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Aviation: strange bedfellows in Malaysian airline market

Posted: 14 Aug 2011 05:19 PM PDT

By Air Travel Reports @ Chief Officers' Network

Now Fernandes and Kamarudin are linked to Kazanah and therefore to government, they are also indirectly linked to Proton and, therefore, linked to Group Lotus with whom the AirAsia pair have a dispute over the use of the name "Team Lotus" in Formula One.

There was no mention of any side-deal relating to Lotus (in either Group or Team form) in the deal relating to the airlines but it would be surprising if there were no nods and winks exchanged at some point.

On the face of it, it's hard to see a downside for any of the parties involved. The ebullient and frequently abrasive Tony Fernandes is to take a seat on the board of AirAsia's biggest threat: Malaysia Airlines.

To see MAS as a threat to AirAsia, it is necessary to see some background for, on the face of it, they are not only not in competition, one as a full service carrier and one as a low cost airline, but actually feed each other.

But that would be to deny the importance of politics. For Fernandes is a political outsider and those running Malaysia Airlines and Malaysia Airports are closely connected to government. Fernandes, who rescued a failing airline by paying USD1 and assuming most of its debts and then turned it into a supremely successful regional then inter-continental carrier, has been a vocal opponent of the links between the Malaysian flag carrier and its airports authority to say nothing of the aviation authorities which, he complains, have obstructed AirAsia's access to routes.

Fernandes says that the investment of both himself and Datuk Kamarudin Meranun in AirAsia have been diluted by the deal which gives them substantial direct shareholder interest in Malaysia Airlines and in Malaysia Airports.

Fernandes says that he will bring to MAS a form of influence but not direct, hands-on, management. But he will also bring something else: he has a knack for delivering good deals on everything from aircraft to fuel - and for rapidly spotting and going after opportunities. MAS has an ageing fleet: some of its Boeing 747s are not so much middle-aged as geriatric. Indeed, MAS operates a primarily Boeing fleet: AirAsia a a group operates exclusively Airbus. AirAsia has a deal in its pocket for a substantial number of new Airbus aircraft and some of those could be used to replace the creaking regional fleet at MAS, speeding up the national carrier's modernisation at a rate that it cannot, at present, justify.

But it is MAS's juvenile Firefly that is creating interest. Launched as a low-cost full service carrier, Firefly has had considerable investment but the concept confuses passengers who understand full-price, full service or low-price, no frills service. The general response to Firefly's pricing is that it is expensive.

There are several options for Firefly: one is to turn it into an MAS version of Singapore Airline's Silk Air. But Silk Air is not a concept: it is a regional carrier. For passengers, the confusion is that Singapore Airlines runs regional flights, under its own brand. And Silk Air has no significant product differentiation from its parent. With Qantas rumoured to be considering launching its own South East Asia regional full service airline (not competing on cost with Jetstar, the only part of Qantas that keeps the larger group financially secure), possibly based out of Singapore or, on some rumours, Kuala Lumpur, the idea of another full service subsidiary seems a bit otiose, especially as MAS has already cut its in-flight service on domestic flights with no alcohol (including no alcohol in its domestic terminal lounges) and light meal packs instead of a full meals service even on flights lasting more than an hour.

MAS is expected to gain some of the AIrAsia culture - although that will be difficult: MAS is extremely bureaucratic and trying to improve staff performance will be like swimming through treacle. Having said that, there have been significant improvements in the past two years or so, after a period when both in-flight and ground service deteriorated far below the standard that had given MAS a stellar international reputation.

For its part, AirAsia says that it expects to be able to reduce some of its servicing costs and that there will be no internecine battles over routes as to do so would harm both sides. But its primary benefits will be that the confusion over the market positioning of Firefly will be removed and that there AirAsia X, in particular, will be able to develop routes that expand the market (e.g. KUL-SYD) beyond premium travellers, as it has on other routes.

With AirAsia X moving its base to London's Gatwick Airport in a few weeks, giving it easier access to London's pretence at hubbing and to a rail service that is better integrated into London than that from Stansted (which goes only to Liverpool Street Station) the new deal raises the prospect of long haul from London to Christchurch as its current longest route.

AirAsia and MAS will not code-share. This is said to be due to the different business models but it is more than that: MAS has been accepted into the OneWorld network and is working towards integration. (see story) and no low-cost airlines are part of IATA or any major network. In part, that is due to the LCC principle that they are "point to point" carriers and therefore disclaim any and all liability if a passenger misses a connection. Indeed, AirAsia will not book a through ticket within its own network: passengers must disembark, collect their luggage and check in for their next flight, even at its KUL principal hub. That does not fit with the airline networks' model and therefore low-cost is out.

There are a couple of additional aspects to the deal.

Kredit: www.malaysia-today.net

Isnin, 15 Ogos 2011

Malaysia Today - Your Source of Independent News

Malaysia Today - Your Source of Independent News

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