MAS to talk to PMB soon on domestic routes

  • Business
  • Thursday, 24 Jun 2004

IS MALAYSIA Airlines (MAS) stirring up a hornet’s nest in seeking a return of the domestic air services it had previously been responsible for, or is it merely protecting its turf?  

Is it going to burden itself again by subsidising the domestic operations with profits from its international business, or would it change its modus operandi to a low-cost model, thus giving no-frills carrier AirAsia a run for its money?  

But, will Penerbangan Malaysia Bhd (PMB) accede to MAS' request, given that AirAsia is also trying to get into the picture?  

These are some of the questions raised after MAS managing director Datuk Ahmad Fuaad Dahalan told the media on Tuesday that MAS wanted to take back the domestic operations.  

Datuk Ahmad Fuaad Dahalan

Under a widespread asset unbundling exercise some three years ago, the domestic operations, seen as burdensome to MAS, were taken over by the Government, via PMB. However, MAS continued to operate the services – on a three-year contract given by PMB, which bore all the costs and revenues.  

The three years will be up in November next year. 

Fuaad told StarBiz yesterday evening: “It is our intention, but it would have to involve discussions with PMB. We have to sit down with them and discuss this issue. We have not approached them yet.  

“We do not see it happening this year. But it is our long-term plan to take back from PMB the responsibility for revenue and cost of the domestic operations.’’  

Fuaad’s affirmation on Tuesday came just days after AirAsia CEO Tony Fernandes lambasted the national carrier, saying “there was no transparency in MAS' domestic performance.’’  

There is no denial that MAS had in the past made losses on its domestic operations. In comparison, upstart AirAsia has managed to make profits from its domestic operations.  

In fact, AirAsia, which aims to become the point-to-point airline in the country, is hoping to be accorded more domestic points. It believes that MAS should concentrate on regional and international routes.  

Fuaad’s explanation is that yields on the peninsular routes have improved in the past few years; and that is why MAS is confident it can make money on the domestic routes. It only needs to replace the Fokker aircraft currently in use – and which had been dragging down efficiency – to make money on these routes.  

MAS’ contention is that it needs the domestic routes, as it is an important component for the national carrier, since these act as a feeder service to its international routes. Without that, it would not be able to provide a complete air service.  

“There are synergies between the international and domestic operations, and one can complement the other,’’ Fuaad explained.  

Even the union representing Malaysia Airlines employees has voiced displeasure against AirAsia getting a bigger slice of the domestic air services. The union expressed concern that thousands of MAS employees would become jobless if AirAsia were given more domestic routes.  

The real reason for all this brouhaha is, come November, PMB will have to decide whether to renew the contract it has with MAS to manage the domestic air services, or offer it to another party. Both airlines want to be the winner.  

It is learnt that MAS had made a submission to the Government to set up a budget airline, but no decision has been made thus far. Similarly, some four months ago, AirAsia made a submission to take over the domestic operations now managed by MAS, but had not received any news since.  

In the last quarter, MAS flew 2.2 million passengers, 7.9% more than in the corresponding period a year ago when it flew two million passengers. But for the financial year ending March 31, there was a 3.8% drop – to 8.3 million passengers, from 8.6 million in the year before. Load factor was 71.4% versus 74% a year ago.  

AirAsia also wants the Government to re-create Subang as a low-cost carrier hub; something MAS is strongly against. AirAsia wants the additional routes to make it viable for it to operate from Subang.  

The decision on who is to operate the domestic services lies in PMB hands. But the views of the rakyat must be taken in consideration; and value creation must be a key deciding factor, not the emotions of the two carriers.  

Yet, PMB also holds 69% stake in MAS. 

Related story:Fuaad: We don’t intend to take over immediately  

 MAS :  [Stock Watch]  [News]

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