Struggling Malaysia Airlines (MAS) is to withdraw from the vast majority of its extensive domestic routes and hand over operations to low-cost player AirAsia as part of its ongoing effort to become profitable.
The troubled state-owned carrier says the drastic cuts will see it reducing its mainline domestic fleet to 21 aircraft from 40 and the number of stations “right-sized” to 16 from 32. It will also be able to cut its workforce of 23,000 by 6,500, or nearly 30%.
MAS currently flies on 118 domestic routes and admits all but four are operated at a loss. As part of the sweeping restructuring it will in future only serve 19 trunk routes – seven between Kuala Lumpur and other cities in peninsular Malaysia, six between Kuala Lumpur and the eastern states of Sabah and Sarawak on the island of Borneo, and six within Sabah and Sarawak.
The airline says these 19 routes are critical because they generate an average of 15,000 passengers annually connecting to its international network.
MAS is in serious financial difficulty and is working on a wide-ranging restructuring under new management. While it has no exposure to losses from domestic services as it operates these on behalf of the state for a fee, government and airline have said these arrangements cannot continue. Privately owned AirAsia has also never been happy about these arrangements, saying they do not create a “level playing field”.
AirAsia says it will “share capacity” with MAS on the 19 trunk routes while it will “gradually replace MAS on non-trunk routes”, starting in the coming months. It plans to launch many new services of its own, take over some eight of MAS’s Boeing 737-400s and employees, and hire a regional airline to operate some routes MAS is giving up and AirAsia will be unable to serve with its own aircraft. Some subsidies will be provided for the necessary “social services”, says the government.
“Both airlines will collaborate cohesively to ensure connectivity between our networks, particularly on routes operated only by AirAsia.”
AirAsia has been growing rapidly in recent years and has helped expand the domestic market, although it has effectively taken away from MAS all of its traditional domestic traffic growth. MAS says many of its domestic losses are the result of the fact that, unlike AirAsia, it has a “social obligation” to serve markets where there may be little demand.
“We are confident that we will be able to work closely with AirAsia to ensure that connectivity and interlining issues are addressed in a timely manner and that international passenger traffic in and out of Kuala Lumpur will not be affected,” says new MAS managing director Idris Jala, who is overseeing the turnaround efforts, which also include international route cuts.
“With the restructuring plan in place, the government’s subsidy burden for loss-making domestic routes can also be significantly reduced. Valuable resources can be reassigned to projects that will spur the country’s development and growth.” ■
Source: Airline Business
