A new all-red airline will take to the skies soon, and one should not be faulted for confusing it with the present incumbent low-cost carrier (LCC) at first glance. After all, it is no secret that the majority of MYAirline Sdn Bhd’s top management and employees had previously worked for AirAsia Group, including its co-founder and CEO Rayner Teo Kheng Hock.
And Teo has roped in his former colleagues at AirAsia, Kathleen Tan and Stuart Cross, for the venture. Tan, former China president of AirAsia, is now MYAirline’s chief executive adviser, and Cross is its chief operating officer (COO).
In an interview with The Edge at the airline’s office in Subang Jaya, Selangor, last week, Teo did not shy away from acknowledging that there were many similarities between MYAirline and AirAsia, from its business model to its aircraft type and the use of red, but he believes the new budget airline can differentiate itself by focusing on customer experiences and seat offerings.
“When we were choosing the colours to grace our airline, we told our team to avoid red, blue, purple and orange. After two to three days, however, we couldn’t find any colours interesting enough to make us want to look at it more than once. We would always skew towards the colour red, and the significant role red plays in Chinese culture also played a large part [in our final decision],” he says.
Thus, MYAirline has unveiled a livery that pairs red with streaks of grey.
Teo likens it to English football clubs Liverpool and Manchester United, arch-rivals on the field that don the colour red.
But MYAirline is determined to prove itself to be the “better red”.
“
As a start-up, because we are small, we are nimble, more aggressive, and if we get ideas, we can work on them quickly. And if anything doesn’t go right, we will make sure that we address it just as quickly,” he says.
MYAirline recently received its air operator’s certificate from the Civil Aviation Authority of Malaysia (CAAM), paving the way for Malaysia’s newest low-cost start-up to start flying passengers. The approval essentially confirms that MYAirline has complied with all safety regulations set in place for aircraft operations.
But there are still several regulatory approvals, including a full air service licence from the Malaysian Aviation Commission, that are needed before it can put flights up for sale. Until then, it cannot disclose the new routes it plans to fly to, except to say that it will start operating with domestic flights in the one-hour range and target leisure traffic with its three Airbus A320s.
“Pretty much everything is in place. We are ready to go,” says Teo.
And it is looking to fill the void left by incumbent players, which were forced to quickly shrink, cut routes and ground hundreds of planes during the Covid-19 pandemic.
Still, the new airline’s entry into the capital-intensive sector has raised eyebrows, with many pointing to the chequered history of airlines in Malaysia as well as the daunting global economic outlook gripped by recession fears, surging inflation and sky-rocketing jet fuel prices. Even before the pandemic, incumbent airlines such as Malaysia Airlines, AirAsia, Batik Air (formerly known as Malindo Air) and Firefly were unprofitable as the airline market was suffering from overcapacity and irrational competition.
Teo points out, however, that MYAirline has several things going for it, including lower rates for new aircraft leases and abundance of airport slots and skilled labour (pilots and cabin crew) in the aftermath of the pandemic, which means previous barriers to entry have been lowered.
“We are reaping the benefits of getting good planes [at lower leasing rates] and we have secured as many planes as we can,” he says.
Maybank Investment Bank (Maybank IB) aviation analyst Samuel Yin Shao Yang concurs, noting that leasing rates for an A320 has dropped to about US$200,000 (RM927,000) per month, down 33% from US$300,000 per month before the pandemic.
Teo also says MYAirline has had no issue hiring talents such as pilots and cabin crew after Covid-19 lockdowns led incumbent airlines such as AirAsia and Batik Air to downsize. The airline already has about 330 employees, but that number is expected to increase to 500 by the year’s end.
“We are still seeing the economic benefits [from the pandemic], but we are also wary that at some point in time — maybe next year — we will see some changes when recovery happens,” he adds.
Maybank IB’s Yin says it will not be an easy start for new airlines such as MYAirline, owing to the recent strength of the US dollar and still-high oil prices.
“US dollar-denominated expenses typically account for 60% to 70% of an airline’s expense. Meanwhile, oil prices are in their best of times, which is not so great for airlines as jet fuel traditionally accounts for 30% to 50% of their expenses,” he tells The Edge.
Nevertheless, Yin notes that lower aircraft lease rates and higher fares have more than compensated for the weaker ringgit and still-high oil prices. The ringgit has fallen around 11% against the greenback over the past year.
“The saving grace for MYAirline is that fares in the last two years have been high, and that was due to low [seat] capacity. But what we are seeing is that fares have remained high despite capacity being brought back [post-pandemic]. The reason for that is many airlines had cut capacity during the pandemic and, thus, with demand recovering, supply remains tight and fares remain high,” he says.
He adds that fares in general are up about 25% since the pandemic. “In some cases, fares have doubled, especially for long-haul flights as airlines like AirAsia had stopped flying [to some of these long-haul destinations] and have yet to resume their service. A return ticket to London now costs RM10,000 compared with RM5,000 before the pandemic, while a return ticket to Sydney or Melbourne costs RM5,000, up from RM2,500 before the pandemic. Yet, people still want to fly.”
According to Yin, what is preventing the aviation industry from fully recovering to pre-pandemic levels are the backlogs at maintenance, repair and overhaul (MRO) service providers, which is making it harder for incumbent airlines to return airplanes that were grounded during the pandemic to the skies as quickly as they would like. Global airlines were forced to slash capacity to as little as 2% of pre-pandemic levels during the pandemic.
“Demand has been quite resilient, actually. Thus, I believe the issue has more to do with redeploying of planes rather than demand. The MRO service providers are unable to repair and redeploy aircraft fast enough, owing to a shortage of spare parts and labour,” he says.
Association of Asia Pacific Airlines (AAPA) director-general Subhas Menon says it will take time for airlines to restore their capacity to pre-pandemic levels as the aircraft have to undergo maintenance checks and staff will need to be retrained.
“It’s not like turning a tap on and off. Airlines have to make a lot of preparations to bring their flights back. The staff will need to be retrained after not working for more than two years, while many have left the industry during the pandemic. So, you have to attract them back. Just the background checks and certification required by authorities can take two to four months,” he adds.
Still, with travel restrictions starting to ease in places such as Hong Kong, Japan and Taiwan, Subhas believes this is an optimal time for new airlines like MYAirline to launch.
“If you look around, there seems to be a lot of pent-up demand at the moment. Many countries are reporting a huge surge in demand in the last few months and it doesn’t look like it is abating anytime soon,” he continues.
“But, of course, we have to be conscious of the headwinds ahead such as surging inflation; rising interest rates; the strong US dollar, which makes other currencies weaker; and the supply chain problems that affect food and energy security and also drive up cost. But the good thing is that, even though everyone is predicting a [global] recession, it will be a job-full recession. In other words, unemployment is very low.
”
The people behind MYAirline
Companies Commission of Malaysia (SSM) data shows that Zillion Wealth Bhd has an 88% stake in MYAirline and Trillion Cove Holdings Bhd has 10% equity interest, while Teo owns the remaining 2% of the airline’s shares. Both Zillion Wealth and Trillion Cove, a money lending and financing company, name Datuk Goh Hwan Hua as a director.
Teo has more than 34 years’ experience in the aviation industry, 15 of which were spent at AirAsia as group head of sales and distribution.
“Having been in the airline industry from day one, one of the goals I had was to one day start a new airline,” he says.
According to Teo, both he and Goh have been working to start the airline since the onset of the pandemic. “I first met Datuk Goh when I was working with AirAsia and he was providing some services to the airline. That’s how we became friends and that’s how we got connected. It’s been over 10 years.”
Apart from Goh and Teo, MYAirline’s three other directors are Datuk Abd Hamid Mohd Ali, former COO of Malaysia Airports Holdings Bhd; Datuk Seri Azharuddin Abdul Rahman, former director-general of the Malaysian Civil Aviation Department (now known as CAAM); and Jothi Prakash Murugan, who is a director at Trillion Cove, the SSM filing reveals.
“We recognised the fact that we needed to have a strong team in terms of the board to support me. So, we went out there to look for them. They did not need much convincing because everybody bought the idea of a new airline very quickly. They believe in this as well,” says Teo.
Avoiding pitfalls
Teo recognises that the operating environment in Malaysia will remain challenging even after the pandemic, amid a generally price-sensitive population, with many players in a small market and high jet fuel prices. As such, he is making sure MYAirline does not over-expand too fast.
“We have seen situations where some people are very aggressive. To a certain extent, they become too aggressive. When that happens, they tend to put in a lot of capacity,” he says, adding that MYAirline expects to expand its fleet to more than 50 planes in five years. “We are not going in and making empty promises or over-promising.”
According to AAPA’s Subhas, the pandemic has so far not been partial to any kind of business model. Both LCCs and full-service carriers (FSCs) alike have been hit hard by the border closures and multiple lockdowns.
“Likewise, the recovery is also not partial to any kind of business model. The same factors apply — the airline business, whether you like it or not, is a high-cost business. It is all a matter of how airlines manage their finances to make sure they are always cash-flow positive. So I don’t think it really matters what sort of business model you are adopting; it is more how you manage demand and supply,” he says.
Maybank IB's Yin believes starting an LCC would be a better bet in a potential recession as cash-strapped travellers would choose low-fare airlines.
“There are fears that the hawkish US Federal Reserve’s actions will ultimately lead to a global recession, probably next year. And LCCs tend to do reasonably well [during a recession] as consumers trade down [to cheaper travel],” he says.
Yin adds that airlines are behaving more rationally post-pandemic, pointing to Malaysia Airlines, which is selling tickets at a more reasonable price level.
He says: “They [Malaysia Airlines] have more resources because of government backing. Its group CEO Captain Izham Ismail had come out to say that his key performance indicator is based on how much money he draws down from Khazanah Nasional Bhd.
“That tells you that the market is behaving more rationally.” As part of the national carrier’s debt restructuring in 2020, Khazanah had committed to injecting RM3.6 billion in new capital into holding company Malaysia Aviation Group Bhd to fund the group’s business until 2025.
“The same goes for Batik Air. They have been loss-making since they came to Malaysia. But fare-wise, they are now behaving more rationally. They are taking delivery of 10 Boeing 737-8 MAX aircraft [from Lion Group this year] and that’s about it. So, everyone is in this kind of [cautious] mode,” says Yin.
Australian daily Herald Sun reported that the fall caused 36-year-old Erin Crocker multiple joint franctures and a torn ligament which required major surgery.
It said Crocker had rejected a settlement offer from AirAsia, which her lawyer Nancy Yonan described as "only a minute fraction of the claim’s true value".
AirAsia, which recently suffered its first air disaster after flight QZ8501 from Surabaya to Singapore crashed into the Java Sea killing all 162 on board, had also wanted her to agree not to make any further claims, the report added.
Yonan said Crocker initially did not want to take "money away from those victims" by pursuing her legal action, but eventually decided to "fight for her rights".
AirAsia has had trouble in the past with Australian authorities.
In 2012, the Australian Competition and Consumer Commission (ACCC), a consumer watchdog, took legal action against the airline for allegedly failing to disclose the full price of fares for flights from Australia.
The Federal Court in Melbourne later imposed a penalty of A$200,000 against the budget airline for contravening the single pricing provision of the Australian Consumer Law.
“Unless the full price is prominently displayed the consumer may well be attracted to a transaction which he or she would not otherwise have found to be appealing and grudgingly pay the additional imposts rather than go to the trouble of withdrawing from the transaction and looking elsewhere,” said judge Richard Tracey in his judgement. – January 18, 2015.
Source: MSN
KUCHING: The decision on Malaysia Airlines (MAS) and AirAsia Bhd’s appeal to the Competition Appeals Tribunal (CAT) over the breach of market-sharing prohibition in the Competition Act 2010 will be known next year.
The Malaysia Competition Commission (MyCC) last year fined the two carriers RM10 million each for violating the Act.
MyCC chairman Tan Sri Siti Norma Yaakob said yesterday the case was in the appeal stage and the outcome would only be known in March next year.
She also said the MyCC was investigating 15 out of a total of 47 cases received since the Act came into force on January 1 2012.
“We have received 47 complaints but many had to be set aside as the complaints were incomplete; they (complainants) had refused to come forward when asked... just complaining but with no evidence.”
Siti Norma said she could not give details of the 15 cases as they were under investigation.
The former chief judge of Malaya was speaking at a news conference after the launch of guidelines against bid-rigging in public procurement and the Help Us Detect Bid-Rigging guidebook, here, yesterday by Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek.
Hasan said bid-rigging might increase tender price by 12 to 15 per cent, thereby causing wastage in public procurement.
“We must pool efforts to stem overpriced procurement of goods, services and workers who are sub-standard,” he said.
Hasan said wastage was a loss to society and country and could be avoided if the procurement process was under tight control, which would prevent bid-rigging.
Bernama
The Malaysia Competition Commission (MyCC) last year fined the two carriers RM10 million each for violating the Act.
MyCC chairman Tan Sri Siti Norma Yaakob said yesterday the case was in the appeal stage and the outcome would only be known in March next year.
She also said the MyCC was investigating 15 out of a total of 47 cases received since the Act came into force on January 1 2012.
“We have received 47 complaints but many had to be set aside as the complaints were incomplete; they (complainants) had refused to come forward when asked... just complaining but with no evidence.”
Siti Norma said she could not give details of the 15 cases as they were under investigation.
The former chief judge of Malaya was speaking at a news conference after the launch of guidelines against bid-rigging in public procurement and the Help Us Detect Bid-Rigging guidebook, here, yesterday by Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek.
Hasan said bid-rigging might increase tender price by 12 to 15 per cent, thereby causing wastage in public procurement.
“We must pool efforts to stem overpriced procurement of goods, services and workers who are sub-standard,” he said.
Hasan said wastage was a loss to society and country and could be avoided if the procurement process was under tight control, which would prevent bid-rigging.
Bernama
On September 12th, the launch ceremony was held in Grenoble, France, the venue of the verification project. At that time it was announced that the actual verification project would commence from October 1st.
This ceremony was held with a large mass media presence from all parts of the world. Toyota Chairman Takeshi Uchiyamada commented with great fervor, "TOYOTA is constantly seeking new forms of mobility to change the amazement of today into the commonplace of tomorrow."
He also said, "The urban transportation sector is a new growth arena for the next generation of TOYOTA". In this way he expressed his passion for this verification project.
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1. The secretary to the Ministry of Trade and Industry avers that trade negations must be done in secret, I suppose by the officers concerned. There should apparently be no public debate or even within the Government.
2. I don’t think it is such a good practice, if indeed that is the practice. Let us see the record of trade and other agreements negotiated by the Malaysian Government. They do not seem to favour Malaysia much. In fact they seem to result in Malaysia accepting unfavourable terms.
3. Firstly let us look at the water agreement with Singapore. Malaysia agreed to sell raw water at 3 cents per 1000 gallons. In return Malaysia can buy 12 per cent or less of the treated water for 50 cents. If the rates are to be revised both countries must agree.
4. If Malaysia raises the rate to 6 cent per 1000 gallons (i.e. 100 per cent) then Singapore can raise by the same factor to 1 dollar per 1000 gallons of treated water. This is not going to benefit Malaysia. And so we never tried to renegotiate the prices.
5. The first agreement lapsed in 2011 and we did not renegotiate at all. The next agreement will lapse in 2060. So we will be getting 3 cents per 1000 gallons of raw water when the cost of living has probably gone up many-many times.
6. To avoid Singapore revising the price of water if we raise the price of raw water, Johor was given enough money to build its own treatment plant. Not having to depend on supply from Singapore, we could raise the price of raw water without Singapore raising the price of treated water.
7. I am told that Johor still needs to buy treated water from Singapore. I really do not know why. So the price has not been renegotiated and I suppose will not be renegotiated until 2060.
8. Today the Singapore Dollar is 2 ½ times the value of the Malaysian Ringgit. At the time of the agreement it was one to one. Are we receiving payment in Singapore Dollar or Malaysian Ringgit? Or is this a secret also?
9. Frankly I don’t think we thought very carefully when we negotiated. Incidentally Johor sells water at 30 cent per 1000 gallons to Melaka, i.e. 1000 per cent higher than for Singapore.
10. Then there is the purchase of the F/A-18 fighter aircraft. Actually the Government wanted the MIG-29. Somehow part of the fund was used to purchase the F/A-18. I suppose the people who made this decision know why they must have the F/A-18.
11. Unfortunately the agreement to purchase did not include the source code. Without the source code the F/A-18 can only fly on missions approved by the United States. Until then these very expensive fighter planes can only be used for show at LIMA. Very expensive toys.
12. Then there is the AFTA, the Asean Free Trade Area. We agreed that cars with 40 per cent local contents qualify as national and tax-free entry into ASEAN markets. Forty per cent local contents are easily achieved by cars from outside ASEAN. This means the Japanese, Korean, Chinese and European cars can get ASEAN countries’ national status merely by being assembled in ASEAN countries together with batteries, tyres and a few other components.
13. We produce the Proton in Malaysia with 90% local contents. Naturally our costs are higher and cannot compete with non-ASEAN cars assembled in ASEAN countries. While these cars flood the Malaysian market, hardly any Proton is seen in ASEAN countries.
14. The negotiators may think they negotiated a good deal but I just don’t think so. We are simply opening our markets to countries with closed markets.
15. But to make matters worse, while Proton must comply with Malaysian safety and other standards, the imported cars are given exemptions from most of these. If Proton wishes to export to the countries of the manufacturers, it must comply with all their standards. So far we cannot export to Japan, Korea and the European countries. This is how good the agreements we have entered into.
16. We lost Pulau Batu Puteh but we cannot build the bridge or remove the causeway, or settle the provident fund issue. But we have given up our railway land worth billions to Singapore for practically nothing. And now we must ask Singapore’s permission to build our high speed train.
17. Look at all the agreements we have entered into and you will find practically none of them favours us.
18. Now we want to swallow the American conceived TPP, Trans Pacific Partnership. This is another attempt by America to let their huge corporations penetrate the domestic markets of the small countries, in particular Government procurements.
19. When the GATT (General Agreement on Trade and Tariff) failed they invented WTO (World Trade Organisation) for the same purpose. That also failed. They then invented APEC. Still they cannot achieve their objective. They introduced bilateral free trade agreements. Then they promoted a Globalised World, a world without borders in which their money can go anywhere, destroy economies and then pull out. In case we have forgotten they did this in 1997 – 8.
20. Still they cannot get at Government procurement. And now they invented TPP, a partnership of unequal, of the strong to take advantage of the weak.
21. This is going to be legally binding. If we breach the agreement, their corporations can sue the Government for billions. I have my doubts about our ability to convince the international arbitrators or courts. We cannot even convince the World Court over Pulau Batu Puteh.
22. They will have the best lawyers, lots of them. We will exhaust all our funds to pay our less experienced lawyers. At the end we will lose and pay indemnities and fees running into billions. And we will continue to pay until we comply. And when we comply we will lose more money.
23. We have a domestic problem and we have to solve this problem. They don’t care. Anyone who talks about the New Economic Policy (NEP) is labelled racist by our officials. When the currency rogues attacked us the purpose was to gain control over our economy. We resisted that because we were still free then. But after we sign the TPP we will be bound hand and foot. No more capital control. We will be colonised again. President Sukarno was right about neo-colonialism.
24. I know MITI is already set to agree to the TPP. It will not entertain any counter arguments. It wants to do this secretly. We don’t punish people who make agreements detrimental to the interest of this country. So what is there to lose.
25. This is my country as much as it is the country of the officials and politicians. If people secretly do harm to my country I have a right to complain.
26. We talk a lot about transparency. Let us see transparency regarding the TPP negotiation. The October 2013 ultimatum should be ignored. And let China also be included.
PETALING JAYA (Nov 23, 2012): AirAsia Bhd has been granted with an air operator’s certificate (AOC) by the Department of Civil Aviation (DCA) to fly for another five months — instead of a two-year period — for not meeting regulatory standards, said sources.
The current AOC is valid until April 2013.
Sources told SunBiz that AirAsia had only obtained a six-month AOC — an approval granted from the DCA to an aircraft operator to allow it to use aircraft for commercial purposes — after periodical audit findings by DCA showed shortcomings in AirAsia’s flight operations procedures and practices including flawed communications between flight operations and pilots, an outdated manual and flight operations not in keeping with the manual.
The six-month period allows for AirAsia to work with the DCA to bring its flight operations procedures and practices up to mark.
It is also understood that AirAsia’s head for flight operations has been changed due to the action.
Three key posts in an airline are nominated with the approval of the DCA, namely the head for flight operations, engineering maintenance system and crew training.
“The fact that they have not grounded AirAsia aircraft shows that it’s not a serious safety issue, but this action still serves as a warning,” one source told SunBiz.
Scheduled commercial airlines based in Malaysia are awarded two-year renewals of AOC by DCA.
In other markets, depending on the track record of the airline, AOCs can be valid for up to five years before a renewal is due.
While the audit is a biennial affair, the DCA conducts inspections on airlines at least once a year.
According to another source, a two-year renewal is given if airlines meet standards set by the regulator. Otherwise they are given a period of time, depending on the issue, to comply before a renewal of AOC is given, or it is revoked entirely.
In the event of a withdrawal of an AOC, the airline can work to meet standards set and re-apply for an AOC which will have to be approved by the Cabinet.
AirAsia and DCA officials did not respond to questions sent via e-mail, as at press time.
An industry observer said it is unlikely that AirAsia will let the situation progress to an outright withdrawal of AirAsia’s AOC, ultimately grounding its flights.
“They (AirAsia) will definitely address whatever issues DCA have and make sure they bring in the right people and fire the wrong people, because too much is at stake.”
He added that while the action taken by DCA is unlikely to have any financial impact on AirAsia as a company, it may impact its reputation as an airline and its ability to secure the best deals for financing in the future.
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malaysiaairlinesfamilies and airasiafamilies!
Posted on 23 November 2012 – 05:36am
sunbiz@thesundaily.com
Indonesian low-cost carrier Lion Air will start a hybrid airline in Malaysia in a joint venture with the country's National Aerospace and Defence Industries (NADI).
The new carrier, named Malindo Airways, will start operations in May 2013 with a fleet of 12 Boeing 737-900ER aircraft.
The airline will offer a "hybrid product" using aircraft with a two-class configuration – 12 in business and 168 in economy. The aircraft will also be equipped with in-flight entertainment systems and in-flight connectivity, Lion Air president director Rusdi Kirana said at a press event in Kuala Lumpur, ahead of the signing ceremony.
Under the agreement, NADI will hold a 51% stake in the new carrier and Lion Air 49%. The airline has named Kirana's personal assistant, Chandran Ramamuthy, as its chief executive.
Malindo will be based at Kuala Lumpur International airport's terminal two and focus on routes between Malaysia and Lion Air's hub in Indonesia before operating to other cities such as Bangkok, Manila, Hanoi and Guangzhou. It will also operate on domestic routes.
The carrier intends to add 12 aircraft to its fleet each year, including the Boeing 737 Max and 787. These aircraft will come from Lion Air's current order book, says Kirana.
The five 787s Lion Air has on order – originally set for its premium carrier Batik Air – will instead go to Malindo in 2015. Lion Air is now in talks with Boeing to order an additional 10 787s, said Kirana.
To compete as a newcomer, the new airline will offer ticket prices lower or at least on par with that of Malaysian low-cost carrier AirAsia, said Kirana, adding that Malindo will have a low cost base owing to the involvement of NADI.
The new carrier, named Malindo Airways, will start operations in May 2013 with a fleet of 12 Boeing 737-900ER aircraft.
The airline will offer a "hybrid product" using aircraft with a two-class configuration – 12 in business and 168 in economy. The aircraft will also be equipped with in-flight entertainment systems and in-flight connectivity, Lion Air president director Rusdi Kirana said at a press event in Kuala Lumpur, ahead of the signing ceremony.
Under the agreement, NADI will hold a 51% stake in the new carrier and Lion Air 49%. The airline has named Kirana's personal assistant, Chandran Ramamuthy, as its chief executive.
Malindo will be based at Kuala Lumpur International airport's terminal two and focus on routes between Malaysia and Lion Air's hub in Indonesia before operating to other cities such as Bangkok, Manila, Hanoi and Guangzhou. It will also operate on domestic routes.
The carrier intends to add 12 aircraft to its fleet each year, including the Boeing 737 Max and 787. These aircraft will come from Lion Air's current order book, says Kirana.
The five 787s Lion Air has on order – originally set for its premium carrier Batik Air – will instead go to Malindo in 2015. Lion Air is now in talks with Boeing to order an additional 10 787s, said Kirana.
To compete as a newcomer, the new airline will offer ticket prices lower or at least on par with that of Malaysian low-cost carrier AirAsia, said Kirana, adding that Malindo will have a low cost base owing to the involvement of NADI.
