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Constant reviews become more vital

Saturday April 4, 2009


THE current economic climate means budget airlines have to be more stringent in their review of routes and their profitability.

Constant review of load factor and yields is part of running the business, but has now become more critical due to the accelerating slowdown in travel.

In the past six months, AirAsia Bhd has stopped flying to Kuantan and scrapped flights on the Kota Kinabalu-Labuan, Kota Kinabalu-Bangkok, Kota Kinabalu-Bali and Kuching-Bali routes.

AirAsia regional head of commercial Kathleen Tan says besides profitability, other factors include airport deals, connectivity, maturity of route and frequency.

"It may be necessary to cancel a route if we feel the aircraft can be better utilised elsewhere. Having said that, if market conditions are right, we will look to reinstate those routes we have cancelled," she tells StarBizWeek in an e-mail.

Ultimately, the route network review needs to ensure that planes are used efficiently, Tan adds.

Fly Firefly Sdn Bhd positions itself slightly differently by serving as a feeder airline supporting medium and long-haul carriers operating from or into Penang besides connecting the island to all major cities in the peninsula, southern Thailand and Sumatra, Indonesia.

However, profitability remains an issue to sustain operations. A recent report says Firefly suffered losses of RM10mil in 2007 and RM12.4mil last year.

It also says flights to five destinations, namely Kota Baru, Kuala Terengganu, Kuantan, Phuket and Koh Samui have been suspended from March 29 as part of Firefly's cutback exercise.

Firefly communications and marketing head Angelina Fernandez tells StarBizWeek that the suspensions are temporary until the environment improves.

"We're being prudent since the full impact of the global recession is just unfolding," she replies in an email.

Fernandez also says the business objectives are based on profitability and not on the number of routes and destinations.

"So far, we are on track for our network and profit target," she adds. It was reported earlier than Firefly aims to break even this year despite the tough operating conditions.

While the airlines are cutting back on unprofitable routes, they are also vying for those with potential high load factor.

Both AirAsia and Firefly were recently granted rights to fly to Singapore from several domestic destinations, including Subang and Penang.

AirAsia can now fly to Singapore from Penang, Langkawi, Sandakan and Tawau while Firefly can fly from Subang, Penang, Kuantan and Terengganu to the island state.

An analyst at a local brokerage says the deepening effect of the global crisis will pressure airlines further in terms of yields and load factor.

"It's a matter of survival especially in the present climate," he adds.

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