Mavcom: Time for airlines to go beyond code-sharing, alliances

KUALA LUMPUR: It is about time, airline companies such as Malaysia Airlines Bhd (MAB) go beyond code-sharing or alliances and look into regional tie-up to survive in the highly competitive and capital-intensive industry.

The Malaysian Aviation Commission (Mavcom) executive chairman Dr Nungsari Ahmad Radhi said cross-collaboration or regional tie-up was not something new as it had long taken place on the global stage.

In Europe, the concept of national airline or flag carrier had been redefined, he said.

One of the most prominent mergers was between flag-carrier British Airways and Spain’s Iberia in 2011, but both retained their original brand. In 2004, Air France and the Netherlandsbased KLM Royal Dutch Airlines became Air France-KLM.

“The airline industry is not only a tough business for locals, but also global players,” said Nungsari in an interview, here, recently.

Talks on MAB have resurfaced as Prime Minister Tun Dr Mahathir Mohamad said the government had received interest from some local and foreign firms to buy the national carrier.

This followed a massive impairment loss made by MAB’s sole shareholder, Khazanah Nasional Bhd, resulting in the sovereign wealth fund reporting a pre-tax loss last year, its first since 2005.

According to the Centre for Aviation, six of Malaysia’s seven carriers were unprofitable, with AirAsia generating its smallest operating profit in four years.

AirAsia Group Bhd, MAB and Malindo Airways Sdn Bhd, a Malaysia-Indonesia collaboration, are the top three airline companies in Malaysia.

“The number of passengers has recorded growth over the years, but the percentage is relatively small, compared with the growth of global aircraft fleet and size (capacity) in the market.”

The commission is forecasting between 2.2 and 3.3 per cent passenger traffic growth year-onyear for the current year.

Nungsari said market structure for the airline industry was tough in nature and could be equated to the automotive industry.

Perhaps, it was about time that airlines look into the regional level tie-up, as well as merger and acquisition, he said.

As a regulator, Mavcom could not decide for the airlines on their corporate moves, but in general, airlines had no option, but to look into the next phase to continuously survive in the fast evolving and challenging industry, he said.

“(Airlines such as MAB need to look into this) because the yield has reduced. It has gone down over the years, making Malaysia unattractive to airlines to fly to. Malaysia’s hub ambition will also be a challenge (to achieve).”

Thus, collaborating with airlines with a larger footprint or network would be the answer, he said.

“May be some companies from North America, Africa or Chinese companies, where most of our tourists come from China,” he added.

As the main issue in the aviation industry was how to optimise the growing number of fleet, he said, adding that “Through partnership, you can utilise your assets, and at the same time, expand you footprint worldwide”.