MAS poised to cut routes

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Published: 01/03/2006 - Filed under: News »

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Malaysia Airlines (MAS) is poised to unveil big changes to its network and in-flight product.

In a bid to return to profitability, government-owned MAS says it will scrap poorly performing routes and consider charging for in-flight food. At the same time it will accommodate more passengers on its planes by cutting the size of the business class cabin and squeezing in more economy class seats.

The moves are part of the carrier's new business turnaround plan in which it freely admits its failings. "If nothing is done," claims MAS management, "we are likely to run up losses of £259 million (RM 1.7 billion) this year. Although the government is committed to MAS it will not bail us out."

According to the report presented by managing director Idris Jala, "Government influence has restrained MAS from adopting market disciplines. So although we have award-winning products and services we face rising costs and low productivity. For example, our aircraft have relatively few seats and this drives up costs. [Because we provide more legroom] it means that our B777s seat 247 passengers as against 293 with Singapore Airlines (SIA)."

"MAS loses money on the bulk of its network. Of our 114 international routes (covering Asia, Australasia, the Middle East, Europe plus North and South America) only 48 make a profit. Out of 118 domestic routes only four are in the black."

Although MAS' flights can run heavily booked the carrier isn't earning enough because of weaknesses in the carrier's revenue management and sales divisions.

The airline says that it struggles to attract profitable long-haul business class passengers. Its Kuala Lumpur hub is overshadowed by rival Singapore which has captured the lion's share of the local market. And because MAS isn't a member of an alliance it doesn't benefit from feed traffic (from other alliance members) in the same way as regional rivals SIA, Thai and Cathay Pacific.

Airline sources say that MAS is expected to cut 20% of its international routes including services to Europe and India where it faces stiff competition not just from other European and Asian carriers but also from the emerging Gulf airlines.

From Kuala Lumpur there are MAS services to 12 European cities including London, Manchester, Amsterdam, Paris, Frankfurt and Munich. But not a single one of these routes is profitable. Indeed, the Vienna service alone loses £4.5 million (RM 30 million) a year.

MAS' London office says that timescale and details (of the routes to be cut) is not yet available.

For more information go to www.malaysiaairlines.com

Report by Alex McWhirter