Lack of clarity in MAS short-haul ops puzzling

It is a fact that Malaysia Airlines (MAS) never fails, at least of late, to surprise the market.

On Tuesday, it said it would not set up a new regional premium airline. Then it added “it will go ahead with the short-haul operations’’ and that the decision to drop the setting up of the new regional premium airline was “part of a business model review’’.

But what puzzles many is, why is there no clarity other than saying the short-haul operations will now be a division of MAS?

An analyst from Singapore is unable to crunch any numbers because there is no clarity on what is next for the regional business. Similarly, many local analysts who track the stock have no clue what is happening. That really leaves a lot to be said about the way the airline engages with its stakeholders.

That may also have led to the drop in its share price yesterday when it fell to a near four-month low of RM1.31.

The question is, why did it scrap the idea when it was so eager to set up the regional premium airline in the first place?

Could this have been a miscalculation?

Some were surprised by the scrapping, others had anticipated it.

The giveaway was the talks between Qantas and MAS that were aborted in March. Both had wanted to set up a joint venture to set up a premium short-haul airline but the way the talks went, it was lopsided, favouring Qantas, and hence it came to a halt.

That aside, there are others that wanted to believe that the unions going around to garner support to get the share swap and comprehensive collaborative framework with Airasia dumped had something to do with the change in heart to scrap the setting up of the new airline.

MAS first announced the plan on Dec 7 last year and wanted to launch the airline in May, giving itself less than six months to launch the airline. It was code-named Sapphire earlier.

The new airline was to use 13 new B737-800 aircraft to focus on the business travel segment and was one of the “game changer’’ initiatives announced by the new management to turn MAS around.

The question many had asked then was, is six months enough? It could have if it had the aircraft and a solid marketing strategy.

Whatever, having a premium short-haul service may be a great idea, but fare pricing is a big consideration in Asia. In fact, many say that low-cost travel is really the flavour in Asia.

Of course, there are those who want to travel in style; however, this portion of the population is really small.

This is despite the rising affluence in Asia as more people are able to take to the skies, but out-pricing itself in a competitive marketplace where even some premium carriers are operating low-cost units, would be a gross mistake for an airline.

There is nothing to stop companies from changing their plans when they see it fit but it helps to be open about things, as closing up only leads to all kinds of conclusions that may be detrimental to the company itself.

We will be more patient and wait for clarity next week when MAS, hopefully, will tell why it changed its mind on the setting up of a premium regional airline.

Deputy news editor B.K. Sidhu likes to think that companies must stay true to their business plans or else why spend time deliberating on them.