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Prime Minister Datuk Seri Najib Tun Razak
shaking hands with Boeing Chief Executive Officer Kevin McAllister
(right) at the Memorandum of Understanding Exchange Ceremony between
Boeing and Malaysia Airlines Berhad (MAB) today. Also present MAB Chief
Executive Officer Peter Bellew (centre).
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Earlier, it was in talks with European jet maker Airbus to buy more aircraft, but opted for the Dreamliner instead. Some of the new jets will be used to replace its existing fleet, especially since it will be using the six A380 aircraft for Haj charter flights and others to enter new markets. It had earlier ordered several A350 aircraft.
The deal for the 16 aircraft was signed on Tuesday and is worth US$4.86bil, and that includes maintenance, repair and overhaul (MRO) services.
“It is a normal thing to (order planes).
“Airlines need aircraft, and new aircraft have long waiting periods. It is better to order now so that the future is secured,” said Maybank Investment Bank Research senior analyst Mohshin Aziz.
Other than the KL-London route, the airline had axed all its long-haul routes, including its only US link via Los Angeles, some years ago to turn into an Asian-centric carrier in a major transformation exercise to revive the airline. “There are nine different very long-distance routes that we are looking at right now, and certainly the west coast of the US and as far as New York. We will be assessing and investigating as to the market size. We are also looking at Amsterdam, Paris, and expansion into Japan and South Korea,” Malaysia Airlines managing director and chief executive officer Peter Bellew told Malaysian journalists in Washington.
“We expect to use the aircraft to fly some new routes with longer distance than we are currently operating. This gives us the flexibility of having the long-distance A350 and ultra-long B787 aircraft, and we will be able to go back to markets where we were in the past, and into new markets not served before,” Bellew added.
While the airline is still assessing if the US is a viable connection, some analysts are not so keen for it to move in that direction so fast.
“Ultra-long-haul flights don’t really work. Via eastwards it is too challenging geographically, and there is too much capacity from Cathay Pacific, Japanese, Taiwanese and now Chinese carriers. Going eastward is also equally challenging, with too much of competition from the Middle-Eastern carriers. But flying to Japan and South Korea would be no issue,” said Mohshin.
CAPA Centre for Aviation analyst Brendan Sobie added that “it’s way too early for the airline to even consider flying again to North America. The South-East Asian-North American market has become extremely competitive and challenging. The 787 gives them some flexibility in future, but I would be shocked if Malaysia Airlines flies to the US this decade”.
The airline is fully aware of all the challenges it will face and that is why Bellew said it would need to investigate before finally making a decision.
“The US is a fascinating proposition. The plane can easily and technically reach the west coast; both Los Angeles and San Francisco are prospects. Technically, New York non-stop is more difficult at certain times of the year due to winds.
“As for the business case for US direct flights, we are just starting on it. The planes were not acquired to do that mission, although it is now possible.
“A lot of negotiations are required with our airline partners, handlers, agents and airports in the US to make it economically feasible,” Bellew said in reply to queries from StarBiz.
However, he added that “it is important to remember that all these routes lost a lot of money for Malaysia Airlines in the past. I don’t want to repeat that. This aircraft (B787) has very strong economics, but we need to get partnerships in place to fill the planes from new destinations with attractive yields. With our new reservation system, we have a real chance of selling connecting traffic on our own, and easily on to our partner networks for the fist time in a simple way,” Bellew said.
As for Amsterdam, where it has a longstanding relationship with KLM which it can rely on, Bellew said, “Amsterdam has the best quick connections all across the United Kingdom and Europe and we have good relations with KLM.”
On the possiblity of flying into Paris, he said: “I also have had two meetings in Paris. It is not off the table, but much more difficult financially.” He said the fittings of the aircraft would be luxurious, with a high proportion of Business Class seats with full flat beds. It is even considering adding First Class seating.
“It is really a move to distance ourselves from the low-cost carriers and to be a premier five-star carrier,” Bellew explained.
Malaysia Airlines and Boeing signed a memorandum of understanding for the planes that was witnessed by Prime Minister Datuk Seri Najib Tun Razak during a visit to the White House on Tuesday, where he told US President Donald Trump that Malaysia Airlines would buy 25 Boeing 737 jets and eight 787 Dreamliners.
The eight 787-9s were converted from a prior 737 MAX order, while Malaysia Airlines also added eight purchase rights over 737 MAX aircraft, Boeing said.
The 16 aircraft would cost the airline US$3.63bil at list prices and without the customary discounts. Apart from that, Boeing will collaborate with the airline on a new MRO facility to specialise in the 787, MAX and Boeing new-generation (NG) aircraft.
Bellew said it would use the existing hangar at Sepang for the MRO services, and MRO services to other airlines with the Dreamliner, MAX and Boeing NG aircraft.
The MRO deal for the 16 aircraft is worth US$1.23bil for 12 years of the life of the planes, and when combined with the purchase of 16 aircraft, the total deal to the airline is worth US$4.86bil. Najib added that the airline would probably add another 25 737s in the near future, a deal he said would be worth more than US$10bil (RM42bil) within five years.
Source: The Star Online | Business | 14 September 2017
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