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CEO Bellew says airline gaining market share as fares are competitive

KUALA LUMPUR: Malaysia Airlines Bhd (MAS) ended 2016 flying more passengers and cutting its losses by half. The airline, which was taken private in August 2014, is seeing average load factors of up to 74% and feels that the fares it charges customers are already competitive enough by the rise in passenger traffic.

According to chief executive officer Peter Bellew, MAS turned in a profit in the final quarter of 2016 and managed to cut cost by RM130mil for the period alone.

“We remain focused on cost control and have identified a further RM400mil of cost reductions in 2017 to offset the US dollar strength. The airline finished 49% ahead of our budgeted loss for the year 2016,” Bellew said in a statement issued yesterday.

“If there was no US dollar impact and if it did not move as much (against the ringgit), we would have made much more money last year,” he added.

On forward bookings, Bellew said overall, MAS has sold 50% more seats from February to July this year than the same period a year ago. “The sale of business class seats has doubled,” he said.

In an interview with StarBiz yesterday, Bellew also said that the passenger loads were growing and felt their airfares were sufficient to counter the competition.

“Despite the competition, we are not going to drop our airfares but maintain the levels,” he said. “Just for December, the passenger loads reached 91%,” he said, describing it as the highest achieved by the airline over the past six to seven years.

For this year, Bellew said the group remained cautious on the weaker ringgit against the US dollar, overcapacity in the industry and intense competition.

In the fourth quarter, the airline’s average fares dipped 3% to RM484 per passenger, passenger traffic grew 5.8% to 3.8 million passengers, and passenger loads grew 11% to 81% from 70% earlier.

Passenger yields for the fourth quarter were at 21.5 sen, down from 21.7 sen in the third quarter, average seat kilometre rose marginally to 10.53 million from 10.57 million, and on-time performance improved to 70% from 68% previously. For this year, the airline expects to fly 15 million passengers, up from 13.9 million in 2016. Bellew said the recovery in passenger traffic, especially in the business class segment on a year-on-year comparison, was a sign of growth led by an aggressive push for sales in the second half of 2016.

In the first half of 2016, the airline focused largely on bringing down costs. MAS, which suffered badly from competition on the KL-London-KL route, has also won back some market share.

Apart from the London route, he said traffic in several markets had recovered and pointed out that the volume from China has gone up significantly. “There has been an incredible rise in passenger volumes,” he said, adding that of the 13.9 million passengers in 2016, about 8%-9% comprised traffic from China.

The airline began its expansion plans to China in the fourth quarter of last year with the launch of flights to Haikou.

Sales for Nanjing, Wuhan and Fuzhou also started in the first quarter of this year with the flights commencing in June.

“Our focus is to be a five-star premium Asian airline, offering the best of Malaysian hospitality to 15 million customers a year travelling to 54 destination in 21 countries.

“At the core of our brand is the golden rule to treat customers as you would wish to be treated yourself,” said Bellew, who took over the helm of MAS on July 1 last year.