For airlines, reliability is the new runway to profitability

As it takes longer for manufacturers to deliver on orders for new aircraft, airlines must now focus on resilience over expansion, says an expert.

With profit per passenger at a low level, airlines must turn to non-seat revenue streams to be profitable. (Envato Elements pic)

KUALA LUMPUR:

 As the airline industry braces for a prolonged shortage of aircraft, an expert has advised Malaysian carriers to build resilience rather than chase business expansion.

Transport consultant Wan Agyl Wan Hassan said with global supply chains unlikely to see a full recovery until the early 2030s, the priority now is to ensure reliability, a disciplined deployment of a limited number of aircraft in existing fleets and strengthening areas of operations that ensure stability.

The International Air Transport Association (IATA) has estimated that supply chain bottlenecks could cost the aviation industry more than US$11 billion (RM45 billion) globally in 2025.

It singled out longer aircraft certification, US-China trade war tariffs on components used in aircraft, and the chokehold on the market by a small number of suppliers as factors that are driving the supply crisis.

Wan Agyl, founder of the think tank My Mobility Vision, pointed to engineering and maintenance as a major component of resilience in the face of these headwinds.

He said that since the Covid-19 pandemic, the turnaround time for servicing aircraft engines has risen sharply.

“In some instances, an aircraft can be grounded for months while waiting for slots for servicing or for replacement components. This is now a global reality,” he said.

He added that the solution lies in deepening maintenance, repair and operations (MRO) partnerships between airlines and manufacturers to secure spare-engine pools and adopting predictive maintenance tools.

Some airlines, such as the Malaysia Aviation Group (MAG), have already begun to take these steps.

“Reliability is becoming a competitive advantage in its own right,” Wan Agyl added.

He said that beyond engineering capability, Malaysian carriers and their regional counterparts are also adopting a more disciplined utilisation of aircraft but narrowing their focus to high-performing routes.

This marks a shift away from pure expansion to reinforcing resilience.

Revenue beyond the runway

With new aircraft harder to come by, the next frontier for commercial resilience lies in non-seat revenue streams.

Wan Agyl noted that around the world, the highest-performing carriers are those that have turned loyalty programmes and digital platforms into major profit engines.

“These revenues are light on capital, scalable, and far more stable than ticket sales,” he said, adding that Malaysia has yet to fully tap into this.

“Malaysia’s most underused aviation revenue opportunity today is the loyalty and digital ecosystem.

“Premium traffic is important, but Malaysia’s geography and corporate travel base naturally limit how much of this high yield segment the country can capture,” he said.

According to Wan Agyl, cargo is another potential area to strengthen revenue streams.

KLIA is already a competitive regional freight hub, and cargo yields remain stronger than pre-pandemic levels thanks to e-commerce and time-sensitive shipments. IATA expects global cargo revenue to hit US$158 billion (RM644 billion) in 2026.

“What remains untapped is loyalty. Some international carriers now earn hundreds of millions annually from loyalty programmes alone.

“For Malaysian carriers, expanding loyalty and digital capabilities offers a more durable revenue path — one that doesn’t depend on acquiring new aircraft,” he said.

Wan Agyl said Malaysian carriers could combine stronger balance-sheet discipline and better alignment with national aviation policy with their digitally-enabled commercial strategy.

“This way, Malaysian airlines can remain competitive in a decade shaped more by capacity constraints than by growth,” he added.

“Programmes like Enrich and BIG Rewards can evolve into broader ecosystems that support everyday payments, retail partnerships, dynamic earn-and-burn opportunities, and subscription-based products.”

According to IATA, airlines make roughly US$7.90 (RM32.29) per passenger globally and US$3.20 (RM13.09) per passenger in the Asia-Pacific region.

Although the industry is an economic enabler for tourism and trade connectivity, airlines generally do not make enough to cover the cost of capital expenditure and investment.

“In a world where adding more aircraft is difficult, the most scalable revenue for Malaysian aviation comes not from the seats themselves but from the relationship with the passenger,” he added. - FMT