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The Star Online

Malaysia Airlines picks up market share

CEO says developments are encouraging in the wake of two air disasters

PUBLISHED : Tuesday, 13 September, 2016, 11:28am
UPDATED : Tuesday, 13 September, 2016, 11:33am

Malaysia Airlines Bhd, which has gone back to the aviation market after a two-year restructuring, is seeing a recovery in its share of the travel business by between 3 per cent and 4 per cent.

Chief executive officer and group managing director Peter Bellew said the airline has regained a higher percentage in some popular routes such as the Kuala Lumpur-London market.

“We have about an 8 per cent per cent market share on the London route and have seen a general increase in market share of 3 per cent and 4 per cent in other routes generally,” said Bellew.

He considers this an encouraging sign, given that MAS has had two air disasters in recent years and the aviation industry is highly competitive with low fares from low-cost carriers.

Bellew attributed the improvement in market share to an aggressive sales push, along with advertising campaigns, something that the full-service carrier had put on the back burner for a long time.

“We saw over the last few weeks that the amount of money we spent on advertising, we were getting back 10 to 20-fold more... it is a no-brainer, and in the leisure business, you have to spend money to bring in money,” Bellew told StarBiz in an interview.

Given the response to the advertising blitz, he feels that “people are willing to give us a second chance and our product has improved. We have also conducted several surveys and have got positive feedback on our food, entertainment, seats and other things”.

“So, we are going to advertise more, be it traditional or new media. We want to tell the world we are back to offer a better travelling experience,” he added.

Bellew, however, said that while the airline would be busy pushing sales, operational changes in areas that needed improving and cost cuts would continue, without cutting the headcount.

The tangible results of the ongoing turnaround will come from higher sales and the improvement in passenger yields, together with regaining lost market share.

While these results will be difficult to achieve, Bellew said there would be immediate plans to revamp the sales and marketing units to get higher loads.

Although airlines have been moving away from working closely with travel agents by using their own distribution networks to push sales, he said MAS would continue to work with travel agents. Bellew, who feels that the agents had been ignored in the past, has met with a number of agents recently.

“We told them that we want to work with them and would offer them the same offers made online,” he said.

There would be a need to tweak the pricing of fares to get the yields the airline wants.

This will be crucial, as MAS’ biggest problem in the past was the mismatch in the amount it earned, which is based on the yield per seat, and the amount it spent, denominated by the cost per seat. The industry average was a yield of 22 per cent, while for MAS, it had dropped to as low as 20 per cent in 2014. Its cost per seat was higher than the yields, resulting in the airline chalking up losses.

Since then, MAS has undergone a restructuring to cut down staff by up to 6,000. For the first time in its history, a foreigner, Christoph Mueller, was appointed as the chief executive. However, Mueller left and Bellew, who was one of the people roped in by Mueller to MAS, took over on July 1.

Last week, the airline released its second-quarter report ended June 30 that saw passenger yields slipping marginally to 22.5 sen (US$5.47) from 22.6 sen (US$5.50) in the previous quarter.

Globally, yields have been falling due to intense competition, but Bellew believes passenger yields can still be pushed 3 per cent to 4 per cent higher for the current year.

He plans to do this by adjusting airfares so that yields will improve without losing out to the competition.

“It is about having the right average fare and we need to adjust the fares continuously. So, we are literally tracking the fares on an hourly and daily basis and taking steps to adjust them. We have seen a significant improvement in passenger yields,” Bellew said, adding that yields were higher for point-to-point traffic than connecting traffic.

Besides yields, Bellew feels that there is a greater need to utilise the airline’s fleet more efficiently. Towards this end, he plans to launch at least three to six more new routes to Japan, Korea, China and Asean from the KL International Airport, Kota Kinabalu, Penang and Kuching.

“The new routes will be the driver of organic growth. We can still operate extra routes and frequencies if we optimise utilisation of our aircraft,” Bellew said.

Passenger loads slipped to 68.6 per cent from 68.9 per cent in the first quarter of the year. Bellew has an 18-month target for passenger loads to hit 80 per cent.