MAS opts for Dream­liner

Na­tional air­line to con­sider fly­ing to US and Euro­pean cities again

The Star Malaysia - StarBiz - - Front Page - By MERGAWATI ZULFAKAR and B.K. SIDHU star­biz@thes­tar.com.my

PETALING JAYA: Malaysia Air­lines Bhd is mulling fly­ing the United States-Malaysia route again and ex­pand­ing into Euro­pean cities once it gets de­liv­ery of the eight new ul­tra-long B787-9 Dream­liner jets and eight B737-MAX it just or­dered from US air­craft man­u­fac­turer Boe­ing.

Ear­lier, it was in talks with Euro­pean jet maker Air­bus to buy more air­craft, but opted for the Dream­liner in­stead. Some of the new jets will be used to re­place its ex­ist­ing fleet, es­pe­cially since it will be us­ing the six A380 air­craft for Haj char­ter flights and oth­ers to en­ter new mar­kets. It had ear­lier or­dered sev­eral A350 air­craft.

The deal for the 16 air­craft was signed on Tues­day and is worth US$4.86bil, and that in­cludes main­te­nance, re­pair and over­haul (MRO) ser­vices.

“It is a nor­mal thing to (or­der planes). “Air­lines need air­craft, and new air­craft have long wait­ing pe­ri­ods. It is bet­ter to or­der now so that the fu­ture is se­cured,” said May­bank In­vest­ment Bank Re­search se­nior an­a­lyst Mohshin Aziz.

Other than the KL-Lon­don route, the air­line had axed all its long-haul routes, in­clud­ing its only US link via Los An­ge­les, some years ago to turn into an Asian-cen­tric car­rier in a ma­jor trans­for­ma­tion ex­er­cise to re­vive the air­line. “There are nine dif­fer­ent very long-dis­tance routes that we are look­ing at right now, and cer­tainly the west coast of the US and as far as New York. We will be as­sess­ing and in­ves­ti­gat­ing as to the mar­ket size. We are also look­ing at Am­s­ter­dam, Paris, and ex­pan­sion into Ja­pan and South Korea,” Malaysia Air­lines man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer Peter Bellew told Malaysian jour­nal­ists in Wash­ing­ton.

“We ex­pect to use the air­craft to fly some new routes with longer dis­tance than we are cur­rently op­er­at­ing. This gives us the flex­i­bil­ity of hav­ing the long-dis­tance A350 and ul­tra­long B787 air­craft, and we will be able to go back to mar­kets where we were in the past, and into new mar­kets not served be­fore,” Bellew added.

While the air­line is still as­sess­ing if the US is a vi­able con­nec­tion, some an­a­lysts are not so keen for it to move in that di­rec­tion so fast.

“Ul­tra-long-haul flights don’t re­ally work. Via east­wards it is too chal­leng­ing ge­o­graph­i­cally, and there is too much ca­pac­ity from Cathay Pa­cific, Ja­panese, Tai­wanese and now Chi­nese car­ri­ers. Go­ing east­ward is also equally chal­leng­ing, with too much of com­pe­ti­tion from the Mid­dle-Eastern car­ri­ers. But fly­ing to Ja­pan and South Korea would be no is­sue,” said Mohshin.

CAPA Cen­tre for Avi­a­tion an­a­lyst Bren­dan So­bie added that “it’s way too early for the air­line to even con­sider fly­ing again to North Amer­ica. The South-East Asian-North Amer­i­can mar­ket has be­come ex­tremely com­pet­i­tive and chal­leng­ing. The 787 gives them some flex­i­bil­ity in fu­ture, but I would be shocked if Malaysia Air­lines flies to the US this decade”.

The air­line is fully aware of all the chal­lenges it will face and that is why Bellew said it would need to in­ves­ti­gate be­fore fi­nally mak­ing a de­ci­sion.

“The US is a fas­ci­nat­ing propo­si­tion. The plane can eas­ily and tech­ni­cally reach the west coast; both Los An­ge­les and San Fran­cisco are prospects. Tech­ni­cally, New York non-stop is more dif­fi­cult at cer­tain times of the year due to winds.

“As for the busi­ness case for US di­rect flights, we are just start­ing on it. The planes were not ac­quired to do that mis­sion, al­though it is now pos­si­ble.

“A lot of ne­go­ti­a­tions are re­quired with our air­line part­ners, han­dlers, agents and air­ports in the US to make it eco­nom­i­cally fea­si­ble,” Bellew said in re­ply to queries from Star­Biz.

How­ever, he added that “it is im­por­tant to re­mem­ber that all th­ese routes lost a lot of money for Malaysia Air­lines in the past. I don’t want to re­peat that. This air­craft (B787) has very strong eco­nom­ics, but we need to get part­ner­ships in place to fill the planes from new des­ti­na­tions with at­trac­tive yields. With our new reser­va­tion sys­tem, we have a real chance of sell­ing con­nect­ing traf­fic on our own, and eas­ily on to our part­ner net­works for the fist time in a sim­ple way,” Bellew said.

As for Am­s­ter­dam, where it has a long­stand­ing re­la­tion­ship with KLM which it can rely on, Bellew said, “Am­s­ter­dam has the best quick con­nec­tions all across the United King­dom and Europe and we have good re­la­tions with KLM.”

On the pos­si­b­lity of fly­ing into Paris, he said: “I also have had two meet­ings in Paris. It is not off the ta­ble, but much more dif­fi­cult fi­nan­cially.” He said the fit­tings of the air­craft would be lux­u­ri­ous, with a high pro­por­tion of Busi­ness Class seats with full flat beds. It is even con­sid­er­ing adding First Class seat­ing.

“It is re­ally a move to dis­tance our­selves from the low-cost car­ri­ers and to be a premier five-star car­rier,” Bellew ex­plained.

Malaysia Air­lines and Boe­ing signed a mem­o­ran­dum of un­der­stand­ing for the planes that was wit­nessed by Prime Min­is­ter Datuk Seri Na­jib Tun Razak dur­ing a visit to the White House on Tues­day, where he told US Pres­i­dent Don­ald Trump that Malaysia Air­lines would buy 25 Boe­ing 737 jets and eight 787 Dream­lin­ers.

The eight 787-9s were con­verted from a prior 737 MAX or­der, while Malaysia Air­lines also added eight pur­chase rights over 737 MAX air­craft, Boe­ing said.

The 16 air­craft would cost the air­line US$3.63bil at list prices and with­out the cus­tom­ary dis­counts. Apart from that, Boe­ing will col­lab­o­rate with the air­line on a new MRO fa­cil­ity to spe­cialise in the 787, MAX and Boe­ing new-gen­er­a­tion (NG) air­craft.

Bellew said it would use the ex­ist­ing hangar at Sepang for the MRO ser­vices, and MRO ser­vices to other air­lines with the Dream­liner, MAX and Boe­ing NG air­craft.

The MRO deal for the 16 air­craft is worth US$1.23bil for 12 years of the life of the planes, and when com­bined with the pur­chase of 16 air­craft, the to­tal deal to the air­line is worth US$4.86bil. Na­jib added that the air­line would prob­a­bly add an­other 25 737s in the near fu­ture, a deal he said would be worth more than US$10bil (RM42­bil) within five years.

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