New Malaysian airlines hit by turbulence
A handful of investor groups that eyed opportunity amid troubles and tragedies at Malaysia’s two major airlines are finding the country’s skies too bumpy to navigate.
Between them, Malaysia Airlines and AirAsia experienced three fatal crashes overseas in 2014 and both also saw their financial results decline. Betting that fliers at home and abroad might be looking for alternatives, two new companies moved to enter the market last year and others have made moves to do so this year. Malindo Air, which had launched flights in 2013, began upgrading its offerings and adding international routes.
Malindo is the only one of these challengers now posing a competitive threat. Regulators forced Rayani Air, which launched domestic flights last December as Malaysia’s first carrier compliant with Islam’s Shariah rules, to suspend operations in April. Flymojo, which had ordered aircraft and planned to launch service in October 2015, has yet to get airborne. Monspace Sky Airlines flew one flight on July 22 but promptly was rebuffed by regulators who said it lacked approval to operate.
ADVERTISING
inRead invented by Teads
“In my opinion, there is no room for another player,” said Mohsin Aziz, aviation analyst at Maybank Investment Bank. The market, he said, “is already too crowded. Anyone who wants to start an airline now is either stupid or crazy.”
Malaysia Airlines announced Sept. 8 that it expected to report a loss for the financial year that ended Aug. 31 but affirmed that it expected to return to profit by 2018 with the help of cost cuts and operational improvements. AirAsia meanwhile reported on Aug. 29 that its net profit for the April-June quarter rose 41% from a year before to 342 million ringgit ($82.7 million) with a boost from higher passenger traffic.
Yet Malindo at least is not retreating. The airline is on track to carry 6 million passengers this year, up from about 900,000 in 2013, according to comments by an executive cited by consultancy CAPA – Centre for Aviation; the airline is expanding its fleet this year by 10 planes to 37.
The airline, 51% owned by state company National Aerospace & Defence Industries and 49% by Indonesian low-cost carrier Lion Air Group, has opened a series of new international routes over the past year, including new daily connections this month between its hub in Kuala Lumpur and Taipei and Hanoi. In a sign of its rising ambitions to be seen as a full-service airline, the company is moving its base from the budget terminal at Kuala Lumpur International Airport to the main part of the airport and is signing pacts to cross-sell tickets with foreign airlines.
“Malindo has been very aggressive lately,” said Shukor Yusof, founder of aviation research company Endau Analytics in Singapore. “They have been pulling passengers away from AirAsia and Malaysia Airlines with some staggeringly low fares.”
Market space
Brendan Sobie, CAPA’s Singapore-based chief analyst, said he sees a place in the market for all three airlines. “[Malindo Air’s] outlook is relatively bright but that doesn’t mean the outlook for the other two main players is any bleaker,” he said. “There is room for a restructured/reinvigorated Malaysia Airlines, Malindo and AirAsia/AirAsia X. They all need to focus on executing their current business plans and strategy and don’t necessarily need to be overly concerned about what the other is doing.”
