'Malaysia's Boeing jets purchase viable, but needs transparency'

It is commercially viable for Malaysia Airlines Bhd to purchase Boeing aircraft following Prime Minister Najib Abdul Razak's visit to Washington recently, but there needs to be transparency in the deal, aviation experts told Malaysiakini.

Aviation consultant Mohamad Daud Sulaiman said the national carrier is in need of a new generation of jets to replace its ageing fleet.

"I'm looking at this from MAS' business strategy view and the capability of the new jets. We need new, fuel efficient jets that comply with stricter aviation regulations.

"It is the business cycle to have planes changed every 10 to 20 years. What we have now are Boeing 737-800 and 737-900, and retired Boeing 777 and Boeing 747," Mohamad Daud said.

It is, therefore, more economical to acquire new aircraft with up-to-date technology, instead of refurbishing old ones, the retired Royal Malaysian Air Force officer said.

However, aviation researcher Chin Jit Kai raised concerns about whether public funds will be used in the jet purchases, since state-owned investment arm Khazanah Nasional Bhd has a 69 percent stake in MAS.

"It is not transparent at all. MAS needs to give more details on the deal, particularly on its strategy of purchasing these jets," Chin said.

Despite this, he agreed that the purchase of middle-range 737 MAXs fitted MAS' business strategy to expand in Asia, while the other model, Boeing 787 Dreamliners, may not fit into the MAS model.

A jet for long-range routes

"Dreamliner is a wide-bodied jet that can fly long-range routes. But, MAS has stopped flying to a few destinations in the US and Europe, citing these routes as not profitable. It wants to focus on the Asia market," Chin elaborated.

"Unless we know what is the strategy of MAS in purchasing these long-range jets, people would think that this is a political deal, not a business deal," he said.

Chin said Najib's statement that he would persuade AirAsia to purchase General Electric (GE) engines from the US was unfair to the low-cost carrier.

"AirAsia is a profit-driven private company and currently uses European Rolls-Royce engines and CFM engines, a joint venture between a French manufacturer and the manufacturer of GE engines," he added.

"This is a political decision (for Najib to ask) AirAsia to buy GE engines and it may not be in the interest of the low-cost carrier."

Mohamad Daud said the GE engines are not uncommon to the country's commercial aviation industry and that a service centre has been set up for that purpose.

He claimed that the controversial deal has nothing to do with the ongoing investigation against the 1MDB in the US.

MAS signs MoU on purchase

"I think the US operates quite differently than Malaysia because the US Department of Justice (DOJ) operates autonomously from the White House. It is not like Malaysia where everything is under the executive branch," he added.

Commenting further, Mohamad Daud said Malaysia has to commit itself to the multi-billion dollar deals with the US to show its neutrality, following a huge amount of foreign direct investment (FDI) from China.

"Once we are seen leaning toward one side, then we have to balance it by doing business with the other side, with almost the same amount (of trade)," he said.

Najib was reported to have told US President Donald Trump that MAS would buy 25 Boeing 737 jets and eight 787 Dreamliners, and would probably add another 25 737s in the near future – a deal he said would be worth more than US$10 billion within five years.

Boeing and Malaysia Airlines on Tuesday signed a memorandum of understanding in Washington to acquire 16 aeroplanes – eight 787 Dreamliners and eight 737 MAXs.

Besides the Boeing deal, Najib also announced that both Employees Provident Fund (EPF) and Khazanah would increase their investments in the US.

Critics have claimed that Najib's plan to purchase the Boeing jets and persuade AirAsia to purchase the General Electric (GE) aircraft engine from the US, among others, are lopsided and unusual. -Mkini