Wednesday, November 9, 2011

MAS to axe unprofitable routes

View: How often does MAS rationalize the network? Seems that some routes have been causing the airline to bleed for a long time!


PETALING JAYA: Malaysia Airlines (MAS), which will be relocating its headquarters (HQ) from Subang to KL International Airport (KLIA) in February next year, will cut several routes including those to Dubai, Johannesburg, Buenos Aires and Cape Town, in a bid to reduce costs, sources said.
The sources added that MAS would no longer rely on Kota Kinabalu as a hub and would cut flights out of the Sabah capital to destinations such as Haneda, Seoul and Osaka.
In February, MAS would stop flying to Johannesburg, Cape Town and Buenos Aires, they said. As for the pullout from the Dubai sector, this will be done gradually, first with the reduction of weekly flights and those via Karachi and Damman.
“These are seen as critical routes that do not bring in the yields or are highly competitive, and the best way to bring down costs is to axe the unprofitable routes first,'' said a source.
The sources claimed that the airline might add Abu Dhabi as a destination in place of Dubai, a route served by Emirates several times weekly, but whether it was a wise move would remain to be seen as Abu Dhabi is an equally competitive route.
The sources added that choosing Kota Kinabalu as a hub was not a strategic move in the first place and now the airline had to reverse the decision. This is the second time that MAS has abandoned the idea of using Kota Kinabalu as a hub. The first attempt was in 2003.
MAS is currently conducting a review of its entire route network and sources claimed that there would be more route cuts. However, new destinations and frequencies will be added to those that bring in the yields.
“They should focus on areas that gives them good yields instead of trying to fly to destinations just for the sake of having linkages. Gone are the days when connectivity was a must, now the focus should be on making money rather than community service,'' said a source.
On the move to KLIA, which will be its second HQ shift in a decade, it is intended to consolidate its administrative operations in one location rather than maintain several. Currently, MAS operates from five places three at Subang and two at KLIA. The move will reduce the number of locations to three two in Subang and one in KLIA.
The new administration and headquarters will be located at the South Support Zone at KLIA. However, the Firefly turboprop operations, engineering and maintenance (E&M) as well as the Malaysia Airlines Academy will remain at Subang. The E&M division needs to stay at Subang because it has three hangars in that location and it would cost too much to relocate them.
“The move may be good for the airline as it wants to consolidate its operations and bring down costs, but it will be a costly affair for employees, whose travelling cost will rise along with their travelling time.
“The last shift was from Jalan Sultan Ismail to Subang. The question is, with the advent of technology, is there really a need to consolidate the operations to KLIA/LCCT... unless there is a plan to sell the land in Subang or even develop it?'' asked a source.
According to its annual report, MAS has 32 office and workshop buildings at Subang which covers 4.6 million sq feet and the net book value of the assets is RM233mil.

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