Malaysia’s new government is talking about shutting down Malaysia Airlines. Is this a realistic threat?
In a word, no. At least not likely. But let’s work our way there.
Prime Minister Mahathir Mohamad is in a bind. As the deficit in Malaysia continues to grow, the newly-elected Prime Minister is looking for ways to stop the bleeding.
Khazanah Nasional, the Malaysian sovereign wealth fund, took Malaysia Airlines (MAS) private in 2014. Since then, it has sought to build a lean and profitable carrier.
Five years later, the prognosis is clear: total failure.
Yes, loss-leading longhaul routes, including service to Los Angeles via Tokyo have been cut. Yes, two tragic crashes scared away many prospective and long-term customers.
But $1.5BN has been poured into making Malaysia Airlines profitable and the carrier just lost about $750MN last year. Such losses cannot possibly be sustained, even with a viewpoint (not widely shared) that the airline is a public necessity, whose ripple effects across the wider economy undermine any calls for shut down.
Prime Minister Mohamad told reporters this week:
It is a very serious matter to shut down the national airline. We will nevertheless be studying and investigating as to whether we should shut it down or we should sell it off or whether we should refinance it. All these things are open for the government to decide. We have to decide soon.
“Round And Round There She Goes, Where She Stops, Nobody Knows!”
Now that’s a sound strategy, isn’t it? We’ll either sell it, close it, or throw in another billion dollars into it…
And that lack of strategy is exactly why Malaysia Airlines will continue to groan on. And on…and on.
After the Prime Minister’s dire warning, Minister of Economic Affairs Azmin Ali talked about new routes to Indonesia and Thailand as part of the turn-around strategy.
It is certainly a logical fallacy, but my hunch is there will be no buyers for MAS, prompting the government to invest more money on the basis that they’ve already invested so much into it. There’s also national pride reasons.
Thus, this whole discussion warrants addressing, but cannot be taken seriously.
CONCLUSION
Even with the rise of Air Asia and other budget carriers, MAS is not redundant. Offering short-, mid-, and long-haul service and offering a full-service model works well for other airlines in the region.
But MAS must pick a strategy and stick to it. It has invested much in its lounge in Kuala Lumpur and in a refreshed business class product. My opinion, for what it is worth, is to cut all service to Europe and focus on a network spanning Japan to Australia that offers customers a reliable, full-service model.
Go ahead. Be an armchair CEO. What is your turnaround plan for MAS? Or do you deem it a lost cause?
Several issues:
1) Lack of good One World relations. I wanted to book Malaysia Airlines recently but the award redemption through American was unavailable on every date or astronomically high compared to the cash ticket. Malaysia would make a great Southeast Asia base for American and One World.
2) Kuala Lumpur’s airport is both good and bad but it’s no Singapore. It should be a destination in and of itself.
3) Malaysia Airlines can’t compete on in-country and regional flights because it doesn’t serve alcohol yet the airfares are as high as airlines that do serve alcohol. If I’m going to pay the premium to fly Malaysia Airlines in business-class for a 2-hour flight then serve me some wine.
4) Malaysia Airlines should eliminate its in-country domestic routes. It can’t compete against Air Asia, Malindo Air, Batik Air, etc. within Malaysia, especially since all of the flights are 90 minutes or less.
On a side note, Malindo Air is an amazing value in business-class compared to the mainline, flag carriers in Southeast Asia. You get a low-cost model in terms of pricing but with the service and food of a legacy carrier.
Pardon my ignorance, but since when has MH not served alcohol? I have flown MH quite a number of times, both business and economy, and always arrived in a session of mists and mellow fruitfulness.
No alcohol for flights under 3 hours.
Armchair management is always so fun to read about.
Yet here you are, not only reading, but commenting!
Yes. And your point being?
@Nick Thomas
I dont know about domestic flights but MH served champagne on their Bali flights in J where MH often offer VERY attractive price.
@Matthew
I thought MH has no more European destinations except London since early 2018?
For some reason they stopped offering those very good J fares around Asia. It’s rare to see these days; in the past it was easy to pick up good fares ex Bangkok to Taiwan, Japan, Indonesia, India, Sri Lanka, even Australia.
I would put up with the inconvenience of the KUL transfer provided the fare was good. But no way I’m going to use MH when they want more $$$ for an indirect itinerary than the other direct flight providers
100% certain that Malaysia doesn’t serve alcohol on any regional flight of a couple hours or less, except perhaps 1 or 2 exception route. Singapore serves Krug between Kuala Lumpur and Singapore. Malaysia won’t even serve more than water, unless you beg for a Coke.
Change the name. The Malaysia Airlines brand is toxic now. When you think Malaysia Airlines, you think airplane crashes.
Sadly, I agree with WR2. A terrible crash can linger in the public’s mind. Struggling Pan Am and TWA were both pretty much (finally) finished-off when they each had a 747 explode in mid-air. ValueJet’s crash was so horrific a name change was essential. The Concorde never regained its allure after the Paris crash and only lasted a short time after re-entering service. Swissair never recovered from the loss of their flight #111 and with mounting debts, folded.
I can’t imagine that Malaysian will ever be able to move beyond having dual 777 tragedies. Travelers who don’t even know where Malaysia is, know about those crashes.
A simple change in the name of the airlines, could make a psychological impact on prospective customers and those who avoided flying MH. Rebranding!!
I hope it doesn’t close down. I have just booked two return tickets early next year to Phuket.
First international flight for us both. Excited and scared both at the same time.
I doubt it’s going to close down at all, and certainly not that quickly.
Probably would have to start the overhaul from the bottom by rebranding the product with a new exiting name.
Name it -‘Transasian’ or ‘Interasian’ airlines.
I honestly don’t think MH can last as is. Just flew from DPS to KUL on A330 – the seats are not well maintained with parts starting to come off.
Also the crews can be a bit hit and miss and in my case I had a lazy crew and the service was not polished at all. No announcement re the delay; excess no of announcements during the flight.
F Golden lounge is very disappointing too apart from the fruit trifle.
I know MH is a national pride but I very much doubt pouring in more money is the way forward. (*my ideal world would be let It merged with SQ)
Change the name to Mahathir Airline
Pls shut down..
Spot on Sir. Nobody is stupid enough to buy a company where the leakages and wastages amounted to 20% of the total expenses
Stop the leakages. Stop the patronage. Let the CEO run the company consistently. It is pretty obvious that politics and vested interests are behind a lot of the problems, or at least compounded them. Getting 1 747 out of retirement (which didn’t ever fly any passenger service), buying the A380s just to brag, signing LOIs for 787s that they don’t need then letting them lapse..
I would take Malaysia Airlines any day for the simple reason that Airasia squeezes every little penny from you and for longer routes (>2 hours) Malaysia Airlines inflight service wins any day. But right now, the airline is rudderless (sorry!), the commercial team is a joke (the number of times I’ve seen a basic economy ticket priced HIGHER than full economy is not even funny), and the way the Malaysian economy is going, there are probably less business people (vs low yielding leisure) flying out of Malaysia.
My sense is Mahatir is right. Let it be a true commercial airline, JV-d with a local or foreign career. And let the professionals run it. The strategy worked with Proton, the national car – sales are up since Geely took over. There’s no reason it wouldn’t work with Malaysia Airlines as well.
I flew MH in economy from KUL to SYD on August 30th. They served a little ham sandwich after take off and the only alcohol offered was a choice of red or white wine. Kinda pathetic for one of their more premium routes. That aside, the service was fine, but next time I’d fly Singapore or heck, even Thai over MH if prices were similar.
They domestic flights are frequently “RE-TIMED” making transit via KUL to oversea destinations unpleasant. I either take the very early flight or accept 4-5 hours transit time for a safe connection.
Services and fares are acceptable.
Malaysia airline should do away call center service .. its have it own office in most of Malaysia airline flown to country .. why not use their own ticketing office to service the customer ,then add additional cost by contracting call center to do the service , which most of the call agent mostly are in experience.. this make matter worse .. its complicate up the service are .. mostly Malaysia airline ticketing area is the most important area of all the sector.. Please look into this area …to upgrade our airline service ..
Malaysia airline should do away call center service .. it have it own office in most of Malaysia airline flown to country .. why not use their own ticketing office staffs to service their customers ,then adding additional cost by contracting call center to do the service , which most of the call agent mostly are in experience.. this make matter worse .. its complicate up the service area .. mostly Malaysia airline ticketing area is the most important area of all the sector.. Please look into this area …to upgrade our airline service ..
I fully agreed with our PM privatetise the airline , More bizness and service Oriented plus focus …
Thumb up 100%
One of the reasons I avoid MAS is the pricing, for what they offer, it’s way too high. Sandwiched between Thai and Singapore as a member of OW while the other two are *A they ought to be able to capitalise on their position but they fail.
They charge Singapore prices and offer less than Thai service. Interline with OW carriers is poor especially into Australia where they have Qantas and Qantas don’t operate to KUL so there is loads of opportunity to interline and use KUL as much more of a hub than they do now.
CEOs come and go, nothing changes. If more is cut there will be nothing left. They have an up to date fleet of A350s and A330s and some old 737s – replace the latter with A320s and there will immediately be efficiency savings.
Loads wrong and little is right.