MAG said flight delays caused by the catering issues have been “significantly reduced”.
PETALING JAYA: Malaysia Airlines used to be one of the top 10 airlines in the world.
This, however, changed drastically over the past decade amid poor management and continued net losses despite billions of ringgit in government bailout.
In 2015, the airline’s then chief executive even declared that Malaysia Airlines was “technically bankrupt”.
By 2023, the “ambassador of Malaysian hospitality” had fallen to the 47th position in a ranking by Skytrax, while Singapore Airlines was ranked first.
The latest fiasco revolving in-flight catering has further affected Malaysia Airlines’ reputation in the market.
It was reported that 20% of Malaysia Airlines’ flights were delayed on the first day, after the contract with its long-time caterer Brahim’s Food Services (BFS) ended on Aug 31.
Just a day before the contract ended, Malaysia Airlines said on its website that it is actively “exploring a new service provider”, suggesting the airline has fallen behind in planning for the transition towards a new catering service.
Analysts told StarBiz that the catering crisis faced by Malaysia Airlines could further delay its efforts to turnaround.
Endau Analytics aviation analyst Shukor Yusof said the crisis would “definitely hurt” the bottom line and credibility of Malaysia Airlines if the issue remains unresolved beyond the last quarter of 2023.
Centre of Market Education chief executive officer Carmelo Ferlito also believed that the loss-making airline’s financial performance could worsen following the catering crisis.
“The recent incident undermines reputation and – within the market – damages to reputation are usually translated into less sales and revenues, if alternative providers or competitors are available.
“The more open the market, the higher the potential damage,” he said.
Had Malaysia Airlines been a monopoly, Ferlito said the loss of reputation would bring minimal damage, as people would have no choice rather than using the airline.
“Instead, the higher the number of available competitors, the higher the potential damage from such mistakes,” he added.
The economist lamented that the management of Malaysia Airlines had not taken adequate measures to prevent teething issues post-ending the contract with BFS.
“Obviously, I do not have access to management details but we get the impression that the transition was not timely planned or prepared,” according to Ferlito.
Malaysia Airlines is owned by Malaysia Aviation Group (MAG), which in turn is 100%-owned by the country’s sovereign wealth fund Khazanah Nasional Bhd.
Datuk Captain Izham Ismail is the group managing director of MAG and chief executive officer of Malaysia Airlines.
In a response via email, MAG said flight delays caused by the catering issues have been “significantly reduced”.
Explaining further, MAG said it received a formal discontinuation notice abruptly from BFS on June 6, terminating the partnership on June 30.
“However, on June 28, BFS agreed on a two-month extension of the contract, from July 1 to 31 August 31.
“During this period, MAG focused its planning on a seamless transition to minimise disruptions to our customers’ overall in-flight experience, ensuring that meals will continue to be served on all routes, while exploring new service providers that share our commitment to enhancing the overall inflight dining experience for our passengers in the long run,” it said.
While observers and passengers have poured criticism on the management of Malaysia Airlines over the catering crisis, Endau Analytics’ Shukor disagrees.
“It is easy to blame management but this is a legacy issue. “No vendor should be given such a contract – 25 years for Brahims – in the first place.
“The management would do well to leave no stone unturned in its effort to rebrand Malaysia Airlines post-Covid-19, especially after the successful debt restructuring in the 2021 to 2022 period,” he said.
Shukor, however, said the catering contract between Malaysia Airlines and BFS ought to be reviewed by the Finance Ministry “in the spirit of Malaysia Madani” to identify whether any rules had been broken.
Nevertheless, he acknowledged that the entire issue is “water under the bridge”.
Brahim’s Holdings Bhd chairman Datuk Seri Ibrahim Ahmad has expressed his willingness to work again with Malaysia Airlines.
However, this would only be possible if Malaysia Airlines drops the “termination of convenience” clause from the contract, he asserted.
The rift between Malaysia Airlines and Brahim’s began after the national carrier added the “termination for convenience” into the new contract.
Under the clause, a party can bring a contract to an end without any valid reason.
“We never expected that it (the catering issue) would be this bad.
“Our country’s name and pride are on the line now. And Malaysia Airlines as the national carrier needs to get all the help and support.
“We are always behind them to support,” he told StarBiz.
Ibrahim pointed out that it is not easy for an airline to appoint a new caterer, as there are many procedures to be adhered to.
He said that once a catering company has its kitchen fully equipped with the necessary equipment and trained personnel, it must secure the Hazard Analysis Critical Control Point certification.
“On the local authority side, you must be inspected and approved by the Civil Aviation Authority of Malaysia as a technically sound production centre adhering to the Good Manufacturing Practices and that you observe a high level of hygiene and safety standards.
“Finally, you need Malaysian Aviation Commission certification to gain entry into the airside where the planes are parked.
“Then you have to get airline customers, who will do a thorough audit before granting you a supplier status,” Ibrahim explained.
It is noteworthy that BFS has 35 international airline customers including Qatar Airways, Emirates and ANA All Nippon Airways.
Analysts urged the management of Malaysia Airlines to quickly address the catering crisis before it further worsens the airline’s operational performance.
The airline group has a lot on its plate to regain the trust of customers. In 2022, MAG’s on-time performance dropped to 82% as compared to 89% in 2021.
It also recorded a slight downtrend in the Customer Satisfaction Index, which stood at 79% last year as compared to 84% in 2021.
In the financial year of 2022, MAG reported a net loss of RM344mil, which saw a significant reduction of 79% from a net loss of RM1.65bil a year earlier.
At the operating level, however, MAG recorded a net operating profit of RM556mil in 2022.
