Malaysia Airlines: Waiting for the white knight

Courtesy Reuters

IN July, there was much excitement about Qatar Airways’ interest in acquiring Malaysia Airlines (MAS), being one of four proposals received by the ailing flag carrier of Malaysia. It seems that has as quickly dissipated.

According to sources, apparently only one proposal from local investors Jentayu Danaraksha Sdn Bhd (JDSB) is left on the table. The consulting firm is fronted by former MAS chief executive officer Tan Sri Abdul Azia who retired in 1991.

But MAS’ owner Khazanah does not seem to favour JDSB which in 2014 said it was keen to revive the carrier but was snubbed.

There has been ambiguity as to whether MAS prefers a local or foreign investor. But there is now new excitement about the possibility that Japan Airlines (JAL) might be that white knight. Much has been hyped about JAL being a good fit for MAS since it had only not too long ago pulled through a difficult time of near collapse and would therefore know what’s needed to rescue MAS.

JAL has earlier tied up with MAS to operate joint flights between Japan and Malaysia, and it looks like a natural step forward to take on a bigger role. Besides, both airlines belong to the OneWorld Alliance (and so too Qatar Airways).

And while the powers that be at Khazanah are gushing with excitement about that prospect, JAL president Yuji Asaka said it was too early to consider an equity investment in MAS but future discussions were possible.

Extending its reach internationally may be a strategy for JAL in competing with rival All Nippon Airways. So far it has partnered with airlines which include China Eastern Airlines, Hawaiian Airlines and Garuda Indonesia in commercial agreements. But equity acquisition is so far not on the card. So it may be a long road, so patience may just be what MAS needs right now.

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At last, Emirates will be offering premium economy

Courtesy EPA

Emirates Airlines is the latest of the few remaining major airlines to jump on the premium economy bandwagon. The Gulf carrier is launching the service in 2020. And as one of the world’s best airlines according to several surveys, it promises a product as one to beat.

Emirates CEO Tim Clark said, “We’re aiming to make it a quiet zone, a comfortable zone.”

It will be an exclusive cabin. Besides more legroom, better food and beverages, and other perks, the seat will be a “sleeperette”, but it will not be a lie-flat bed as in Business Class. The idea is to attract economy class passengers to upgrade. And Mr Clark has said the prices will be “well below business class fares.”

Emirates’ entry into this segment of the business will certainly heighten the competition among rival airlines that are already offering premium economy. A noted rival is Singapore Airlines (SIA). Interestingly, Emirates seems to be following in the footsteps of SIA which held out for quite a while before it decided to fly premium economy behind several other major carriers such as Cathay Pacific and Qantas. Both SIA and Emirates are known for their excellent service in the upper classes, but they cannot ignore the growing appeal of that in-between class that their close rivals ride on.

Closer home, it may not be a question now as to whether Qatar Airways and Etihad Airways will also come on board but when

Will Qatar Airways be Malaysia Airlines’ white knight?

Some three to four months after Malaysian prime minister Mahatir Mohamad said ailing Malaysia Airlines (MAS) may shut down or be sold, he revealed he had received four proposals to take over the national flag carrier.

The first known interest came from former AirAsia non-executive chairman Pahamin Ab Rajab and five partners, whose consortium is looking at scooping up a 49 per cent stake in MAS. Whether AirAsia is part of the consortium is not clear, but the budget carrier’s chief Tony Fernandes had said he was not interested as it would be a mistake for a low-cost operator to want to go full-service. (See Can AirAsia save Malaysia Airlines, 8 July 2019)

Qatar Airways now emerged as the second prospective white knight come to the rescue of MAS following a meeting between Dr Mahatir and Qatar Emir Sheikh Tamin Hamad al-Thani. Both Qatar and MAS belong to the OneWorld alliance. At least that’s common ground for a start, unless geopolitical problems Qatar faces with its neighbours that lead to its isolation in the region stand in the way.

But, of course, no doubt Qatar has the funds to shore up the loss-making MAS. There are good competitive reasons for doing so. The tie-up will certainly boost Qatar’s standing in Southeast Asia and the extended Asian region. Dr Mahatir has recognised that MAS suffers from fierce competition, and Qatar’s aggressive strategy in the international arena may well also push the Malaysian carrier in the same direction.

The acquisition will complement Qatar’s investment in Europe, where it is already a major shareholder of the International Airlines Group (IAG) which owns British Airways, Iberia, Vueling and Aer Lingus. With a share of 20.01 per cent, it s IAG’s largest single stakeholder.

It is interesting that of the four proposals received by MAS, Qatar is the only foreign company. It is not known if the other proposals are from industry players apart from the suggestion that Mr Pahamin had an aviation link in a non-executive capacity. That probably explains how many industry experts think MAS’ best bet is AirAsia, once a carrier heavily indebted and now Asia’s leading budget operator.

Qatar’s credentials as the world’s best airline voted by Skytrax respondents are impressive, but national pride to keep the flag carrier in local hands may present a hurdle. Yet one only has to look at Swiss International Air Lines now owned by the Lufthansa Group and the merger between Air France and KLM to appreciate how in business, the desire to survive will dictate the course. Already Dr Mahatir has assured his people MAS will retain its name.

2019 Skytrax World Airline Awards: Who are the real winners?

It’s that time of the year when the airline industry is abuzz with the Skytrax World Airline Awards announced recently at the Paris Air Show.

There are surveys and there are surveys, if you know what I mean. Skytrax, which launched its survey back in 1999 (according to its website) is generally viewed with some regard. It is said that more than 21 million respondents participated in the 2019 survey.

But what can we read of the results?

Which is the real winner: Qatar Airways or Singapore Airlines?

Qatar Airways switched places with last year winner Singapore Airlines (SIA) to be the world’s best airline.

As far back as 2010 until now, the two airlines have been ranked one behind the other in the top three spots, except in 2012 when Asiana came in second place between Qatar the winner and SIA in third position. In the ten year period, SIA came behind Qatar in eight years, except in 2010 when SIA was second and Qatar third, and last year when the Singapore carrier became the world’s best ahead of Qatar in second placing.

It looks like a tight race between Qatar and SIA for the top spot, and going by the survey results, Qatar has outranked SIA. It has become the first airline to have won the award five times, one more in the history of the awards.

But SIA is still ranked ahead of Qatar for first class and economy class.

In the first class category, Qatar is not even a close second to SIA in first placing but fifth behind Lufthansa, Air France and Etihad as well

In the economy class category, Japan Airlines is tops followed by SIA and Qatar in second and third placing respectively.

Besides SIA has the best premium economy in Asia, second only to Virgin Atlantic worldwide. But,of course, Qatar does not offer that class of travel.

Additionally SIA tops for cabin crew, and Qatar is farther down the list in 9th position.

But Qatar wins for business class, followed by ANA and SIA in second and third placing respectively. So it seems there is heavier weightage for this segment which has become probably the fiercest battleground for the airlines. First class included, it also suggests the halo effect of the premium product, but it is the business class that is the primary focus in today’s business.

It also attests to the impact of the recency factor. Qatar obviously impresses with its cubicle-like Qsuite that comes with its own door to provide maximum privacy. Quad configurations allow businessmen to engage in conference as if they were in a meeting room and families to share their own private space. And there is a double bed option.

Which brings up the importance of having to continually innovate and upgrade the product to stay ahead in the race.

The top ten listing: Consistency equals excellence

The ranking does not shift much from year to year. Besides Qatar and SIA, there are some familiar names: All Nippon Airways (3rd this year), Cathay Pacific (4th), Emirates (5th), EVA Air (6th) and Lufthansa (9th). So there is not much of a big deal as airlines switch places so long as they remain in the premier list.

Hainan Airlines (7th) is making good progress, moving up one notch every year since 2017. Qantas (8th) is less consistent, moving in and out of the top ten list, Thai Airways retained its 10th spot for a second year.

It is no surprise that the list continues to be dominated by Asian carriers which are generally reputed for service. You only need to look at the winners for best cabin crew: Besides SIA, the list is made up of Garuda Indonesia, ANA, Thai Airways, EVA Air, Cathay Pacific, Hainan Airlines, Japan Airlines and China Airlines. With the exception of Qatar, no other airline outside Asia is listed.

If you to look to find out how the United States carriers are performing, scroll down the extended list of the 100 best and you will see JetBlue Airways (40th), Delta Air Lines (41st), Southwest Airlines (47th), Alaska Airlines (54th), United Airlines (68th) and American Airlines (74th).

Home and regional rivalry

Rivalry between major home airlines or among competing regional carriers is often closely watched.

Air Canada, placed 31st ahead of rival WestJet at 55th can boast it is the best in North America. That’s how you can work the survey results to your advantage.

ANA (3rd) has consistently outdone arch rival JAL (11th). In fact, ANA has been the favoured airline in the past decade till now. It has Japan’s best airline staff and best cabin crew. Across Asia, it provides the best business class. Internationally, it provides the best airport services and business class onboard catering.

Asiana (28th) is favoured over Korean Air (35th ).

The big three Gulf carriers are ranked Qatar first, followed by Emirates (5th) and Etihad (29th).

Among the European carriers, Lufthansa (9th) leads the field, followed by Swiss International Air Lines (13th), Austrian Airlines (15th), KLM (18th), British Airways (19th), Virgin Atlantic (21st), Aeroflot (22nd), Air France (23rd), Iberia (26th) and Finnair (32nd).

What about low-cost carriers?

Worthy of note is how some budget carriers are ranked not far behind legacy airlines. AirAsia (20th) is best among cohorts. EasyJet (37th) and Norwegian Air Shuttle (39th) are not far behind the big guys in Europe. Among US carriers, Southwest Airlines (47th) is third after JetBlue (40th) and Delta (41st).

Also, pedigree parents do not necessarily produce top-ranked offshoots. Placed farther down the list are SIA’s subsidiary Scoot (64th) and the two Jetstar subsidiaries of Qantas – Jetstar Airways (53rd) and Jetstar Asia (81st). So too may be said of so-called regional arms. Cathay Pacific’s Cathay Dragon is ranked 33rd, but SIA’s SilkAir is way down at 62nd.

Pioneer of the modern budget model Ryanair is ranked 59th.

Down the slippery road of decline: Aisana Airlines and Etihad Airways

If it is difficult to stay at the top, it is easy to slip down the slippery road of decline. Asiana and Etihad are two examples.

Asiana was ranked world’s best airline in 2010 and became a familiar name in the top ten list up to 2014, after which its ranking kept falling: 11th (2015), 16th (2016), 20th (2017), 24th (2018) and 28th (2019). Its erstwhile glory has been whittled down to being just best cabin crew in South Korea.

Etihad did reasonably well for eight years until 2018 when it was ranked 15th, and a year later suffered a dramatic decline to the 29th spot. That, despite beating Qatar to be this year’s best first class in the Middle East.

As I stated at the onset that there are surveys and there are surveys. Some are not specifically targeted , whether its interest is business or leisure for example. There is always an element of subjectivity and bias in the composition and weightage, and this renders no one reading as being definitive. At best, we can read across several creditable surveys to know with some conviction how the airlines really measure against each other.

Read also:

https://www.todayonline.com/commentary/can-singapore-airlines-overtake-qatar-worlds-best-airline

Emirates’ profit plunges: Are the good days over?

Courtesy EPA

Emirates Airlines posted its weakest earnings in a decade – its profit at Dh871m (US$237m) plunged 69 per cent for the year ending March 31.

The airline’s chairman Sheikh Ahmed bin Saeed Al Maktoum attributed the lacklustre performance to higher oil prices, competition, weakening of travel demand particularly in the Gulf region, and strengthening of the US dollar.

Was 2018/19 merely an exceptionally tough year, or is it a sign that the good days are coming to an end?

Emirates has been very successful in operating inter-continental flights, hubbing at Dubai International Airport. However, with more airlines mounting direct flights, Emirates may face the challenge to fill up its fleet of A380 superjumbo. Its reliance on Asia-Pacific traffic to connect through Dubai to Europe has also been affected by the spread of terrorist attacks that are turning travellers away.

Going forward, Sheik Ahmed bin Saeed Al Maktoum said: “We expect the year ahead to remain challenging with hyper competition squeezing airline yields, and volatility in many markets impacting travel flows and demand.”

Interestingly, Emirates will be introducing a premium-economy class next year to help broaden its appeal. Known to have modelled itself after Singapore Airlines (SIA) in its early years of formation, Emirates is going through the same kind of pain that SIA experienced. And a little lately. SIA had for some time fought shy of going the premium-economy way, and is now competing aggressively to lead the pack.

The danger with success is how one thinks the good days will never come to an end so long as one continues to do what one has been doing. We forget that things are constantly changing around us.

Emirates’ profit plunge may signal something wider in the Gulf region. Last year Qatar Airways reported a loss of 252m riyals (US$67m), attributing it largely to a political dispute that resulted in a ban on the airline by Saudi Arabia, the UAE, Egypt and Bahrain. It expects to make a loss again this year.

Etihad Airways too has been incurring losses since 2016. Last year it posted a loss of US$1.28b. The Abu Dhabi-based airline has since shifted its focus on acquiring stakes in other airlines to build up its intercontinental network to focusing on operating point-to-point flights. There is rumour that it may eventually be assimilated by rival Emirates.

So true it is that one’s fortune may change depending on how and where the wind blows. You can’t ever rest on your laurels.

Some more Boeing woes: Shoddy work at manufacturing plant

As Boeing works at regaining the trust of travellers in the B737 Max 8 jet (following the crashes of an Ethiopian Airlines jet and a Lion Air jet in similar circumstances), assuring them that the software fix to the anti-stall system will make it the safest aircraft to fly the skies, new issues that have surfaced aren’t helping.

A New Times report (April 23, 2019) stated that the Boeing factory in North Charleston (South Carolina) that makes the 787 Dreamliner “has been plagued by shoddy production and weak oversight that have threatened to compromise safety.”

Whistle-blowers have pointed out defective manufacturing resulting from faulty parts being installed, debris left on planes dangerously close to wiring beneath the cockpits, and pressure to not report violations. The debris includes tools, metal shavings, Bubble Wrap and chewing gum, and it is alleged that customers had found random objects in new planes.

One airline – Qatar Airways – it seems, was so upset that it has since 2014 bought only planes built in Boeing’s main plant in Everett. It may sound ridiculous, but will travellers now go checking where the Dreamliners operated by other airlines were built, as a supermarket shopper would ordinarily do?

While the public may understand the risk of a mechanical failure of any machine, it is quite a different thing when the problem lies in a culture of not caring enough to ensure that the safety of the traveller comes before all else, that kind of trust that travellers must have in the product such as a plane.

Pushing production to meet deadlines at all cost and compromising safety standards can only rattle the traveller’s confidence. Already more than 50 per cent of Americans have said they will not fly the Max jet, even if the problem has been fixed.

And now the concern is extended to the Dreamliner. What next?

The New York Times report raises many concerns, top of which is how the management had turned a blind eye to complaints by the staff. Some of them alleged they had been punished or fired when they voiced concerns.

Two former managers said they were pushed to cover up production delays and employees were told to install equipment out of order to make it appear production was on schedule. In fact, Qatar’s beef was that Boeing was not being “transparent” about the cause of production delay.

What about the Federal Aviation Administration (FAA)’s role in all this, particularly when in the Max investigations the agency the agency had been censured for allowing Boeing to self-certify?

According to the New York Times report, an FAA spokesman, Lynn Lunsford, said the agency found metal silvers in several planes certified by Boeing as free of debris.

The FAA issued a directive in 2017 requiring that Dreamliners be cleared of shavings before they are delivered. However, it was determined that the issue does not present a flight safety issue.

Boeing has all along insisted the Max is a safe aircraft and that there are procedures in place to correct errors presented by the anti-stall system. The software fix to be implemented is meant to make a safe aircraft “safer”.

Boeing CEO Dennis Mullenberg, courtesy CNBC

Today Boeing CEO Dennis Mullenberg echoed the same line, saying on Monday April 29 that the pilots of the fateful Ethiopian Airlines flight did not “completely” follow the although Ethiopian officials said earlier they did but could not control the plane.

Mr Mullenberg said: “When we design these systems, understand that these airplanes are flown in the hands of pilots.” Without saying as much, the competence of the pilots or their familiarity with the procedures has been called into question. “Going forward we have identified a way to improve,” he added, “I am confident that that again will make one of the safest airplanes in the air to fly”

Those words of assurance have since been uttered often and will continue to be repeated as Boeing faces the uphill task of regaining trust in the improved Max jet. More than their airline customers – some of whom have stood staunchly by Boeing – it is the majority of travelling end-users that they need to convince.

Airbus A380: Big is not necessarily beautiful

Courtesy Airbus

BIG is not necessarily beautiful. Now that Qantas has cancelled its order for eight Airbus A380 superjumbo jets while Emirates, the largest operator of the double-decker jet, is also considering switching some orders to the smaller A350, the future of the world’s biggest aircraft hangs in the balance.

A Qantas spokesman said: “These aircraft have not been part of the airline’s fleet and network plans for some time.”

Clearly things are changing and the preference is trending towards a smaller but more fuel efficient aircraft.

The A380, which can carry as many 850 passengers, is supposed to cater to the rising demand for seats and at the same time relieve airport congestion. However, ten years after its inauguration, the industry is yet again shifting. It may seem the ideal solution moving more people at the same time. But as more airlines compete with non-stop flights, filling to capacity becomes increasingly challenging.

Qatar Airways Group CEO Akbar Al Baker said: “As an aircraft, it is very well suited for routes that require high capacity. We have successfully deployed it in markets where we see this large volume of passengers and operate to slot-restricted airports.” However, he was of the opinion that “this aircraft is very heavy (and) has very high fuel consumption.”

Besides, its size does not allow the flexibility to use it on other less populated routes which are dependent on seasonal demands.

Qatar has 10 A380s in its fleet. Other major operators include Singapore Airlines (24), Lufthansa (14), Qantas (12) and British Airways (12). But none comes near Emirates’ fleet of 109 with more than 50 on order.