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Boasting one of the finest transportation networks in Asia, Malaysia has five world-class international airports. The Malaysian government is heavily involved in the domestic aviation sector and is the owner-operator of the nation’s flagship carrier, Malaysia Airlines (IATA: MH), which operates domestic and international services. Two subsidiaries of MH, Firefly and MASwings, operate domestic and regional flights. The Department of Civil Aviation Malaysia is the government agency responsible for providing Air Traffic Services, enforcing airport standards, planning and supervising the development of Air Traffic Control Systems and airport facilities. Malaysia Airports Holdings is the publicly listed company responsible for the development, management, operation and maintenance of most of Malaysia’s airports, including all international gateways.
In an effort to diversify the economy and make Malaysia’s economy less dependent on exports the government has pushed to increase tourism in Malaysia with the aim of making the tourism industry a prime contributor to the socio-economic development of the nation.
Airports in Malaysia
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Malaysia Airlines (MAS) plans more rapid expansion over the short to medium term albeit at a slower rate compared to the torrid 20% capacity growth recorded for 3Q2013. The carrier – which has been expanding its domestic, short-haul international and long-haul international operations at similar rapid clips in 2013 – will focus in 2014 primarily on regional international growth.
MAS has been able to grow passenger traffic so far this year by 28%, including a 37% jump in 3Q2013, easily outstripping the large increase in capacity. But the load factor improvements have come at the expense of yield, pushing MAS back into the red in 3Q2013.
The flag carrier hopes it can eventually improve yields across both cabins, leveraging the improvements in its product and new membership in oneworld. But the intense competition in Southeast Asia could make it difficult to achieve higher yields, clouding the carrier’s outlook.
A corporate leader of any organisation requires an unusual, sometimes extraordinary range of skills. Inevitably not every CEO has these; nor does having the skills necessarily always triumph over external forces. Timing is not everything but it is important. With time, those external forces change the skill sets needed, for example when an industry is undergoing major upheaval.
Arguably, given the complexity of the airline business, a leader in this industry has greater demands placed on him (rarely her; there are very few women CEOs). And today the world must seem a particularly hostile place for legacy airline managements and their workforces, under siege from all directions. Meanwhile the Gulf carriers and many new short-haul low-cost models are changing the demands made on competitors, as protectionism slips away and hiding places become scarce.
This CAPA report examines some of the features involved in making a great airline CEO – or not.
Corporate travel demand in the Southeast Asia-Europe market appears to be on the rebound but competition continues to intensify as more carriers jockey for a slice of the corporate spending pie. There are also signs of improvement in the much smaller Southeast Asia-North America corporate travel market, which has become more competitive as Singapore Airlines (SIA) pulls its exclusive non-stop services to Newark and Los Angeles.
Capacity levels for non-stop services between Southeast Asia and Europe are up only slightly on a year-over-year basis as Asian carriers have been focusing more on expanding regionally. But the number of players in the non-stop market is expanding while one-stop capacity via the Middle East continues to grow, putting pressure on the overall market.
The competitive pressures could keep premium and corporate fares from increasing as demand returns.
Asian carriers continue to pour additional capacity into Myanmar, building on increases which were initially pursued in 2H2012 after the market quickly opened as economic sanctions which had been in place for two decades were lifted. The Myanmar international market will exceed 110,000 weekly international seats in Jan-2014, representing an increase of about 40% compared to Jan-2012 and almost 130% compared to Apr-2012, when Aung San Suu Kyi’s National League for Democracy won landmark elections.
But so far the additional capacity has outstripped demand. International passenger traffic in Myanmar has grown by about 70% over the past two years – an impressive figure but not sufficient to keep up with the capacity increases. As a result load factors to and from Myanmar are significantly below the global average.
Nearly all of the 14 foreign carriers which were already serving Myanmar before Apr-2012 have seen load factors on their Myanmar routes drop over the last year. The nine foreign carriers which have launched and retained services to Myanmar since the market opened have also so far recorded lower than normal load factors – generally in the 50% to 70% range.
AirAsia X’s new affiliate in Thailand is gearing up to launch services in early 2014 with an initial fleet of two A330-300s and an initial network of three destinations. At least one destination in Australia and North Asia is expected to be served from a base at Bangkok’s Don Muang Airport.
Thai AirAsia X (TAAX) is one of three new low-cost carriers in Thailand but is strategically well positioned as it will be the country’s first medium/long-haul LCC. It will also have the advantage of being on the receiving end of Thailand’s largest short-haul LCC, Thai AirAsia.
TAAX will be the first of potentially several new joint venture carriers from Malaysia-based AirAsia X, which is using proceeds from a Jun-2013 IPO to accelerate expansion in line with a new multi-hub strategy. Indonesia is in line to host the second AirAsia X affiliate, potentially launching by the end of 2014 with a base in Bali. The Philippines for now is not being considered for an AirAsia X affiliate, although it remains a long-term possibility.
Indonesia AirAsia and Tigerair Mandala have unveiled plans for further international expansion, with both low-cost carriers in particular targeting the Indonesia-Hong Kong market. Indonesia AirAsia, which is already the largest carrier in the Indonesian international market, is also planning to launch services to Vietnam and India.
Tigerair Mandala has announced the launch of services to Hong Kong from Bali and Surabaya from Dec-2013, supplementing its relatively new Jakarta-Hong Kong route. Indonesia AirAsia is preparing to also launch Surabaya-Hong Kong service in 2014 and is looking at serving Hong Kong from Medan.
The AirAsia expansion could result in the carrier widening the gap in Indonesia’s international market over Lion Air, which is the dominant player in the Indonesian domestic market but has been slower in pursuing international expansion. The forthcoming expansion from Mandala could also result in Tigerair overtaking Lion as a larger LCC group in Indonesia’s international market.