2009 CEO OUTLOOK Monday January 26, 2009
Malaysia Airlines managing director and chief executive officer Datuk Seri Idris Jala shares his plans on how the carrier intends to keep its market share and remain competitive.
OUTLOOK of the airline industry?
IT'S going to be tough. It's actually a double whammy for airlines. First, we were hit by the high fuel price, and then by the global economic slowdown which is affecting both global passenger and cargo traffic.
International Air Transport Association (IATA), whose members account for 93% of the world's air traffic, recently forecast that the airline industry could lose US$2.5bil in 2009. IATA predicts that Asia-Pacific carriers losses will more than double to US$1.1bil in 2009 from US$500mil last year.
How does MAS intend to keep its market share and remain competitive?
Our focus in such adverse times is on remaining resilient after a remarkable comeback. We have now successfully recorded nine consecutive quarters of profit after losing RM1.3bil in 2005.
We made money in the third quarter of 2008 and this was almost impossible in such times when over 30 airlines have gone bankrupt, many other airlines lost money, and many major airlines declared lower profits.
To stay resilient, we remain focused on our business transformation plan and we have fast tracked our vision of becoming the world's five-star value carrier.
Underpinning our transformation is our four-pillar strategy – dynamic pricing, network optimisation, cost management and innovation.
Dynamic pricing is a key pillar as it will help us grow our customer base, enabling us to accurately manage the pricing and yields. Our fare promotions such as Everyday Low Fares, and the subsequent All-Inclusive Low Fares, pushed our forward bookings and increased our market share.
We have also embarked on a project called dual pricing where we have created a profit and loss statement for each of the 110,000 flights we have annually.
By looking at each flight in detail, we are able to offer more low-fare seats during off-peak season, and maximise sales of high priced seats during peak seasons.
When this project is completed, it will make us much more competitive and will dovetail with our recently launched MH Value Fares.
This new four fare option – MHlow fares, MHbasic, MHsmart and MHflex – will provide consumers with real value and choice, giving them complete control over their travel experience. This will have to be complemented by network optimisation, cost management and innovation as these four pillars are key to our success.
Where does MAS see areas of opportunities and what would be done to take advantage of them?
There is huge potential in third-party revenue from our maintenance, repair and overhaul (MRO) business.
It is expected to generate revenue of RM500mil in 2009. This is a massive improvement from RM100mil in 2005.
In addition, we have also signed a memorandum of understanding (MoU) for a joint venture (JV) with Qantas, MoU for JV with GMR for world-class MRO in Hyderabad, India and we have plans for a proposed JV company for ATR aircraft maintenance in Malaysia.
Likewise, there's potential in Firefly, our community airline. It will have a fleet of 20 new-generation aircraft, the ATR 72-500, by 2011.
Five new aircraft are already in service and Firefly will be getting another five from April onwards, which will allow it to introduce more new destinations and add more flights for destinations where there is high demand.
Given the expected drop in travel demand and cargo space, would you cut capacities and scrap routes further?
We are reviewing supply and demand across the globe to ensure that we retain the correct balance in network and fleet utilisation.
At the same time, we have various forms of partnerships with more than 170 airlines that will enable us to get our passengers to their destinations.
Would MAS consider entering more partnerships and mergers to help reduce the cost of flying into destinations with low load factors?
We have a dedicated team that works on securing bilateral partnerships with other airlines. We currently have 25 code-share partnerships and are looking at implementing code-sharing with one airline in India, a couple in the Middle East and one or two in Eastern Europe.
We are also working on expanding a few of the existing interlining agreements to code shares. These partnerships, together with the more than 150 interline agreements we have in place, will ensure that we are able to fly our passengers to the destinations they want to go.