MH CEO comments - aircraft acquisitions, bundled fares & other topics

[Strategic Aviation]

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.”

 

[Strategic Aviation]

Additionally, Malaysia Airlines: traffic growth resumes as loads improve; outlook brightens, but still challenging - CAPA - Centre for Aviation (subscriber-only):-

Malaysia Airlines is again growing. Passenger numbers were up 8% in 2H2016, marking the first year-over-year gains since 1Q2014. Passenger numbers are expected to increase by another 10% in 2017, driven by load factor improvements and a resumption of capacity expansion.

The government owned airline, which completed a drastic network restructuring in early 2016, is still unprofitable. However, Malaysia Airlines was profitable in Dec-2016 and expects to be consistently profitable from 4Q2017, despite rising oil prices and intensifying competition.

The outlook is significantly brighter than a year ago, but is still relatively cloudy given the highly competitive landscape in Malaysia. Malaysia Airlines continues to work on cutting costs – a prudent move given the depreciation of the Malaysian Ringgit – and to pursue a relatively conservative growth plan. It expects to maintain its fleet at the current level of 75 passenger aircraft over the next two years, but adjust the mix to include a larger widebody component.

Subheadings:
* Malaysia Airlines traffic dropped 10% in 2016 but was up in second half
* Malaysia Airlines ASKs reduced by 25% in 2016
* Malaysia Airlines expects to return to 16 million passenger level by 2018
* Malaysia Airlines should have record annual load factor in 2017
* China drives capacity growth in 2017
* Network expansion will only include China
* Malaysia Airlines plans capacity increases through upgauging
* Malaysia Airlines to grow widebody fleet
* Malaysia Airlines plans to transition London route to A350s in Sep-2018
* Malaysia Airlines decides against offering premium economy
* Malaysia Airlines' outlook improves
* Malaysia Airlines still has to overcome stiff headwinds

 

[Strategic Aviation]

Malaysia Airlines eyes Airbus A330neo, Boeing 787 order - AusBT

Malaysia Airlines eyes Airbus A330neo, Boeing 787 order - Australian Business Traveller

Both the Airbus A330neo and Boeing 787 are in the frame, although Bellew didn't specify which specific models in each line would be up for consideration.

The order for between 25 and 30 jets would see 15 replacements for older aircraft with the rest earmarked for rebuilding the MAS network.

 

[cmon0005]

Anyone know when MH's Amadeus implementation will happen this year?

 

[Strategic Aviation]

Anyone know when MH's Amadeus implementation will happen this year?

They were apparently at the halfway mark in February - Malaysia Airlines expresses optimism in migration to Amadeus PSS - Amadeus Corporate Blog

And now it's imminent - Malaysia Airlines Amadeus Switchover June 10, 2017 (Be Prepared)

 

[Strategic Aviation]

Malaysia Airlines CEO says airlines have “15 minutes or less to say sorry” in response to incidents - Australian Aviation

Bellew said the growing use of social media, particularly live streaming, meant the public was quick to pick up news of any incidents such as what happened on MH128.

And airlines could not afford to sit on the sidelines amid the drama.

“I actually think you have less than 15 minutes now to say you’re sorry because people were live streaming on Facebook what was happening on the aircraft because the aircraft was below 4,000 feet,” Bellew said.

“That’s the pressure you’re under now. It’s horrendous. The speed and the proliferation of the social media will overtake you so you have to take control of the story.”

Bellew said a further consideration is ensuring there were senior, frontline stuff quickly on the scene.

“There is nothing better than if the top people are there on the spot at the airports,” he said.

 

[ermen]

I am travelling on MH on that very weekend!
Hope all goes well, especially with the OLCI for domestic on 12th!

 

[Strategic Aviation]

Hope all goes well, especially with the OLCI for domestic on 12th!

If it doesn't, you can get an apology within 15 minutes

 

[Strategic Aviation]

Malaysia Airlines to grow partnerships, increase codeshare traffic following cutover to Amadeus PSS - CAPA Centre for Aviation

With the new PSS Malaysia Airlines is able to improve the booking experience for its online customers and pursue more codeshare traffic. Malaysia Airlines says it had limitations under the previous system, and was not able to sell most codeshare flights on its website.

Malaysia Airlines CEO Peter Bellew said that most codeshare flights had historically only been available for sale on GDSs. “This will open up a whole other world to us”, he told CAPA on the sidelines of the 4-Jun-2017 IATA AGM.

With the old PSS passengers were also unable to make changes to existing tickets online, having to contact the call centre to make any changes. Under Altea Malaysia Airlines passengers are now able to change their bookings online, and can enjoy other new functions.

Approximately two thirds of oneworld members were already Altea customers. Malaysia Airlines plans to pursue expanded relationships with several oneworld members now that it has switched to the Altea platform. “It’s a bit of a joke you are part of oneworld and you can’t sell a flight on our own site”, Mr Bellew said.

Malaysia Airlines currently codeshares with seven oneworld members – American Airlines, Cathay Pacific, Finnair, Japan Airlines, Qatar Airways, Royal Jordanian and SriLankan Airlines. Mr Bellew said that Malaysia Airlines had recently strengthened its partnership with Japan Airlines, and “at the moment is strengthening with American Airlines”.

Obvious holes in its portfolio of codeshare partners are oneworld members British Airways and Qantas. BA is the only oneworld member serving Kuala Lumpur that does not yet have a codeshare with Malaysia Airlines.

A partnership with Malaysia Airlines could become more appealing to BA in 2018 as Malaysia Airlines downgauges both of its London flights from the A380 to A350. BA launched services to Kuala Lumpur in 2015, two years after Malaysia Airlines joined oneworld, and initially elected against pursuing a codeshare on the route due to overcapacity concerns.

However, traffic volumes generated by the Emirates partnership have remained relatively low. The switch to Altea should generate some improvements as more Emirates operated flights and fare classes will become available for sale on the Malaysia Airlines website, but it is still unlikely the partnership will generate the volumes that were first anticipated when it was forged in late 2015.

Malaysia Airlines already had limited codeshares with Etihad and Qatar when it pursued the deal with Emirates. The partnership with Qatar has been maintained, given the oneworld connection. Somewhat surprisingly, Malaysia Airlines has also expanded its codeshare with Etihad, instead of dissolving it as the Emirates codeshare was implemented.

Mr Bellew said Malaysia Airlines is happy to work with all the Gulf carriers and pointed out “they all do different stuff with us”. He added: “We are the Switzerland of airlines. We get along with everybody”.

Malaysia Airlines has also expanded its codeshare partnerships with Garuda Indonesia and Philippine Airlines in recent months.

Its portfolio of codeshare partners now includes nine other airlines from Southeast Asia. None of these airlines are members of oneworld – Malaysia Airlines is the region’s only oneworld member.

Xiamen, along with Beijing, Guangzhou and Shanghai, were its only Chinese destinations at the beginning of 2017. Malaysia Airlines has already added Haikou and Nanjing so far this year, and plans to add Chengdu, Chongqing, Fuzhou, Shenzhen, Tianjin and Wuhan by the end of 2017.

Mr Bellew said initial sales on all its new China routes have been above expectations. China accounts for almost all of the airline’s capacity growth in 2017 and the airline is planning further expansion in the Chinese market in 2018 and beyond.

 

[coyote25]

Comments about codeshare with BA & QF once the new booking system is in place

Malaysia Airlines eyes partnerships with Qantas, British Airways

 

[Strategic Aviation]

Comments about codeshare with BA & QF once the new booking system is in place

The AusBT article is a very brief commentary of the CAPA article above. AusBT's opening sentence may be misread as new plans to codeshare with QF and BA - while that is certainly a possibility, no comments of that nature by the CEO were reported.

Bellew only said that they'd recently strengthened the partnership with JAL and were currently strengthening with AA. CAPA identified QF and BA as "obvious holes in its portfolio of codeshare partners", but again there was nothing explicit about new plans or intentions.

The prospects of QF codesharing may be questionable. It will be interesting to see what develops.

 

[moa999]

I suspect it is more than just MHs systems as to why no codeshare.

There were seemingly numerous historic discussions around M&A/RedQ etc and after that a bit of a split, noted by the particular treatment that MH fares get under SimplerFairer

 

[Strategic Aviation]

Malaysia Air Nears A330Neo Deal Though Price Is Sticking Point - Bloomberg

Malaysia Airlines Bhd. has held discussions with Airbus SE about the purchase of A330neo wide-body jets but has so far been unable to agree a price for the planes.

The carrier is also seeking clarity regarding other aspects of the transaction, including delivery schedules, Chief Executive Officer Peter Bellew said in an interview Saturday. There’s no likelihood of an order being placed at this week’s Paris Air Show, and one could take until September at least, he said.

 

[Strategic Aviation]

Malaysia Airlines again adjusts its widebody strategy, to resume long haul growth in 2018 - CAPA - Centre for Aviation

Malaysia Airlines plans to use four A350s to replace A380s on its twice daily London service under a recently accelerated schedule which includes transitioning the first London flight in 1Q2018. The other two A350s were initially intended for medium haul routes within Asia Pacific, including Auckland, but are now earmarked for a new not yet decided long haul route.

Malaysia Airlines is also planning to nearly double the size of its passenger widebody fleet over the next few years – from 21 aircraft to 36 aircraft. The lease of approximately 15 additional A330s will enable Malaysia Airlines to upgauge several routes from the 737-800 as it shrinks its narrowbody fleet.

Malaysia Airlines CEO Peter Bellew told CAPA on the sidelines of the 4-Jun-2017 IATA AGM that the morning departure from Kuala Lumpur to London will now transition from the A380 to A350 in Feb-2018 or Mar-2017, with the exact launch date hinging on when the airline receives its first two A350s. Mr Bellew said the second Kuala Lumpur to London flight, which departs Kuala Lumpur just before midnight, will transition to the A350 once the airline receives its third and fourth A350.

As a result, Malaysia Airlines will be reducing capacity on the Kuala Lumpur-London route by over 40% before the start of the 2018 peak summer season. First class capacity will shrink by 50%, and business class capacity by nearly 50%, while economy seat capacity will be cut by approximately 40%.

However, Mr Bellew told CAPA that Malaysia Airlines no longer has any intention of operating the A350 to Auckland or any other destination in Asia Pacific.

Malaysia Airlines could have selected an alternative market to Auckland in Asia Pacific – either in Australia or North Asia – for the A350. However, Mr Bellew said the airline had determined that the A350 is too expensive to operate on medium haul routes to be profitable.

Other A350 operators use the aircraft on medium haul routes, but Mr Bellew pointed out that these operators have much bigger fleets. Malaysia Airlines has no intention of expanding its A350 fleet beyond six aircraft, making the aircraft a niche fleet that can only be profitable if the fleet is used entirely for long haul routes, according to Malaysia Airlines calculations.

“We've got the A350, it’s an expensive aircraft and we have to find something meaty and significant to do with it,” Mr Bellew said. “We hope to find something more than nine hours. We haven’t landed on one thing. We are looking at European destinations. We are looking at things further afield than Asia but I haven’t landed on something where I can make it work.”

The planned reduction in the 737-800 fleet is not surprising, given the airline’s aspirations to upgauge several routes to South Asia and North Asia from the 737-800 to A330-300 as the A330 fleet is expanded. The upgauging plans are driven partially by slot constraints, which prevent Malaysia Airlines from adding frequencies on several routes that are now experiencing high demand.

Mr Bellew told CAPA TV during a May-2017 interview at CAPA’s Airline Leader Summit in Dublin that there are seven or eight routes that can accommodate larger gauge aircraft. “We are really running up to the limit on the 737 on a number of routes. There are seven or eight routes where we don’t have enough seats, particularly in business class, where we are achieving are very good yield. We are looking for a quick way to return some 737s we have and replace them with second hand A330s.”

Malaysia Airlines retrofitted its A330 fleet in 2016, improving the business class product and adding two rows of extra legroom seats at the front of the economy cabin. Malaysia Airlines is not yet selling the extra legroom seats on its A330 routes, but plans to begin selling extra legroom seats in mid-2018.

The extra legroom product will also be available on its new fleet of A350s. Mr Bellew said extra legroom sales on both the A350 and A330 will begin after the airline takes delivery of the last of its six A350s – or “around Jul-2018”.

 

[Strategic Aviation]

Malaysia Airlines cancels Darwin-Kuala Lumpur flights - Australian Business Traveller

However, the airline says that despite dumping Darwin "we are working toward announcing frequency increases to Adelaide, Auckland and Perth in the future, while Sydney and Melbourne will likely see peak season capacity increases with our flagship A380s".

It's understood that Malaysia Airlines also hopes to restart Airbus A330 flights between Brisbane and Kuala Lumpur later this year.

 

[Strategic Aviation]

Qantas plans online reward bookings for Malaysia Airlines, JAL - Australian Business Traveller - potentially indicative of further cooperation such as codesharing?

Qantas Frequent Flyer members will soon be able to use their hard-earned frequent flyer points to book reward flights with Malaysia Airlines, Japan Airlines and China Eastern via the Qantas website.

Malaysia Airlines will be the first to come online, with a spokesperson for the airline confirming September 1 2017 as the airline's "go live date" for booking seats using Qantas Points via the Qantas website.

 

[Strategic Aviation]

Airline ‘super-profits’ likely in the next decade Malaysia Airlines CEO Peter Bellew - CAPA - Centre for Aviation

As Elon Musk fires up a battery coughnal in South Australia to back up that state's renewable energy supplies, Malaysia Airlines CEO, Peter Bellew, predicts airlines could be earning ‘super-profits’ next decade as the oil price stabilises amid surging growth in renewable energy sources and as battery technology improves.

Mr Bellew, responsible for the turnaround of Malaysia Airlines, will be a keynote speaker at the CAPA Australia Pacific Summit on 1/2 August in Sydney.

“I’ve been following renewable energies for more than 20 years. I think we’re very close to an inflection point on renewables and battery technology. I think around 2020, we’ll see a levelling off in global demand for oil, and I think that’ll reach the public consciousness by late-2021. Then we could see a levelling off in the price of oil for at least 10 years at around USD30-35 a barrel. And that then could lead to super profits for airlines and also for the manufacturers and all the associates. But we will have the lack of infrastructure to cope with it and people need to start working on that now”, Mr Bellew said.

The Malaysia Airlines CEO said that, under this scenario, “suddenly, many aircraft that didn’t look as sensible because of the cost of the oil, could [become] very practical to use again”.

“Renewables will be just consistent. It will be non-stop. It will be a steam roller effect. A little bit like the change that happened when people switch from coal to oil, you know back 80-90 years ago, and then we’ll just see that levelling off. It’ll also change significantly the power that the oil states have at the moment and maybe even the economies of those states. And I’m only talking about three to four years from now.

 

[docjames]

Any word on the A380s?

 

[andyhui01]

wasn't it confirmed that they are giving them back and have no plans to continue using them? They never had the yield for an A380 KUL-LHR anyway, only had them because their neighboring competitors had them and didn't want to lose out.

 

[docjames]

wasn't it confirmed that they are giving them back and have no plans to continue using them? They never had the yield for an A380 KUL-LHR anyway, only had them because their neighboring competitors had them and didn't want to lose out.

Last i'd heard it was "no reasonable market" (ie. couldnt get the price they wanted) so were going to use for HAJJ charters etc. Which seemed like a huge amount of capital tied up for charter work.