By Stephanie Jacob
The first week of December was a busy one for Malaysia Airlines Bhd. It released its first quarterly report and announced an enhanced partnership with Emirates. But a lack of details have left Tiger wanting more specifics.
On Dec 3, 2015 Malaysia Airlines Bhd released its first quarterly update. The new entity had come into being on Sept 1, 2015 and continued in the example set by Khazanah Nasional Bhd, which has been providing quarterly reports since it took ailing national carrier private last year.
In the report, Malaysia Airlines gave an update on what it had been doing in the first three months of existence as a new company unburdened by its predecessors debt and with a much smaller workforce.
Let us look at the positives first.
Firstly, the fact that Malaysia Airlines is producing quarterly reports for public consumption is a good thing. Technically as it is not a listed company, it is under no legal obligation to provide updates, quarterly or otherwise. Continuing Khazanah’s example of keeping everyone informed is a commendable move.
Looking at the information provided, it was also good to see Malaysia Airlines report that it had increased its revenue per available seat kilometre (RASK). RASK takes into account capacity utilisation and measures the revenue obtained for every available seat kilometre (ASK) flown. (RASK equals yield multiplied by load factor, where yield is the de facto indicator of price.)
Many have said in the past that Malaysia Airlines needs to deal with its costs and this is true. However, according to data provided in Khazanah’s Turnaround Plan, the airline actually had a slight cost advantage to its regional full-service carrier peers.
But this is wiped out by its revenue disadvantage compared to those same airlines. So to hear Malaysia Airlines say “the negative trend of RASK was stopped and reversed” was certainly heartening.
What was disappointing however is that there were no numbers provided. Yes, RASK rose, but by how much? The airline also said load factor rose but failed to say by how many percent. Neither did it reveal how much the staff rationalisation and other cost cutting measures reduced the cost per available seat kilometre (CASK)?
It is hard for anyone, whether an aviation analyst, a reporter or just a curious Malaysian taxpayer to get a holistic view of Malaysia Airlines without its proper financial statements.
Here is hoping that going forward, the airline will not only continue to provide updates but expand it to include the numbers which will enable a proper analysis. It would be best if it provides quarterly reports similar to those produced by listed companies.
This is not too much to ask, given that this is a RM6 billion turnaround project being financed by Khazanah, wholly owned by the Finance Ministry. This is not the first time Malaysians are bailing out the national carrier and in the past, only to hear that the effort has failed.
Hopefully the new management, which has made positive noises about the importance of accountability and transparency in areas like procurement, will also extend this to its updates to the Malaysian people.
The other interesting development this week for Malaysia Airlines was the announcement of a code-sharing deal with Emirates. The airline said the partnership will help expand the airline’s global network and provide a larger range of travel options to customers.
Under the agreement, Malaysia Airlines will add its code on Emirates flights to Europe, the Middle East, Africa and the Americas. While Emirates will add its code on Malaysia Airlines flights to domestic routes in Malaysia, Southeast Asia and selected cities across the Asia-Pacific region.
In line with this, Malaysia Airlines will suspend its Paris and Amsterdam routes from Jan 25, 2016. This means Malaysia Airlines will only have a direct flight to one European destination, London. It has not had any North or South American nor African destination for a while now.
Christoph Mueller
The partnership with Emirates appears to be sort of a “if you cannot beat them, join them” move. Malaysia Airlines group chief executive officer Christoph Mueller has obviously decided that the airline cannot compete with Middle Eastern carriers on European routes and has decided to cut its losses.
The move also makes sense because he has managed to extend the airline’s route network via the codeshare. On solely its own code, Malaysia Airlines route is Asia and Australasia focused – in many ways it is a regional airline.
Through the partnership, Malaysia Airlines’ customers now have access to 90 destinations across Europe, the Americas, Africa and the Middle East – so that is positive.
Meanwhile, Malaysia Airlines will take Emirates passengers coming to Asia Pacific to their final destinations on its regional route network. Mueller has been quoted as saying that this will allow the airline to regain some market share.
What is unclear is whether or not Emirates will stop or reduce its flights to its Southeast Asian destinations, namely Indonesia, the Philippines, Thailand, Singapore and Vietnam.
It will also be interesting to know which Asia-Pacific cities, Emirates will codeshare with Malaysia Airlines. Will it only codeshare on routes which it does not have, or will it also reduce or stop its flights to some its existing destinations leaving the route solely to Malaysia Airlines?
On the face of it this partnership seems like a good move. But there are several important questions which still remain. In addition to those mentioned, it will be also be interesting to know how this ties in with Emirates partnership with Australia’s Qantas airline.
Will Emirates codeshare with Malaysia Airlines or Qantas for flights from KL to Australia?
Here’s hoping for more information from Malaysia Airlines soon.
GRRRRR!!!
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