Partnership with MAS could form key part of Qantas' new international strategy

Malaysia Airlines (MAS) plans to start codesharing with several oneworld carriers, including Qantas, prior to it formally joining the global alliance at the end of 2012. Qantas is sponsoring MAS’ entry into oneworld and sees MAS as a key component to its plan to restore profitability of its long-haul operation although the Australian carrier currently does not serve Malaysia.

oneworld announced earlier this week it had accepted MAS as its 14th member and its first from Southeast Asia. MAS will follow airberlin and Kingfisher, which were accepted as new oneworld members last year and are now aiming to formally join in 1H2012.

MAS’ hub in Kuala Lumpur is currently only served by three other oneworld members – Cathay Pacific, Japan Airlines (JAL) and Royal Jordanian. MAS only now codeshares with two oneworld members – Cathay and Royal Jordanian. MAS CEO Azmil Zahruddin told CAPA during the IATA AGM in Singapore that JAL, British Airways and Qantas are “good places to start” as the carrier looks to forge bilateral partnerships with more oneworld members prior to formally joining the alliance. “I think we can move quite quickly on a number of them,” Mr Azmil says.

BA and Qantas previously served Kuala Lumpur. As Kuala Lumpur is now in line to become a oneworld hub, Mr Azmil expects both carriers could be enticed to resume serving the Malaysian capital. Finnair, which already serves Bangkok and Singapore from its Helsinki hub, may also be persuaded to launch services to Kuala Lumpur.

“It’s something we would like to see. Without MAS they wouldn’t consider Kuala Lumpur. Commercially it now becomes attractive," Mr Azmil says. "But it’s very early days."

Mr Azmil says MAS in particular is “keen to work more closely with Qantas”. He points out the two carriers have had a relationship for a long time, including on the maintenance side, but there has never been a commercial partnership. This will clearly change as Qantas continues to study several options for improving its loss-making international business. This study takes on even more importance following the announcement this week of a new partnership between two of its biggest rivals - Virgin Australia and Singapore Airlines.

MAS will help Qantas improve its position in Asia

Qantas has taken a battering in the Australian media and on the Australian stock exchange since the Virgin Australia-SIA deal was announced. Qantas had already been widely criticised for not responding to increasing international competition and some analysts called the Virgin Australia-SIA partnership “Qantas’ worst nightmare”. But the new partnership with MAS will significantly improve Qantas’ position in Asia and help in its battle to retain its share of the Australian corporate market.

The new Virgin Australia-SIA combination will include coordinated schedules, joint pricing, frequent flyer links and codeshares. Virgin Australia in particular singled out India, where the SIA Group serves 10 destinations. Virgin believes the SIA partnership will give it an edge in the increasingly important Australia-India market as it will be able to offer a one-stop product throughout India with quick connections in Singapore.

But Qantas will also gain significant access to India through its new tie-up with MAS, which could help it withstand pressure from Virgin Australia as Virgin aims to eat into Qantas’ share of the Australian corporate market. MAS now has almost 9,000 seats per week into India, where it serves five destinations. The SIA Group, which includes Singapore Airlines and SilkAir, has twice as many seats into India and twice as many destinations compared with MAS. But MAS serves all the major Indian metros daily and with the right schedule coordination the MAS-Qantas combination will be able to match what Virgin Australia-SIA will be offering to the key destinations of Bangalore, Chennai, Delhi, Hyderabad and Mumbai.

Qantas could also use new oneworld member Kingfisher for its passengers on multiple-leg itineraries who need to travel domestically while in India or need to access some of India's smaller cities. Kingfisher already serves India from Singapore, where it will be able to connect with Qantas and could potentially launch services to Kuala Lumpur, complementing the services already provided by MAS.  

Capacity from Malaysia to India (one-way seats per week): Jun-2011 to Nov-2011

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Capacity from Singapore to India (one-way seats per week): Jun-2011 to Nov-2011

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The MAS-Qantas combination should also be able to compete effectively with Virgin Australia-SIA on city pairs connecting Australia with the two main destinations in Thailand (Bangkok and Phuket), Vietnam (Hanoi and Ho Chi Minh) and Cambodia (Phon Penh and Siem Reap) as well as Rangoon in Myanmar, Dhaka in Bangladesh and Kunming in southwest China. Virgin Australia-SIA will have exclusive access to some secondary destinations in the region such as Danang and Chang Mai but these are generally not served daily and have very limited business traffic from Australia.

Qantas also has been looking at launching a new Singapore-based full-service carrier which could significantly improve its connections between Australia and Asia. But in case Qantas decides launching such a carrier is too risky, the partnership with MAS along with the connections it already has to Asia via Singapore with its Jetstar Asia affiliate could give it enough to effectively compete with the new Virgin Australia-SIA combination. MAS also serves the same five Australian cities that SIA serves.

In addition, MAS will open up one-stop connections for Qantas to Amsterdam, Istanbul, Paris and Rome, as well as a new option for Qantas passengers to fly to Frankfurt and London. The Virgin Australia-SIA deal partnership excludes Europe although Virgin Australia has started competing against Qantas on the kangaroo route through its new partnership with Etihad Airways.

MAS will continue to codeshare with carriers from other alliances

MAS currently codeshares with three Star carriers – SIA, Thai Airways and South African Airways – as well as SkyTeam member KLM. Mr Azmil hopes MAS can retain all of these codeshares. He explains the SIA, SAA and Thai codeshares will not overlap with any future relationship with oneworld members because the three codeshares are limited to its Singapore, Thailand and South African routes.

With KLM, MAS has a closer and more comprehensive partnership. MAS is relying on this partnership as it plans to up-gauge its popular Kuala Lumpur-Amsterdam flight to the new A380 next year. KLM tried to persuade MAS to join SkyTeam instead of oneworld. But Mr Azmil says MAS, which didn’t consider Star given Malaysia’s proximity to Singapore and Thailand, concluded oneworld was the best overall fit.

“We have the greatest respect for them,” Mr Azmil says, referring to KLM. “We have a good relationship with KLM and we’d like to continue to have that relationship. But one airline doesn’t make an alliance.”

In Asia there will be very little overlap as MAS will be oneworld’s only ASEAN member. In ASEAN, SkyTeam currently has Vietnam Airlines and Garuda Indonesia is also in the process of joining. Mr Azmil says while the key relationships with other oneworld members will be in Asia Pacific and Europe, the alliance will also help MAS re-establish a presence in the US east coast. MAS currently only serves Los Angeles in the US as it dropped its New York service in 2009.

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