truly new airline as it must be a clean slate for esp the management and staff too. But guess this would never happen and MH will continue to lose hopefully less millions for the future.

And with its planned A380s coming into service soon - believe MH will suffer more as even with today's low rate of its 2 daily 744 and impending economic uncertainty - even the new novel of the A380 n its premium class will not do any good for MH.

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Let's not forget a new premium airlines = new opportunities for contracts, for handouts. Depending on how this is handled, it will just more bad news.

 

I however don't concur with CAPA's statement that Firefly may have been successful. The very fact that they admitted it shifted new planes from MAS (who sorely needed it) already proved it was a poor strategic move. Why try to do beat someone else at their game (budget) when they have yet to mastered their own game (full service)?

Edited by J Chong

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PETALING JAYA: Malaysia Airlines (MAS) will cut unprofitable routes, spin off its ancillary units, explore joint ventures with other airlines and launch a regional carrier by second half of next year in a bid to return to profitability by 2013.

 

This is the fourth time in a decade that MAS is being restructured, though the theme this time is be a leaner airline, but some analysts attending the briefing were unimpressed.

 

“It seems their consultants did the work for them and we are disheartened by the fact that the management only aspires for RM900mil net profit when benchmarked against first-tier airline, they should be aiming for RM2bil to RM3bil,” said an analyst.

 

A Maybank Investment analyst added: “It is a strategic mistake to set up a new airline when they could service the short-haul routes using the MAS brand name. Why the need to gamble when there is no guarantee of immediate success? However, what is convincing is that they are suspending flights to unprofitable destinations.”

 

MAS has also begun discussions with AirAsia and AirAsia X to cooperate on fuel-purchasing, maintenance, training and ground-handling, which could save the national carrier RM100mil annually.

If I may rephrase the intro based on my understanding over the matter - "Malaysia Airlines (MAS) will cut unprofitable routes, divestment of MAS Engineering Services, MAS Pilot Training Academy, MAS Ground Services and MAS Kargo, establish joint ventures with Qantas and British Airways and join oneworld and split into two entities, each focusing on narrow body and wide body type of aircraft by second half of next year in a bid to return to profitability by 2013."

 

While I think the plan to divest in the 4 subsidiaries is a good option to reduce cost and manpower (and ultimately its unions et al), I hope a very care and very publicly scrutinised development over the matter will be established. This is to ensure that what happened previously with MAS Catering where the unit was divested to a crony company belongs to parties related to former PM Abdullah Badawi with guaranteed profit for the company and MAS had to sign up a long term contract of 25 years with them, is not going to happen again, ever.

 

As for the negative responses garnered from the analysts, I somehow had predicted it based on the rather light-weighted BP in general. The fact that one of the analyst said that it was the con-sultants (yet again) that drafted the BP for MAS should be taken as a serious insult as it indicated that those appointed to helm the company are clueless, useless and hopeless. I hope to be able to share some of their reports when they start flowing in later in the day.

 

As for the plan to establish join procurement of fuel and MRO with AK/D7, I hope AK/D7 will be given veto power over the purchasing decision. MAS should just shut up, listen and follow.

 

Several long-haul routes to be cut, starting with South Africa and Argentina

 

Other long-haul routes will also be axed but have not yet been identified by MAS’ new management team, which is led by new CEO Ahmad Jauhari Yahya. Most of the routes will likely come from MAS’ unprofitable European network because the carrier’s Middle East and Asia-Pacific networks are performing relatively well and its North American network was already slashed to only three weekly flights and one destination (Los Angeles) in the previous restructure.

 

MAS will also need to cut about 25% of its European capacity in order to achieve the goal of a 12% system-wide capacity reduction. This figure could be reduced slightly if MAS opts to also trim back its Australia/New Zealand operation.

Personally the plan to axe some European routes comes as a surprise to me. This is because during the flip flop of the decision to cancel the affected routes last month, a rumour that MH is going to reinstate Zurich was widely speculated.

 

On the surface, if there are European routes that are in danger, they should be Istanbul and Rome. I think I am going to do a thorough calculation about this to find out where the reduction of 25% from European routes as reported by CAPA will be coming from.

 

MASReduceEurope.png

 

So if what reported by CAPA is going to materialise that MH is cutting 25% of its current capacity to/from Europe, we will see Istanbul, Rome and Frankfurt (!!!) leaving the network, with a slight reduction to maybe Paris on top of that.

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If ex-KUL pax to DXB/AUH are mostly transit to EUR, then what is MH plan to capture this pax? What about ex-DXB/AUH pax to AUS, MNL, CGK?

 

:sorry:

 

This is the gist of the BP, which MH acknowledges.

 

(Dont people read anymore these days?)

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While I think the plan to divest in the 4 subsidiaries is a good option to reduce cost and manpower (and ultimately its unions et al), I hope a very care and very publicly scrutinised development over the matter will be established. This is to ensure that what happened previously with MAS Catering where the unit was divested to a crony company belongs to parties related to former PM Abdullah Badawi with guaranteed profit for the company and MAS had to sign up a long term contract of 25 years with them, is not going to happen again, ever.

 

In fact this was clearly alluded by Danny & AJ during the townhall meeting. They've repeatedly stressed that they do not want a repeat of that.

 

Whether it will be so remains to be seen.

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Actually they just said that they will now own

 

As for reduction in European capacity, do remember that capacity will actually first INCREASE with the introduction of the A380s to LHR. As such, deeper cuts will be needed on other routes!

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Injecting additional capacity through the introduction of the A380s at a time when volume and yield from Europe is plummeting is going to have a huge impact on yield. While MAS management is banking on the novelty of the A380 to draw passengers to it and lifting yield, it should note that the A380 is not a novelty on the Kangaroo Route any more. It is operated by at least three airlines - Singapore Airlines, Qantas Airways and Emirates on this route with the prospect of Thai Airways International joining the fray.

 

MAS A380s are not expected to be any more spacious than those already operating ... so they will have to find another way to drum up that "wow" factor in order to achieve higher yield while injecting capacity in a shrinking market.

 

MAS should be careful about diversting its stake in some subsidiaries - especially those with strategic interests such as those engaged in engineering and ground-handling services. And where it does divest its interests, I hope that someone is watching where the money from such divestments go.

 

Greater co-operating with British Airways and Qantas Airways sounds fine - so long as it is not an excuse for management personnel and their massive entourage to fly to both ends of the Kangaroo Route on a regular basis for meetings, consultations, discussions, signing ceremonies for every little agreement etc etc etc.

 

And I still cannot imagine that the B747-400 fleet's replacement is the A380 (still think it is far too much capacity at a lousy time - and perhaps even when it is a upward cycle). There is still no talk about the B777-300ER - where two engines less to maintain and gobble fuel is a lot more efficient especially when fuel costs continue to dominate the red ink on the profit/loss reports.

 

Perhaps MAS' management should also spend some time thoroughly analysis what JAL has done in the last two years before pushing out this huge report on a new Business Plan. At least this time round, it is just called a Business Plan, and not some fancy title and acronym. And let's hope this is the last one needed ... meanwhile, I remain unconvinced about the premium regional model - not that it is a faulty thought but I suspect it will complicate many areas of operation and result in needless costs.

 

KC Sim

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This is the gist of the BP, which MH acknowledges.

 

(Dont people read anymore these days?)

 

Believe by cutting capacity to EUR won't help to attract pax using MH to EUR.

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The carrier aims to have an annual after tax profit of MYR900 million (USD280 million) by 2016.

 

In a good year, SIA makes that in one quarter... :rofl:

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CEO sets in motion business plan to bring airline to profitability by 2013

Black by 2013 but back to red again by the end of 2015 :D

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“Last year, we lost more than 40 percent of KL-based passengers flying a ‘full service’

competitor airline to a city served by Malaysia Airlines.” Pg17

 

However, MH still keep balance 60% of die hard and GLC pax, and not yet become the airline of last choice. MH survived without these picky pax, MH don't need them and they can pay premium fare if wish to travel on MH. :)

Edited by KK Lee

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I remain unconvinced about the premium regional model - not that it is a faulty thought but I suspect it will complicate many areas of operation and result in needless costs.

To me, the new airline, complete with new management, is their way to reduce headcount. Would be very politically difficult to rightsize MH under its present structure. So a fresh new airline with fresh new management and staff is the way to morph MH into a more efficient operation.

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To me, the new airline, complete with new management, is their way to reduce headcount. Would be very politically difficult to rightsize MH under its present structure. So a fresh new airline with fresh new management and staff is the way to morph MH into a more efficient operation.

 

If the new airline can piggyback on MH, the new airline will certainly be profitable from day one. MH Dinosaur is mean to be extincted in modern time :good:

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What do you guys reckon insofar as the staffing requirements of the new Premium Regional Airline be? 40 + 738s running domestic and premium routes will require how many people?

 

MH International will then become 50% of original size. Does it mean nearly an equal percentage of staff will be redundant? Does it mean retrenchment, MSS or VSS?

 

Do you guys think that the new airline will be rehiring the MH redundant staff on different T&C?

 

With the CCF in place, would it not make more sense for Mh Regional to operate A320, which hints at MH taking over AK's undelivered orders? Single a/c type means plenty of savings with economies of scale kicking in, common spares pooling, common crewing and training requirements?

 

I think there are a few very clever people doing some very clever work in there, which may eventually benefit the Nation in a very small way, and possibly themselves in a big way.

 

There has been a number of fly high profit followed quickly by crash and burn cycles since Tajudin's takeover. There has been so many turn around programs that MH actually turned around its losses to short term profit then turned around again into long term losses. Tajudi took over, airline showed small time profit, followed by big time loss. The came Tan Sri Mohd Nor, with WUA, and MH turned around into the black before Dato' Fuaad bled red. Idris then came in, turned around into black then clueless Tengku Azmil steered it into red.

 

Now we have this. With every turn around program the airline gets smaller and smaller. Now it will be split.

 

Rather confusing for a simpleton like me who looks at profits simply by taking revenue less cost.

 

Some of the comments here are so intelligent it makes the MH Management look like schoolboys.

 

Let's lighten up the mood;

 

In the near future Brain transplants have become common place, and people can go to a Brain Shop to get a new Brain. So this guy went to a Brain shop to get a new one, and he looked at the brains for sale on display. There were various prices from cheap to frightfully expensive.

 

He looked at the cheap ones: " How come these ones are cheap, who does it belong to? " " Emirates and SQ Managements' brains " the salesman said. He walked around and saw the Premium selection, brains displayed in gold plated containers, with spotlights and all. " WoW. These ones are really expensive. How come ? " The salsman said " Of course, its expensive. Pristine condition brains belonging to Mh Management. Seldom Used....." <_>

 

Ok. Now awaiting serious responses......

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There is still no talk about the B777-300ER - where two engines less to maintain and gobble fuel is a lot more efficient especially when fuel costs continue to dominate the red ink on the profit/loss reports.

KC, I was just thinking of your comment on this aircraft.

 

With MH's B772 routes already bleeding red ink, wouldn't it bleed more if a bigger aircraft was used? With the A380 replacing the B744, and with the CPT, JNB and EZE routes axed, would MH need this aircraft anymore?

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If the new airline can piggyback on MH, the new airline will certainly be profitable from day one. MH Dinosaur is mean to be extincted in modern time :good:

 

Whether it is profitable on stand-alone basis or not, it is still part of the same holding company which is listed, and all numbers are consolidated. I dont envisage you will be able to buy shares in the narrow-body aircraft biz separately. And if the mngt in both narrow & wide body biz are supposed to be accountable, then services need to be charged and paid on arms length basis.

 

What do you guys reckon insofar as the staffing requirements of the new Premium Regional Airline be? 40 + 738s running domestic and premium routes will require how many people?

 

MH International will then become 50% of original size. Does it mean nearly an equal percentage of staff will be redundant? Does it mean retrenchment, MSS or VSS?

 

Do you guys think that the new airline will be rehiring the MH redundant staff on different T&C?

 

With the CCF in place, would it not make more sense for Mh Regional to operate A320, which hints at MH taking over AK's undelivered orders? Single a/c type means plenty of savings with economies of scale kicking in, common spares pooling, common crewing and training requirements?

 

 

Staffing? Dont know but reckon MI and KA would be good benchmarks to startwith on productivity on bodies per ASK. But I dont think SQ/CX show their numbers separately or provide such details.

 

But unlike KA and MI which are seen as the poor cousin/ feeder service (on marginal routes - putting aside PVG & PEK in KA's case) to mainline CX and SQ respectively (and it shows, from the pax perspective), MH narrow body is not quite a mere feeder service as it will operate some trunk routes albeit regional. As it is, apart from the crappy seat pitch in Y, MH's new 738s are more luxuriously equipped than MI's fleet. And as the aim is to provide the same customer experience, I dont think the T&Cs of the cabin crew will differ between narrow & wide body ops.

 

As for A320s for regional ops, the cancellation charges imposed by Boeing must be punitive enough. So, no - it does not make more sense to use AK-ordered 320s unless the 738 orders can disappear with a positive net impact to the cashflow & financials.

 

 

There has been a number of fly high profit followed quickly by crash and burn cycles since Tajudin's takeover. There has been so many turn around programs that MH actually turned around its losses to short term profit then turned around again into long term losses. Tajudi took over, airline showed small time profit, followed by big time loss. The came Tan Sri Mohd Nor, with WUA, and MH turned around into the black before Dato' Fuaad bled red. Idris then came in, turned around into black then clueless Tengku Azmil steered it into red.

 

 

It appears there's something inherently wrong with their respective KPIs that resulted in the short term focus. Perhaps, their compensation should have been skewed more towards long term impact as opposed to "during their reign." As for Tajudin, the mega-debt for shares model was seriously flawed - his likely problem was that he was highly geared and was suffering from cashflow issues just to service the financing from Bank Bumi. MH wasnt paying much dividends, hence the tendency to look for other cash-generating avenues, including alleged over-invoicing and whatever else that you have heard or read now coming out from the woodwork. And not much focus was done on the operational aspects of MH, leaving his no 2 Wan Malik to "run" the show. Not, as I understood it, that much "running" was actually done.

Edited by Mushrif A

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