Revamped Malaysian Airline Sector Poses Threat to Singapore

[Seth K 3]

Revamped Malaysian Airline Sector Poses Threat to Singapore, Says AirAsia Chief

SEPANG, Malaysia (AP) -- Budget carrier AirAsia said Tuesday its massive expansion in Malaysia's domestic market will help turn the country into a regional aviation hub to rival neighboring Singapore.

 

"Watch out, Singapore, is all I have to say," said Tony Fernandes, chief executive of AirAsia, Southeast Asia's largest low-cost carrier by fleet size.

 

Under a major restructuring of Malaysia's aviation sector announced by the government Monday, flag carrier Malaysia Airlines will give up its near-monopoly in the market, hand over 99 domestic routes to AirAsia for exclusive flights, and lose all government subsidies. The changes take effect Aug. 1.

 

Malaysia Airlines, or MAS, will be left with only 19 domestic routes that it will operate as a full-service airline in competition with the no-frills AirAsia.

 

Fernandes said the arrangement benefited both AirAsia, which has been eager to expand domestically, and MAS, which needed to shed unprofitable routes.

 

He sought to portray it as a collaborative effort, even if they will be competing on some routes.

 

"Both of us working together will win big-time," Fernandes said. "With so much global competition, it really makes sense to combine our strength."

 

MAS Managing Director Idris Jala, speaking alongside Fernandes at a news conference, was more circumspect about the dynamics behind the new arrangement.

 

"You do collaborate with competitors when it makes sense," said Idris, who has promised to make MAS profitable by 2007. "You do compete with them when it doesn't."

 

Typically upbeat, Fernandes projected that the deal would turn Malaysia "into the center of low-cost travel, the center of premier travel, the center of maintenance, excellence, safety and training" -- and overshadow Singapore Airlines, or SIA.

 

"Without a doubt, I firmly believe that MAS is a far superior product than the robotic SIA," Fernandes said.

 

When asked to respond to Fernandes' comments, a Singapore Airlines spokesperson said: "We don't know what he's talking about."

 

The restructuring comes as MAS, which is 69 percent owned by the government, struggles to return to profitability after it suffered a 1.26 billion ringgit (US$340.5 million; euro283 million) loss in the nine months through December.

 

AirAsia said its net profit for the half-year through December rose 20 percent to 65 million ringgit (US$17.6 million; euro14.6 million) on revenue of 412.2 million ringgit (US$111.4 million; euro92.6 million).

 

Singapore Airlines Ltd. said its net profit fell 14.6 percent in the October-December quarter to 397 million Singapore dollars (US$243 million; euro201 million) on sales of 3.56 billion Singapore dollars (US$2.17 billion; euro1.8 billion).

 

Malaysia Airlines said last month that only four of its 118 domestic routes were profitable. To keep the carrier afloat, the government has been bearing an annual loss of about 300 million ringgit (US$81.3 million; euro67.6 million) -- providing the airline an indirect subsidy.

 

Fernandes predicted that following the revamp, many people would come to Malaysia from abroad and treat Kuala Lumpur as a hub before taking low-cost AirAsia flights to tourist destinations in Malaysia and elsewhere in the region.

 

Idris said MAS management is in talks with the company's unions about the fate of 6,500 MAS workers who will be retrenched from its current staff of 23,000 due to the reduced operations.

 

Both Idris and Fernandes confirmed some of the staff would be absorbed by AirAsia, but they refused to give details, citing ongoing negotiations.

 

"It's a new era for MAS and AirAsia. It is one vision of two national champions. I do want to learn best practices from AirAsia," Idris said. "We will have to improve our yield, reduce our costs. It will help us increase our profitability."

 

The 19 trunk routes that MAS will share with AirAsia include flights to tourist destinations such as Penang, Langkawi, Kota Kinabalu and Kuching in addition to state capitals.

 

In addition, AirAsia will have the exclusive right to operate 96 smaller routes in peninsular Malaysia and on Sabah and Sarawak states on Borneo island.

 

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Interesting point, Singapore known as Super Hub now threaten by AK executive chief(Don't play with this guy). Well, this is a long term predection by Tony which may well work to get KUL to the top after they expand through out SEA or futher more. With 100 plane to arrive, new routes, new terminals(the permanent one u/c) put lots of things in joepardy.Before that, see this pix...........what can you conclude?(you can out caption if you want )

 

Your thoughts about the article???

[Y. J. Foo 0]

I'd say 50/50- If we can play hard against them, then it's not impossible.

 

But that'll be a long hard way...

[Kee Hooi Yen 0]

I would like to see that happens ! At least for now, Air Asia & MAS has a good and right start !

[Keith T 2]

When asked to respond to Fernandes' comments, a Singapore Airlines spokesperson said: "We don't know what he's talking about."

 

Uhh, one thing SQ should do - sack that spokesperson! Like hello...great response.

[Benjamin Ho 0]

that is one hell of a robotic response... at least say something upbeat like :bring it on!!!

 

Ben-G

[Mushrif A 3]

I think what Tony said was just plain PR statement which looks & sounded rather silly (like a 5-year old with a new toy). Please explain what makes KUL the regional aviation hub that dethrones SIN, just because you now pay RM9.99 to go MYY-SBW or can now fly on AK to Kudat?

 

Sure, AK will boost its revenues but does that mean that the whole world will now fly to Limbang, amongst other places?

 

I agree with the SQ spokesperson.

 

It was obvious that Idris was taken aback by Tony's statement and he sounded more realistic.

[S V Choong 4]

I think what Tony said was just plain PR statement which looks & sounded rather silly (like a 5-year old with a new toy). Please explain what makes KUL the regional aviation hub that dethrones SIN, just because you now pay RM9.99 to go MYY-SBW or can now fly on AK to Kudat?

 

Sure, AK will boost its revenues but does that mean that the whole world will now fly to Limbang, amongst other places?

 

I agree with the SQ spokesperson.

 

It was obvious that Idris was taken aback by Tony's statement and he sounded more realistic.

 

Ditto

 

It actually takes a hell lot more than just what Mr Fernandes said to overtake Singapore's position as an Aviation hub. I am surprised at what he said, perhaps he should aim at BKK as well instead of picking solely on Singapore. After all both of them are KUL's biggest competitor.

 

Tony is smart, but the management of SIA is not stupid either. He should take a look at the qualification of SIA's managment. Some might like to call it Kiasuism but Singaporeans tends to react to situation faster than our government or management. This is called efficiency, something what should be picked up by our fellow countrymen. Afterall, it is not like SIN is going to sit there and waiting to be overtaken by KUL.

Edited March 29, 2006 by S V Choong

[Attan 0]

TF is talking about AK serving the region up to China and India. If planned and executed correctly, this should materialise. If MH brings in (and takes out) enough long-haul traffic, AK will be kept really busy connecting them from the Malaysian hubs to the regional points, maybe not so much to Limbang. If MH joins SkyTeam, this will be better still.

 

Perhaps TF has the data that we don't have access to regarding the traffic patterns in the Asia Pacific region for him to make that statement.

 

 

[zealich 0]

I would say SIA have the upper hand. Fernandes still have alot to think of and AirAsia still have a long way to go to overtake ppl who has been there for long time and MAS..hmmm...don't want to comment of them..they should have been there long long ago but now seems like they are junior..

[Mushrif A 3]

TF is talking about AK serving the region up to China and India. If planned and executed correctly, this should materialise. If MH brings in (and takes out) enough long-haul traffic, AK will be kept really busy connecting them from the Malaysian hubs to the regional points, maybe not so much to Limbang. If MH joins SkyTeam, this will be better still.

 

Perhaps TF has the data that we don't have access to regarding the traffic patterns in the Asia Pacific region for him to make that statement.

 

Well, AK's plan to venture into China/ India has been there with or without the domestic revamp. Again, unless there are some significant touristy or economic activity to attract, say, Indian tourists, to say, Kudat -then I would think the two issues (China/India expansion & domestic revamp) are mutually exclusive.

 

Furthermore, AK being busy to connect MH long haul customers is really antithesis to its modus operandi, which is really point-to-point. One can connect but it will hardly be seamless and at one own's risk. (Btw, the LCCT has just debunked KLIA's tagline - Integrated For Ease - certainly aint easy for the connecting pax between main terminal and lcc t.)

 

I'd say, Tony was bluffing and it was merely a rallying cry for attention. Frankly, it was cheap publicity and lacked finesse but publicity was what he desired.

 

But as consolation, we'll prob. be the leading low cost (and that only) aviation centre ahead of Spore - by default given the large domestic market in the first place.

 

 

 

[Sanjay Thaker 0]

TF doesnt talk without thinking we should already know that with the way he's handling AK...well he said..watch out singapore...we're coming..that means..as a STRONG COMPETITOR ....not necessarily..they need to overtake SQ and SIN immidiately

[Ruiz Razy 1]

It can happen as long as Malaysia is one step ahead ( including MH , AK and MAB) particularly in providing comfort and connectivity to KL and around the globe.

 

As an example.......

our LCCT is not well connected. The bus does not look good and the only way is to extend the ERL / KLIA Transit

[Seth K 3]

It can happen as long as Malaysia is one step ahead ( including MH , AK and MAB) particularly in providing comfort and connectivity to KL and around the globe.

 

As an example.......

our LCCT is not well connected. The bus does not look good and the only way is to extend the ERL / KLIA Transit

 

 

Hope the permanent LCC home will be an easy accees facility.

[Sandeep G 1]

its about time that airline executives in Malaysia started seriously addressing the compeition from south of the border!

 

The bold and brash statements by Tony Fernandes are a welcome change to the old days of MAS trying to say that they are not comparable and thus 'don't compete with' the likes of QF, SQ and CX... the old days of MAS thinking that it is in a league of its own are numbered and this will only permit future growth and profitability for the airline with a HUGE home market! SQ is a formidable opponent, but, MAS with the right management and connections (like AirAsia and an alliance with Skyteam) will really put a dampener on SQ's performance!

 

2 weeks to a month they say, and the plan will be revealed!

 

It really is exciting times for aviation in Malaysia!

 

And to those 6,500 workers that may or may not lose their jobs... productivity at MAS is shamefully low, so whilst this may seem as a nightmare for the employees and the unions, it also strengthens the committment and resolve of remaining MAS workers to straighten up and fly right, as their jobs are easily replaced also!!

 

But, i'm sure we have plenty of space for those workers in the Future or elsewhere in the Malaysian aviation scene, especially if the planned growth is to be realised!

[Attan 0]

LCC's can make a dent on the full service airlines (as seen in the US) and the number of LCC's will increase. If full-service airlines (including MH) think that they are in a different ballpark from the LCC's, they will soon be caught with their pants down.

 

When Apple introduced the PC, IBM ignored them until they found out later that their mainframe sales were being affected. So they also launched their own PC's to keep Apple on their toes but it was too late.

 

It was Microsoft, however, that subsequently enabled the IBM PC to recover. Then the IBM clones came and IBM's own PC's began to lose market share until the landmark sale to a Chinese company recently.

 

Fortunately for IBM their mainframes are still selling well but imagine how big their market would have been if there were no PC's. What happened to the minicomputer producers (Wang, Honeywell, NCR, etc.)?

[S V Choong 4]

I wouldn't be too optimistic just yet, one shouldn't be too optimistic just out of nationalism at all. Like Mushrif said, Fernandes is just selling cheap publicity. It is funny how Idris and Fernandes have different dress code too LOL. Frankly speaking, so far, I have not seen anything from Malaysia (with importance) which has succeeded over what Singapore had achieved. It is not as easy as saying "A, B, C". We might have the tallest building on earth at one stage but over half of the office space is actually unoccupied. This may not sounded good for many Malaysian but I said this out of impartiality.

 

Singapore's corporate business success and technology is more superior than Malaysia. We might have Proton, but check where their technology came from. Singapore has higher overseas investment and their GDP per capita is high too. Most importantly all these are higher than Malaysia.

 

It actually takes more than just an airport and LCC terminal to overtake SIN's position as an aviation hub. Bear in mind that SQ does have their own LCC and regional airline, what it lacks is a land mass for domestic traffic by default.

 

LCC's can make a dent on the full service airlines (as seen in the US) and the number of LCC's will increase. If full-service airlines (including MH) think that they are in a different ballpark from the LCC's, they will soon be caught with their pants down.

 

Oh, is that a hint on MAS to convert to LCC / Semi-LCC? I like this idea but obviously MAS is not heading this way. So we might see them stuffing it up again!?

Edited March 30, 2006 by S V Choong

[Bing Chu 0]

What happened to the minicomputer producers (Wang, Honeywell, NCR, etc.)?

I've always thought Wang Computers have only themselves to blame. Going by logic that those who blog are known as "bloggers" those who go camping are "campers" those who drink are "drinkers" - who in their right mind will, if they have a choice, use a computer called Wang ............

 

Sorry for going off topic here !

[Bing Chu 0]

Fernandes predicted that following the revamp, many people would come to Malaysia from abroad and treat Kuala Lumpur as a hub before taking low-cost AirAsia flights to tourist destinations in Malaysia and elsewhere in the region

Yeah right, they will come up till the point where they try to transfer between KLIA MTB and LCCT vv - they could well stop coming round after that !

 

Yes, your average young able-bodied backpacker army will rough out the inconvenience. But they are by and large budget constrained - not what most tourism industry players target for. The 'premier' group, ie those who can afford and are willing to shell out the extra bucks will transfer within MH's system.

 

Incidentally, read somewhere recently that Sabah's tourism products, being mainly the (fragile) nature based ecotourism, cannot be sustained if it has to cater to mass tourism (ie things will get destroyed eventually) So, we have to target the high end and settle for fewer head count to preserve what precious little remains. Interesting, I thought !