Malaysia Airlines a new breed of hybrid carrier: Idris

ISTANBUL: Malaysia Airlines (MAS) said it has evolved into a new breed of hybrid carrier, which blends the traditional full-service carrier traits with that of low-cost carriers (LCCs).

"We continue to offer our customers five-star services, but at the same time competitive and affordable fares. Once you start doing that, you enter into a different league," MAS chief executive officer and managing director Datuk Seri Idris Jala told Malaysian reporters on the sidelines of the International Air Transport Association's (IATA) 64th Annual General Meeting and World Air Transport Summit here.

He described MAS' current business model as being between full-fledged full-service airlines such as Cathay Pacific Airways and Singapore Airlines (SIA) and LCCs like AirAsia Bhd.

"Today no (network carriers) has done what we have done. Take for example our 'Everyday Low Fares' campaign. We are creating a new market, attracting people who have never flown on MAS or AirAsia before and I predict this market to be quite big," he added.

Previously, moves by MAS including the introduction of meal boxes for economy class passengers on its regional short-haul flights and the "Everyday Low Fares" campaign had brought confusion over the national carrier's business focus and were seen as moving away from the business model that made it successful.

At the same time, AirAsia has called on the carrier to stop competing in its market and concentrate on the premium, full-service market.

"The airline industry's operating environment has become very tough and most airlines recognise that this is the worst in the history of the airline business. I believe we can overcome this difficult period, but we have to be relentless about reducing our costs from where we were before. We must choose a different game (to remain competitive and sustainable)," said Idris.

On Monday, IATA chief Giovanni Bisignani had warned that tough times were ahead for the global aviation industry and rocketing fuel prices have forced the world airlines group to downgrade its industry profit to a loss of US$2.3 billion (RM7.4 billion) based on an average oil price of US$106.5 (RM344) a barrel.

Idris said MAS' five-year business transformation plan (BTP2) plays a key role to ensure the carrier pulls through difficult times.

"We will expedite (our BTP2) even more. Although we have successfully turned around, if we run our business as it is now, we will not be able to weather the storm because oil prices have gotten so high. We have got to transform ourselves and quicken the pace," he added.

On losing its premium customers to full-fledged airlines such as Cathay Pacific and SIA as they continue to improve their premium products while MAS focuses on reducing costs, Idris said MAS would buy new aircraft as part of its long-term plan to provide for market growth and for replacement of existing aircraft.

It has ordered 35 new 737-800s with an option to buy 20 more, of which the first will be delivered in September 2010. However, it is reviewing its plans to buy new wide-body planes to replace its ageing B777 and B747 fleet because of high fuel prices.

"But between now and 2010, we have to be content with the existing fleet. (To ensure that we do not lose our premium customers), we are spending money to refurbish the cabins of all aircraft with new seat covers and carpets. We are also changing the crew's uniform to make it more contemporary but still keep the batik and kebaya. The colour will be brighter.

"It will be a cosmetic change, not a total retrofit as that will involve a lot of money and would require five to seven years to recover the cost. The target plan is to complete the entire exercise by the end of January next year," he said, adding that the exercise will be funded internally. Its cash reserve currently stands at RM5 billion.

"In the course of next year, we are also looking at introducing other projects that will be good for the customers," said Idris.