MAS A380 - Fleet to be Retained

[Lim Kar Yong 0]

I think this is perhaps the most realistic growth plan we have from MAB. It truly reflects the reality we are in. Plus, as have been said many times, MAB is nowhere near the big boys at the moment. Even SQ's growth plan for the past few years have not been that great - hardly new destinations.

Better to be good at what one can do and aim towards break even or modest profits, than continuous expansion where it will further burden tax payers' money. I think we no longer have the luxury for this anymore.

[flee 5]

Prudence is the key to a steady and sustained business.

 

The Malaysian economic outlook is not rosy for the coming years. Right now, the property sector is in danger of a major slowdown and if property values are depressed, bank loans will also be harder to come by. Salary levels are also unlikely to increase significantly. So the people's ability to travel for leisure and holidays may be compromised by stagnant incomes and rising living costs. Faced with difficult business challenges, business travel may be cut further too.

 

It is good to know that MAB is cutting its clothes according to its cloth. Hopefully, this means that there will be no more taxpayer bailouts and that MAB will start repaying its loans to Khazanah (which is also losing money!).

Edited November 29, 2017 by flee

[Mushrif A 3]

It's quite telling that in 5 years, the 15 A333s were explicitly mentioned, but the much newer A359s - which are on 12 yrs leases - did not warrant a specific mention. Hmmmm...

[KK Lee 5]

Prudence is the key to a steady and sustained business.

 

The Malaysian economic outlook is not rosy for the coming years. Right now, the property sector is in danger of a major slowdown and if property values are depressed, bank loans will also be harder to come by. Salary levels are also unlikely to increase significantly. So the people's ability to travel for leisure and holidays may be compromised by stagnant incomes and rising living costs. Faced with difficult business challenges, business travel may be cut further too.

 

It is good to know that MAB is cutting its clothes according to its cloth. Hopefully, this means that there will be no more taxpayer bailouts and that MAB will start repaying its loans to Khazanah (which is also losing money!).

 

With bank interest rate on rising trend and liquidity tightening, expect consumers spending to be suppressed in the next few years. As a transport company, MAB should target customers from its network not primarily from MYS.

[Izanee 0]

 

With bank interest rate on rising trend and liquidity tightening, expect consumers spending to be suppressed in the next few years. As a transport company, MAB should target customers from its network not primarily from MYS.

 

Thats exactly what they need to do, you are right. Thats why EK and SQ can sustain their ops. You need have a decent number of places to act as your feed to other more profitable destinations. You cant completely rely on Malaysia which is a low yield destination (as people keep harping on about it). MAS has completely cut off its European feed - acting as a link between North Asia and Australasia is just a nonsense way of doing things - especially when you have so many Chinese carriers offering flights from secondary cities in China to Oz/NZ.

That idea was probably good if not for these Chinese carriers popping out of nowhere.

[nastar 0]

1. MH connecting pax contributed only 45-50% from total pax, compare to QR for an e.g, up to 90%

 

2. Malaysia itself is a destination, compare to Qatar for e.g. mostly as a transit point. MH is focusing on MY pax to/from as having the advantage being the non-stop carier.

 

3. However, MH also facing fierce competition from much lower cost per seat carriers, AK/D7 and perhaps OD

 

4. MH wants to compete with the other boys as a feeder for kangaroo route for an e.g. but cost per seat is still not as low as EK (again for an e.g)

 

5. Rebuilding network from intra-Asia focus is necessary and the best way to go, rather than introducing new long-haul destinations (e.g. EUR) as the current financial situation doesnt permit MH to do so. Im sure you know it wouldnt be profitable in the 1st year of launching any new destinations, worse if longer haul.

 

6. Thats why there is no EUR destinations to launch in next 3-5years (except AMS which is still not finalized)

 

7. 2018 is just around the corner, MH is struggling to achieve a lower unit cost and at the same time, it is still essential to build up the network.

 

8. Help me to understand, how MH to be profitable if MH immediately starting up the long haul destinations for kangaroo route while the current financial situation doesnt permit them to do so, rather than focusing and strengthening the base as an intra-Asia carrier, achieve a lower unit cost, dah strong baru we venture into a longer route?

 

9. No one was happy with what had happened. But we have to build up a stronger base again in order to move forward.

 

10. Agreed that MH should focus on longer route, but believe me, the current situation doesnt permit MH to do so.

[flee 5]

Some very good points you have listed there nastar - it neatly sums up MH's dilemna. To succeed you need big bucks. When companies with big resources (e.g. SQ) are struggling to make decent profits, one needs to question whether we should throw the money into MH only to see poor returns.

 

I know many in here are impatient to see MH restored back to its heydays. Unfortunately, the industry is different now and MH is still an old school organisation. Although staff was cut, the organisational overhaul was too big a job to sell to the remaining staff. So, some of the old bad habits still remain. New airlines have structural cost advantages over MH.

 

Long haul requires huge resources which MH does not have. So they will have to prove themselves to travellers in Asia before they can dream of doing long haul again. Even cost efficient Airasia X is thinking long and hard about a return to Europe and they are cutting capacity to Australia. So all is not good in these markets because the competitive environment is very different these days.

 

MAB is right to consolidate resources and ply their business in the Asian markets. The Chinese airlines do not have the brand reputation of MH. So there is still a small window of opportunity if MH plays its cards right.

 

Its now or never. I wish them all the best.

[Izanee 0]

Thanks Nastar for the inside info. I guess it all makes sense. MAS had billions ploughed into it over the years. If it hadnt got into the wrong hands or used for the wrong reasons, maybe we might have had a fighting chance ...

but lets hope that the government keep their grubby paws off MAS for a change.

[Mushrif A 3]

AusBt in an exclusive today said that MH will retain the 380s as part of its mainline fleet and will continue to operate various scheduled services in addition to the seasonal charters to JED and MED.

 

That pilgrimage charter spin-off airine proposal is dead.

 

Interestingly, the 380s will also replace the 359s on the London route in the mid 2018s. MH will be considering a cabin update for the 380s.

I wonder whether Amedeo with its large fleet of no-takers-A380s killed that MH spin off airline, as Amedeo wanted to do the same thing.

Edited December 12, 2017 by Mushrif A

[jahur 0]

AusBt in an exclusive today said that MH will retain the 380s as part of its mainline fleet and will continue to operate various scheduled services in addition to the seasonal charters to JED and MED.

 

That pilgrimage charter spin-off airine proposal is dead.

 

Interestingly, the 380s will also replace the 359s on the London route in the mid 2018s. MH will be considering a cabin update for the 380s.

I wonder whether Amedeo with its large fleet of no-takers-A380s killed that MH spin off airline, as Amedeo wanted to do the same thing.

Very difficult to fill up the dugong a380 profitably unless one has passenger and transiting volume of gulf carriers even the 744 is cheaper to operate in terms of capacity wise. Cathay pacific and Vietnam airlines spoke back then via staff recruitment talks about how they were glad of not ordering any a380 cuz it would be hard to fill the plane up commercially and dumping fares to fill them up adds more yield risk.

 

Think mas really needs to get rid or revise how these a380 are deployed or it'll bleed their expenses.

Edited December 12, 2017 by jahur

[BC Tam 2]

Interestingly, the 380s will also replace the 359s on the London route in the mid 2018s.

You gotta be kidding !

If this really jadi, then it's like another ridding of predecessor's traces exercise

(your observation at #3652 above very sharp)

 

 

MH will be considering a cabin update for the 380s.

At least give it a proper clean la

[Mr.Bandit 0]

No wonder those dugongs will make another C check + mod coming months.

[flee 5]

Very difficult to fill up the dugong a380 profitably unless one has passenger and transiting volume of gulf carriers even the 744 is cheaper to operate in terms of capacity wise. Cathay pacific and Vietnam airlines spoke back then via staff recruitment talks about how they were glad of not ordering any a380 cuz it would be hard to fill the plane up commercially and dumping fares to fill them up adds more yield risk.

 

Think mas really needs to get rid or revise how these a380 are deployed or it'll bleed their expenses.

 

Well most of us here at MWings were highly sceptical of that plan. Furthermore, we also thought that the sudden withdrawal of the B747 and B777 fleets were a huge over reaction to MAS' billion MYR losses.

 

Now they have come up with another half baked plan for the A380. It is going to be used as a super sub on (seasonal) routes with heavy traffic. At other times, it will do the pilgrimage runs. It would appear that the A380 fleet will be lightly utilised. But that is the best it can do - the alternative is to park the planes in the (KLIA) desert.

 

The A350 does not look like it will have a future. It was part of the knee jerk reaction that retired the B747/777 fleets. It would appear that they can't back out of the lease - so they just took it and will return it when the lease ends or when it is possible to terminate them. The current A333s also look like they will go back to lessors because they were leased at a time when the rates were still high. The ex-AB A332s were bargains and that was why they were snapped up - they will replace the expensive A333s when the time comes.

 

So that leaves us with the MoU for B789s. It would appear that these are going to be the A333's true replacements - if the MoU is firmed up. It is a rather roundabout way to get the 787s!

No wonder those dugongs will make another C check + mod coming months.

I thought all 6 had undergone heavy maintenance last year?

[jahur 0]

 

Well most of us here at MWings were highly sceptical of that plan. Furthermore, we also thought that the sudden withdrawal of the B747 and B777 fleets were a huge over reaction to MAS' billion MYR losses.

 

Now they have come up with another half baked plan for the A380. It is going to be used as a super sub on (seasonal) routes with heavy traffic. At other times, it will do the pilgrimage runs. It would appear that the A380 fleet will be lightly utilised. But that is the best it can do - the alternative is to park the planes in the (KLIA) desert.

 

The A350 does not look like it will have a future. It was part of the knee jerk reaction that retired the B747/777 fleets. It would appear that they can't back out of the lease - so they just took it and will return it when the lease ends or when it is possible to terminate them. The current A333s also look like they will go back to lessors because they were leased at a time when the rates were still high. The ex-AB A332s were bargains and that was why they were snapped up - they will replace the expensive A333s when the time comes.

 

So that leaves us with the MoU for B789s. It would appear that these are going to be the A333's true replacements - if the MoU is firmed up. It is a rather roundabout way to get the 787s!

I thought all 6 had undergone heavy maintenance last year?

Friend working in Thai Airways mentioned their a380 is also heavy burden. Frankfurt and Paris requires nearly 450 pax to break even. Sometimes operations would change the equipment to b773 when the front end cabin is not that filled.

 

Regarding mab, their constant flip flopping and indecision occuring, dont even think the MOU conversion to firm orders of the 787s is going to work now. With 6 A330-200s, 6 A380-800, 6 A350-900 planned for 2018 believe MAB will stick closely for a330-900neo unless they were to offload the a330-200 later then it would be wise to take the 787s.

[Milk_chow95 0]

No wonder those dugongs will make another C check + mod coming months.

What about D check?

May I know when an aircraft is require to undergo D check?

[flee 5]

Friend working in Thai Airways mentioned their a380 is also heavy burden. Frankfurt and Paris requires nearly 450 pax to break even. Sometimes operations would change the equipment to b773 when the front end cabin is not that filled.

 

Regarding mab, their constant flip flopping and indecision occuring, dont even think the MOU conversion to firm orders of the 787s is going to work now. With 6 A330-200s, 6 A380-800, 6 A350-900 planned for 2018 believe MAB will stick closely for a330-900neo unless they were to offload the a330-200 later then it would be wise to take the 787s.

 

MAB has found out that the A380 is quite good for flights of about 8-9 hours as it does not need to carry so much fuel - this additional payload will mean that its economics is quite acceptable. Maybe that is why they are planning to deploy it as a super sub during peak travel seasons on their major routes. I was told that after the two B777 losses, A380 loads of below 100 pax were quite common in low season - that was why they panicked.

 

Yes, 2018 will see a big increase in wide body capacity - on the surface, this seems like another knee jerk reaction and load factors might decline again. They need to really evaluate the routes carefully before injecting all those additional seats to the market.

 

You mentioned crew shortage before - I wonder how this plan will be implemented if there is still a crew shortage?

[jahur 0]

 

MAB has found out that the A380 is quite good for flights of about 8-9 hours as it does not need to carry so much fuel - this additional payload will mean that its economics is quite acceptable. Maybe that is why they are planning to deploy it as a super sub during peak travel seasons on their major routes. I was told that after the two B777 losses, A380 loads of below 100 pax were quite common in low season - that was why they panicked.

 

Yes, 2018 will see a big increase in wide body capacity - on the surface, this seems like another knee jerk reaction and load factors might decline again. They need to really evaluate the routes carefully before injecting all those additional seats to the market.

 

You mentioned crew shortage before - I wonder how this plan will be implemented if there is still a crew shortage?

The crew shortage will not affect the a350 and a380 but it is a serious matter on the narrowbody fleet maybe they'll increase utilization on widebody while narrowbody undergoes reduction. Difficult to sponsor cadets, ground up to type rating sponsorship requires funds of nearly myr500k per pilot even with tighter contract bond they will have issues allocating budget. Not to forget these folks will likely come online in 3 years from now which is already the quickest they can go. Fresh flying school graduates are fished out by AK with provision of higher salary and improving work schedule and at the same time are currently introducing full training from ground up to type rating with easy bank loan approvals, flying school student slots will be limited in the future. Expat hiring is also another burden as their salary demand has to be competitive again requires deep pocket. So if MAB cant adjust and entice people to join growth is likely affected.

Edited December 12, 2017 by jahur

[Johan Z 0]

They should have thought about this earlier. This really makes them look incompetent.

 

Now with A359, MH can easily up-gauge and down-gauge LHR. Before this they only stuck with A380 to fly to LHR.

[Josh T 0]

I, for one, am glad that they're kerping the A380s. It's a wonderful plane to fly in and still my favourite after flying the 787 and A350. The A350 is great for low season to LHR but definitely doesn't have enough capacity for peak season flights. Keeping them would also open up the possibility of offering First Class all the way from SYD/MEL to LHR and I know quite a number of people who want that kind of service.

[Izanee 0]

I was surprised they let so many trained cabin staff go. As we can see now, it takes years of investment to get them trained. They have really shot themselves in the foot

[Mohd Azizul Ramli 2]

Random rants on this latest flip-flopping:

 

1. Where MH is going to fly all those aircraft? 6 A380, 6 A350, 6 A332, 15 A333.

 

2. The chance of BKI and KCH getting the A380 during festive periods is now escalating. Oops, just remembered. Both airports are not A380 capable.

 

3. I wish MH can pay the lease of the A380 as "pay as you go". Of course, there is no such thing.

 

4. This seems to suggest that the A350 is a mistake when it was in fact brought in to cover a mistake (A380).

 

5. This also seems to suggest that Project Hope is not economically viable since the very beginning.

[leon t 0]

doubt MAB can be profitable as they are keeping this 6 A380s and only flying them when there is some demand or likely when their A330s are unexpectedly AOG for some time. If MAB was able to hive out these a380s from their books by starting a new charter company, then their financial woes will be lessen. Still believe MAB should try to sell these 6 A380s again even at a lower price as its expensive to just keep them around to use only when there's demand as MAB still have to pay for the planes whether they fly or not.

[Craig 0]

1. Where MH is going to fly all those aircraft? 6 A380, 6 A350, 6 A332, 15 A333.

MW dreams - LAX, CDG, FRA, AMS, JNB, EWR, YVR etc.

 

 

4. This seems to suggest that the A350 is a mistake when it was in fact brought in to cover a mistake (A380).

Hindsight is always 20/20, no? It wasn't too long ago when MH was struggling terribly after the twin disasters that prompted MH to shrink. A lot. Once daily 738 to PVG, 3 daily 738 to HKG, pulling out of AMS, CDG, FRA, BNE and a whole slew of others.

 

Imagine this at MH's boardroom meeting in Dec. 2014:

Intern: My analysis showed that we will need to lease more wide bodies in 3 years, expand in China by resuming second daily into Shanghai and will be served by 330s on both flights, expand into secondary Chinese cities such as Fuzhou, Haikou, Chengdu, Chungking, Hangzhou, and Nanjing.

Others: I want whatever you are smoking!

 

Nobody at that time thought that MH could recover to this level today in just 3 years - expanding rapidly into China now when China was one of MH's worst market then.

 

350s were ordered to replace the 380s to serve LHR. As bad as MH was back then, at least they knew the value of LHR slots (they could have easily sold it and never return).

 

PS: I am curious about the Haj/Umrah charter plans. Let's say they re-configure the 380s into 2-class configuration with 600 seats (a conservative estimate) and they send 4 380s to MED/JED/RUH (2 spares or just for rotation since only 1 frame is needed for KSA rotation) a day - that's 2,400 available seats to KSA per day or approximately 864,000 seats a year to KSA - is there such a large market for pilgrimage charters (especially when there aren't that many connections that feed to charter flights) year round?

Edited December 13, 2017 by Craig

[flee 5]

Yes, pilgrimage business is good - we have at least two airlines operating these charters from KUL. FlyGlobal is now flying charters from KUL in addition to MAB. I am not sure if Eaglexpress is still in the market.

 

However, the pilgrimage business is peaky - huge capacity is needed during the Haj season while only normal capacity is needed off season. So it is very difficult to have a dedicated fleet for this purpose. The VLAs need other routes to keep them flying off season.

[V Wong 0]

doubt MAB can be profitable as they are keeping this 6 A380s and only flying them when there is some demand or likely when their A330s are unexpectedly AOG for some time. If MAB was able to hive out these a380s from their books by starting a new charter company, then their financial woes will be lessen. Still believe MAB should try to sell these 6 A380s again even at a lower price as its expensive to just keep them around to use only when there's demand as MAB still have to pay for the planes whether they fly or not.

A malignant tumour - radical measures to get rid of it to save life and limb..... although the A380 issue must be more complicated than that.