Malaysia Airlines’ top priority to stem losses

The national carrier also wants to regain its stature as a preferred premium airline with better services and newer aircraft.

KUALA LUMPUR: The top priority for Malaysia Airlines now is to stem its huge losses and a return to profitability soon, besides striving to regain its stature as a preferred premium airline with better services and newer aircraft, its group chief executive officer, Ahmad Jauhari Yahya, said today.

Its recent senior management shake-up and drastic route cuts are among the many strategies being taken to put the national airline back on track towards profitability from the 2013-14 financial year onwards, he said.

He also said it was imperative that solutions be found to address issues at the national carrier, as the Malaysia Airlines name, invoked much pride among Malaysians.

For the nine months ended Sept 30, 2011, Malaysia Airlines incurred RM1.209 billion in pre-tax losses as compared with a RM23.73 million profit for the same period in 2010. It is scheduled to release its full year financial result next week.

To avoid “rivers of red ink” for a considerable period if nothing drastic is done, major shareholders of Malaysia Airlines decided to undertake a top management change, as well as a landmark share swap deal late last year between MAS and its closest local rival, AirAsia.

Under the deal, AirAsia’s major shareholder, Tune Air Sdn Bhd, took a 20.5% share in Malaysia Airlines while Khazanah Nasional Bhd got 10% of the low budget airline.

As part of the revamp, Ahmad Jauhari, 57, an engineer by training and a corporate figure who had made his mark at Malaysian Resources Corporation Bhd and Malakoff Bhd, was appointed CEO last September.

“We have to stem losses first before moving forward. So, the first thing we did was to review all the ‘bleeding’ routes, then on managing costs and finally, relooking our network,” he told Bernama in an

The company’s new board of directors, he said, had also looked at how other factors could be improved, including, increasing frequencies on certain profitable routes such as to Manila, Jakarta, Shanghai and Beijing.

Strategic partners

Although the move by Malaysia Airlines to cut off certain routes had caused lots of rumbling, including from employees, Ahmad Jauhari said such decisions were common in the aviation industry.

“It’s a norm for airlines. You must get the volume. Japan Airlines slashed 40% of the routes when it was in trouble,” he said in citing an example.

But he said Malaysia Airlines may relook some routes that were cut if profitability could be ensured in future.

Route cutting, he explained, would also help Malaysia Airlines to slash its maintenance and operating costs, as 36 aircraft in its fleet were at the end of their leases, and this meant it need not ground them as they would be returned to the lessors.

At the same time, Malaysia Airlines will be receiving 23 new aircraft, thus reducing its average fleet age to eight years from 14 years previously, and improving cost efficiency through newer and fuel-efficient engines.

In refuting claims that the route cuts had benefited its strategic partners, AirAsia and AirAsia X, he said: “Both airlines [Malaysia Airlines and AirAsia] actually act [separately] in terms of their own networks. Just as we cut and introduce new routes, they also do the same all the time.”

Ahmad Jauhari said Malaysia Airlines withdrew from Capetown and Johannesburg but neither AirAsia or AirAsia X was flying there.

Similarly, AirAsia X withdrew from London, Paris, New Delhi and Mumbai but these routes are still serviced by Malaysia Airlines, and when AirAsia X stopped flying to Abu Dhabi, Malaysia Airlines did the same with Dubai.

“So, it is completely an independent decision of both airlines. But whenever airlines cut routes, the incumbent get the traffic. That could be any airline,” he pointed out.

Promotion campaign

On suggestions by some quarters that the partnership with AirAsia may eventually turn Malaysia Airlines into a low-cost carrier over the long haul, Ahmad Jauhari said emphatically that it would always remain a full-service carrier.

On plans to revitalise the airline as a preferred premium airline and attract more passengers, Ahmad Jauhari said it would embark on a major advertising and promotion campaign from mid-2012.

This would be just as Malaysia Airlines receives the first of its A380 jumbo aircraft, which would be deployed for the Kuala Lumpur-London sector from July 1.

The campaign will be rolled out in stages, in Southeast Asia first, before going worldwide.

“The A380 will be our flagship aircraft to compete with other airlines. It is also a good opportunity to place Malaysia Airlines deservingly as a premium entity and help us win back customers,” he said.

Asked why Malaysia Airlines had lost ground as a premium airline, Ahmad Jauhari said its competitors had been improving their services and offerings with newer aircraft.

“As such, regaining premium customers would not be on price alone, as Malaysia Airlines needs to put in more hard work, to entice them by offering better services and frills as they are now spoilt for choice,” he said.

On the Kuala Lumpur-London sector, for example, carriers such as Etihad, Emirates and Singapore Airlines are also flying the same route.

“We can’t force customers to fly Malaysia Airlines. It’s all about winning back customers by providing the better choice. These days you got to pamper customers.

“The mission is very clear. We basically have a large competition out there and the company needs to do this in order to survive. It is really about survival and winning back customers,” he added.

Premium passengers

As part of the campaign to capture more premium passengers, Ahmad Jauhari hoped that Malaysia Airlines’ emergence as a member of the “One World” alliance in November this year would help, as it allowed access to almost 950 destinations in 150 countries, served by a combined fleet of 2,600 aircraft operating around 10,000 flights a day and carrying 358 million passengers.

Asked to elaborate on the introduction of new destinations, he said this would have to wait until the airline turned profitable.

“It takes at least a year to build up traffic for a new route. For the first few months, you are going to lose some money. So, until we are financially sound, we can’t give that a try, and unless very certain of enough traffic,” he added.

As to the possibility of Malaysia Airlines being forced to offer a voluntary employee separation scheme following the route cuts, Ahmad Jauhari said the management would look at seconding its skilled workforce to other airlines first, if there was a surplus.

“Secondment means these skilled workers would be gainfully employed until such time when the situation improves and Malaysia Airlines could then fully utilise them again,” he added.

He said the highly trained cabin crew, pilots and technical personal of Malaysia Airlines were much sought after in the industry.

“If we have more than necessary, we can send them on secondment. This is also a norm in the industry. We helped start India’s Jet Airways (in that way), as they used our cabin crew, pilots and planes,” he disclosed.

He stressed that the management would ensure that its workforce would be “usefully employed”.

- Bernama