KUALA LUMPUR: Malaysian Airline System Bhd (MAS) will begin its route rationalisation exercise by discontinuing eight loss-making routes beginning January.
Group CEO Ahmad Jauhari Yahya said the withdrawal was based on an independent internal profitability and yield analysis.
“This accounts for almost 12% of our passenger capacity and we estimate that the ongoing route rationalisation will improve loads, increase yields and have a profit impact of RM220 million to RM302 million for 2012,” Jauhari said in a statement yesterday.
These routes include Kuala Lumpur-Surabaya, Kuala Lumpur-Dubai, Kuala Lumpur-Johannesburg and Kuala-Lumpur Rome.
The rationalisation was outlined in MAS’ business plan last week, where it said 40% of its 100 routes were loss-making and that its unit cost position was 10% to 15% above corresponding revenues.
Concurrently, it will increase frequencies of flights to key regional cities to benefit from the strong growth expected in regional demand.
“Malaysia Airlines will focus on the core Asean region, South Asia, Greater China and North Asia where the demand outlook is strong, fuelled by a burgeoning middle class and increased global and intra-regional trade,” it said.
Additionally, MAS seeks to identify strategic partnerships for code sharing and joint ventures to leverage on strategic routes.
MAS intends to minimise the losses expected for FY11 ending Dec 31 and FY12. The national carrier’s net loss for 9MFY11 ended Sept 30 amounted to RM1.2 billion.
The strategy to withdraw from loss-making routes is part of MAS’ aim to become a “smaller yet profitable network”. MAS said the rationalisation exercise would have a minimal impact of its cargo operations, as it will continue to maintain its key cargo destinations in the UK, Europe, the Orient, Australia, the Middle East, South Africa and the US.
The move was also in line with MAS’ focus on shifting to the ‘hub-and-spoke’ approach, with the KL International Airport as a centre to its global network.
“The route rationalisation is expected to have minimal impact on Malaysia’s position as a top tourist destination in Asia as we will work aggressively with our code-share partners.
“Through our existing arrangements with them, we will continue to promote connectivity between Malaysia and key international destinations as well as contribute towards efforts to increase tourist arrivals to Malaysia,” said Jauhari, adding MAS hoped to return to these markets after it had stabilised its business.
This article appeared in The Edge Financial Daily, December 15, 2011.
Group CEO Ahmad Jauhari Yahya said the withdrawal was based on an independent internal profitability and yield analysis.
“This accounts for almost 12% of our passenger capacity and we estimate that the ongoing route rationalisation will improve loads, increase yields and have a profit impact of RM220 million to RM302 million for 2012,” Jauhari said in a statement yesterday.
These routes include Kuala Lumpur-Surabaya, Kuala Lumpur-Dubai, Kuala Lumpur-Johannesburg and Kuala-Lumpur Rome.
The rationalisation was outlined in MAS’ business plan last week, where it said 40% of its 100 routes were loss-making and that its unit cost position was 10% to 15% above corresponding revenues.
Concurrently, it will increase frequencies of flights to key regional cities to benefit from the strong growth expected in regional demand.
“Malaysia Airlines will focus on the core Asean region, South Asia, Greater China and North Asia where the demand outlook is strong, fuelled by a burgeoning middle class and increased global and intra-regional trade,” it said.
Additionally, MAS seeks to identify strategic partnerships for code sharing and joint ventures to leverage on strategic routes.
MAS intends to minimise the losses expected for FY11 ending Dec 31 and FY12. The national carrier’s net loss for 9MFY11 ended Sept 30 amounted to RM1.2 billion.
The strategy to withdraw from loss-making routes is part of MAS’ aim to become a “smaller yet profitable network”. MAS said the rationalisation exercise would have a minimal impact of its cargo operations, as it will continue to maintain its key cargo destinations in the UK, Europe, the Orient, Australia, the Middle East, South Africa and the US.
The move was also in line with MAS’ focus on shifting to the ‘hub-and-spoke’ approach, with the KL International Airport as a centre to its global network.
“The route rationalisation is expected to have minimal impact on Malaysia’s position as a top tourist destination in Asia as we will work aggressively with our code-share partners.
“Through our existing arrangements with them, we will continue to promote connectivity between Malaysia and key international destinations as well as contribute towards efforts to increase tourist arrivals to Malaysia,” said Jauhari, adding MAS hoped to return to these markets after it had stabilised its business.
This article appeared in The Edge Financial Daily, December 15, 2011.
