Strategic Aviation
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Select quotes from Malaysia Airlines CEO Peter Bellew: "Something very wrong in the (Asian) long haul market" - CAPA - Centre for Aviation (see the full article for more):-
Malaysia Airlines continues to look for additional widebody aircraft
Malaysia Airlines obviously stands to benefit from plummeting lease rates and airlines desperate to shed excess aircraft. The airline has not yet completed any deals for additional widebody aircraft, despite searching for more than six months and receiving numerous proposals.
Malaysia Airlines has repeatedly increased the number of additional widebody aircraft it needs over the next two to three years (2H2017 through 2019) but has still not completed a deal for any aircraft, including for the current year. In the short term (by early 2018) it is now looking for six additional widebody aircraft.
Mr Bellew is perhaps trying to send a message to manufacturers and leasing companies that conditions have become so favourable for buyers or lessees that he expects an even better deal than the already low prices Malaysia Airlines has been offered. Malaysia Airlines has been considering a combination of second hand A330-300s and ordering new 787-9s or A330-900neos.
Malaysia Airlines is already committed to reducing its 737-800 fleet from 54 to 50 aircraft over the next few months, due to upcoming lease returns. The 737 fleet could be reduced further if the current negotiations with its 737 lessors do not conclude with an agreement by Aug-2017.
The reduction to 50 – and perhaps fewer – 737s addresses an imbalance in the Malaysia Airlines fleet, which Mr Bellew believes now includes too many 737s and too few A330s. As a result, Malaysia Airlines is now forced to use 737-800s on popular flights to slot constrained airports where there is actually sufficient demand to upgauge to A330s. In some cases these flights were operated with widebody aircraft prior to the recent restructuring, which resulted in a significant reduction in the widebody fleet as the 777 fleet was phased out in early 2016.
“I just don’t have any seats left on many routes today and I need put to widebodies in”, Mr Bellew said. “It’s merely about serving the market as there’s massive overspill at the moment. We have a lot of great slots to India, Japan, Australia, Korea and Taiwan at times and at airports where there will never be any more slots ever again. And I’m stuck at the moment operating some of those with 737s. I need bigger planes. It’s kind of a no brainer.”
Malaysia Airlines has 25 737 MAX 8s on order for delivery from 2019 but these can be used to replace existing 737-800s. Its only other outstanding order is for six A350-900s, which are slated to be delivered in Dec-2017 and 1H2018, and used to replace its six A380s.
On the decision against pursuing a rebranding: “You don’t hit 90% load factor in a month and there’s something wrong with the brand. We have gotten over that.”
On continuing to offer a fully bundled product: “I think in Asia it’s a really bad idea to unbundle fares. I think it will be bad news for the (full service) carriers that do that. I don’t think it works here … I think people in Asia want a really, really cheap low cost seat or they want something fancy. I don’t think there’s a middle ground in Asia.”
On airport slot shortages in Asia: “It’s fine selling people planes, leasing people planes. There are no slots left anywhere where you really want to fly and make good money. That’s an issue.”
On expected airline CEO changes (‘CEO roulette’): “I think what’s really going to create chaos in the next 12 months is there’s going to be a massive amount of changes in CEOs at airlines from Western Europe all the way across to Hawaii. It is going to be good times for recruitment consultants. But a lot of new people will come into big Asian carriers with ideas to unbundle fares, charge for seats and bags etc. That’s going to actually make things worse for some of these carriers.”