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Malaysia Airlines launches widebody tender process, could oust Boeing 787 deal: source

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SINGAPORE (Reuters) - Malaysia Airlines has launched a fresh tender process for 20-30 widebody jets that could supersede a deal with Boeing Co (BA.N) agreed during a high-profile U.S. visit by the country’s prime minister last year, a source with knowledge of the matter said.

 

Its non-binding memorandum of understanding with Boeing to buy eight long-range 787 jets, valued at $2.25 billion at list prices, had come as a surprise given that the national carrier already had an all-Airbus SE (AIR.PA) widebody fleet.

 

More:

https://www.reuters.com/article/us-malaysia-airlines-boeing/malaysia-airlines-launches-widebody-tender-process-could-oust-boeing-787-deal-source-idUSKBN1HH0IJ

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The A350XWBs are on lease, so MH's free to decide whether to continue with the lease or to get rid of it once the leases end. So it may not be game over for Boeing yet.

 

If they can offer a great deal, then Boeing might just be able to snatch the order from Airbus.

Edited by Mohd Suhaimi Fariz

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Well, Boeing/GE has given cut price deals to Hawaiian and American, so maybe MAG also wants to join the party in squeezing better prices from Boeing and to test where Airbus wants to play in terms of pricing.

 

IMHO, I think MAG should stick to one type - so it should be either the A330Neo family, A350 family or Boeing 787 family. There isn't much point in having 6 aircraft subfleets. 20-30 is more economically viable.

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Have a feeling mab would go for the a330neo instead and surplussing a350 from the current 6. This is Airbus chance to push the Lukewarm received a330neo and push the a350 sales after the American pullout. Operationally it saves mab cost on the Commonality.

 

Just hope that the company has the manpower. Last I heard the company is still short of crew by near 100+ fleetwide and they're already opening up expat programs to quickly fill in vacancy as quickly as possible but progress is still too slow and people are still resigning every month. Sim session queue is also slowing down the addition of new pilots and cadets as current crew have booking for their base check. Another interesting part is a majority of mab pilots still prefer flying boeing probably because they started off from 737s. The progression rate to widebody Airbus is not as easy with quite high sim failure rate than those from AirAsia where the crew are already familiar with Airbus. They'll have to sort Airbus rated pilots in bulk to avoid progression delay as well.

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Have a feeling mab would go for the a330neo instead and surplussing a350 from the current 6. This is Airbus chance to push the Lukewarm received a330neo and push the a350 sales after the American pullout. Operationally it saves mab cost on the Commonality.

It won't be so easy to get rid of the A350 as they are on 12 year leases from ALC.

 

As with all aircraft orders, it is the terms of the sale and the finance arrangements that are highly important. Lets see what happens with this new RFI...

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Have a feeling mab would go for the a330neo instead and surplussing a350 from the current 6. This is Airbus chance to push the Lukewarm received a330neo and push the a350 sales after the American pullout. Operationally it saves mab cost on the Commonality.

 

Just hope that the company has the manpower. Last I heard the company is still short of crew by near 100+ fleetwide and they're already opening up expat programs to quickly fill in vacancy as quickly as possible but progress is still too slow and people are still resigning every month.

Its official. Short by 300++ pilot by the end of the year.

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The headline is misleading. MH simply said no change to the status quo. Headline suggests, perhaps mischieviously, that MH is converting the MoU into a firm order.

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The Reuters article above has been updated to provide more information.

 

Lets see what comes out of the RFI - MAG needs to order the wide bodies soon because the leases for their A333s will begin to expire in about 2-3 years - so they will either have to order new aircraft or extend the leases of the old ones.

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The MH statement is merely saying the Reuters article is erroneous, which is totally plausible if they want to be technical about it.

 

I have little doubt that the process has indeed been kicked-off. Capt Izham's visit to CIMB in the past few days also to me adds some weight to this.

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The MH statement is merely saying the Reuters article is erroneous, which is totally plausible if they want to be technical about it.

 

I have little doubt that the process has indeed been kicked-off. Capt Izham's visit to CIMB in the past few days also to me adds some weight to this.

Maswings defaulted their lease to local banks previously. Not sure, many are willing to finance new purchase unless arm twisted by mof.

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The MH statement is merely saying the Reuters article is erroneous, which is totally plausible if they want to be technical about it.

 

I have little doubt that the process has indeed been kicked-off. Capt Izham's visit to CIMB in the past few days also to me adds some weight to this.

Yes, last year, the talk was all about a 25 widebody aircraft order before the Boeing MoU was signed. And when it was signed, the number of orders fell short - only 8 planes, not 25!

 

I believe that they are merely resuming their shopping for new widebodies and the MoU will either be expanded to include more aircraft or abandoned if another type is chosen.

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It won't be so easy to get rid of the A350 as they are on 12 year leases from ALC.

 

I recalled correctly the 6 A350 are on a 6 years lease. And from past communications, MH is not too keen about it (that it will be returned to lessor as soon as the lease expires).

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Not all regional and intercontinental routes could fill or break even a 300 seaters daily. To maximize yield, Mh need to consider different model with capacity range from about 220 to 300.

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I recalled correctly the 6 A350 are on a 6 years lease. And from past communications, MH is not too keen about it (that it will be returned to lessor as soon as the lease expires).

They are on long term leases:

https://www.reuters.com/article/malaysia-mas-air-lse/malaysia-airlines-signs-lease-agreement-with-air-lease-corp-for-four-airbus-planes-idUSL4N11G41N20150910

 

https://www.thestar.com.my/business/business-news/2016/05/24/malaysia-airlines-to-lease-two-new-aircraft/

 

I find it strange that they are not too keen on the A350s too. So, if the A380 and A350 are not good aircraft for the MH long haul route to LHR, what other aircraft can they use? The B77W will still be too big and the B77E will be fuel guzzling.

Not all regional and intercontinental routes could fill or break even a 300 seaters daily. To maximize yield, Mh need to consider different model with capacity range from about 220 to 300.

Therein lies the problem MH needs to solve - why can EK do 2 x A380s and 1 x B77W from KUL daily and they cannot even fill a 300 seater flight from their home hub?

 

MH really needs to look at itself closely as to why its sales performance his not improved enough over the years, especially in light of the the fact that the passenger market doubles every ten years.

The CASK for say, the A332, is not going to be better than that for the A333 or A388 due to poorer economies of scale. They recognised that and that was why they have ordered the B737-10 Max. That will allow them to operate a 200 seater at narrow body economics.

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Therein lies the problem MH needs to solve - why can EK do 2 x A380s and 1 x B77W from KUL daily and they cannot even fill a 300 seater flight from their home hub?

 

What makes you think EK's 2 x A380s & 1 x B77W are profitable? It could just be that those flights are loss leaders to feed in their DXB-Wherever flights.

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With only 25 widebodies, MAS better stick with A350s which they already have some now and stick to a single type of aircraft to ensure efficiencies in ops, maintenance, spares and crewing. On Emirates flying A380s and 777 to KUL, it should be making some money and at least breakeven as doubt Emirates would want to "lose" money and use KUL to feed its DXB flights.

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With only 25 widebodies, MAS better stick with A350s which they already have some now and stick to a single type of aircraft to ensure efficiencies in ops, maintenance, spares and crewing. On Emirates flying A380s and 777 to KUL, it should be making some money and at least breakeven as doubt Emirates would want to "lose" money and use KUL to feed its DXB flights.

 

If they're going to replace the A350s in due time anyway, they're free to decide otherwise.

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Therein lies the problem MH needs to solve - why can EK do 2 x A380s and 1 x B77W from KUL daily and they cannot even fill a 300 seater flight from their home hub?

Because MH's "home hub" doesn't connect the world, unlike DXB. It has neither the O&D nor connecting traffic to support an EK-style megafleet. Unless, of course, Malaysian taxpayers are willing to shell out another 10 billion ringgit to keep bailing out the airline.

 

MH really needs to look at itself closely as to why its sales performance his not improved enough over the years, especially in light of the the fact that the passenger market doubles every ten years.

 

The CASK for say, the A332, is not going to be better than that for the A333 or A388 due to poorer economies of scale. They recognised that and that was why they have ordered the B737-10 Max. That will allow them to operate a 200 seater at narrow body economics.

I'm sure those with actual knowledge of CASK would be able to make the right decision.

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Maswings defaulted their lease to local banks previously. Not sure, many are willing to finance new purchase unless arm twisted by mof.

 

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

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Yes, they are empowered to terminate leases under the Malaysia Airlines Act. This was necessary during the restructuring.

 

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

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I think MH made a mistake when they cut so many routes as they were non profitable. As people have said here before, if you are a major airline, you still need your feed from these routes to make others profitable.

Now I am still suspicious that Chris Mueller made some very rash decisions about routes and then made MH forgo some of their previous codesharing partners by going to sleep with EK. And quite soon after that, Mueller went on to EK... effectively disabling a competitor on the Europe - Aust/NZ route.

 

Now MH is stuck having lost that very important feed. MH decided to concentrate on North Asia to Aust/NZ instead which I still think is a mistake because of the emergence of multiple second tier Chinese airlines.

 

Anyway, MH lost its place as a major connecting airline from Europe a long time ago. Once you lose your place, its going to be so difficult to get back with all the cut throat competition going on.

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Considering MASWings is not really a commercial entity, whatever loan they took up must've been guaranteed by the government anyway.

 

Even if that is not the case, whatever financial undertaking MH takes up now will again surely be backed up by Khazanah....

 

Really a non-issue.

Undoubtedly all glc lead back to sugar daddy mof.

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They are on long term leases:

https://www.reuters.com/article/malaysia-mas-air-lse/malaysia-airlines-signs-lease-agreement-with-air-lease-corp-for-four-airbus-planes-idUSL4N11G41N20150910

 

https://www.thestar.com.my/business/business-news/2016/05/24/malaysia-airlines-to-lease-two-new-aircraft/

 

I find it strange that they are not too keen on the A350s too. So, if the A380 and A350 are not good aircraft for the MH long haul route to LHR, what other aircraft can they use? The B77W will still be too big and the B77E will be fuel guzzling.

 

Therein lies the problem MH needs to solve - why can EK do 2 x A380s and 1 x B77W from KUL daily and they cannot even fill a 300 seater flight from their home hub?

 

MH really needs to look at itself closely as to why its sales performance his not improved enough over the years, especially in light of the the fact that the passenger market doubles every ten years.

 

The CASK for say, the A332, is not going to be better than that for the A333 or A388 due to poorer economies of scale. They recognised that and that was why they have ordered the B737-10 Max. That will allow them to operate a 200 seater at narrow body economics.

Understand mh is currently remain unprofitable.

 

Even lcc like D7 is increasing depending on transit pax.

 

For mh to be profitable, it would have no choice but to expand it's network with right mix of aircraft and align Schedule.

 

Cask alone shouldn't be the deciding factor in aircraft e.g 388 has one of the lowest cask. Believe the ability to fill the aircraft at least to break even is more important.

 

Airlines business is similar to hotel; during peak period, everyone is full house and charging rack rate. But whether the hotel/airlines is profitable annually is depending on how well it perform during low season. Believe it is more important to break even and profitable during low season than focusing on peak season.

 

If mh continue to focus on peak season demand, it could hardly make profit.

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What makes you think EK's 2 x A380s & 1 x B77W are profitable? It could just be that those flights are loss leaders to feed in their DXB-Wherever flights.

I believe EK looks at the big picture - it is looking at its operations as a whole. So, over the course of a year (and straddling high and low seasons), over the length and breadth of its network, EK is managing to make profits overall. Every bit of the network is making a contribution and every aircraft is contributing to its overall yield.

I think MH made a mistake when they cut so many routes as they were non profitable. As people have said here before, if you are a major airline, you still need your feed from these routes to make others profitable.

Now I am still suspicious that Chris Mueller made some very rash decisions about routes and then made MH forgo some of their previous codesharing partners by going to sleep with EK. And quite soon after that, Mueller went on to EK... effectively disabling a competitor on the Europe - Aust/NZ route.

 

Now MH is stuck having lost that very important feed. MH decided to concentrate on North Asia to Aust/NZ instead which I still think is a mistake because of the emergence of multiple second tier Chinese airlines.

 

Anyway, MH lost its place as a major connecting airline from Europe a long time ago. Once you lose your place, its going to be so difficult to get back with all the cut throat competition going on.

When MH was bleeding billions for two or three years, panic is understandable. They just wanted to stop the bleeding to stabilise the finances. Remember, it was technically bankrupt and those were really desperate times. However, Muller did not stay long enough to effect the recovery plan.

Understand mh is currently remain unprofitable.

 

Even lcc like D7 is increasing depending on transit pax.

 

For mh to be profitable, it would have no choice but to expand it's network with right mix of aircraft and align Schedule.

 

Cask alone shouldn't be the deciding factor in aircraft e.g 388 has one of the lowest cask. Believe the ability to fill the aircraft at least to break even is more important.

 

Airlines business is similar to hotel; during peak period, everyone is full house and charging rack rate. But whether the hotel/airlines is profitable annually is depending on how well it perform during low season. Believe it is more important to break even and profitable during low season than focusing on peak season.

 

If mh continue to focus on peak season demand, it could hardly make profit.

Yes, the network must be there so that MH can make code share agreements for feed from its own stations as well as other airlines' stations.

 

CASK is important because every organisation must keep its costs to a minimum. For the airline business, it is even more difficult due to the price volatility of one of its biggest CASK components - aviation fuel.

 

Although they have done much on the cost side, MH has not done enough on the revenue side - that was what Peter Bellew tried to boost before he went home. It really needs to make more sales. Sales will drive network growth and sustained sales will make the enlarged network sustainable.

 

There must also be a proper fleet planning policy so that the cost structure is more stable - this will enable better planning and allow decisions to be made for the medium term well being of the company.

 

Still lots of work needs to be done before MH can turn in profits. But as some airlines like QF and SQ have proven, great management and execution of turnaround plans will see profitability return. Does MAG have it in them to do that?

Edited by flee

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