01 July 2008

MAS chief issues dire warning

KUALA LUMPUR - Malaysia Airlines has become the latest airline to predict dire times for the worldââ¬â¢s airlines.

Managing director and CEO Idris Jala wrote in an open letter last week that MAs is prepared to "take the lead" in increasing fuel surcharges and raising fares.

Fuel surcharges are set to rise between 25% and 80%.

"Change, and I mean drastic change, is absolutely vital for our survival. That, and a willingness to reinvent the way we operate, including through mergers and acquisitions," Jala said.

He said MAS "kept our head above water" with a first-quarter profit of MYR120.5 million (US$37 million) but that it will "face more pressure in the near future."

The MAS chief warned that more airlines are going to be ââ¬Åâœforced out of business, while the majority of us are going to bleed red ink yet againââ¬~.

The bottom line, he said, is the general public everywhere ââ¬Åâœmust be prepared to face sharply higher prices for air travel nowââ¬~, or be prepared to ââ¬Åâœstomach even higher prices later when the number of participants become fewer and competition fizzles out in favour of consolidationââ¬~.

Jala said MAS would be "focused on cutting costs right down to the bone"--including cutting capacity--and would "continue to innovate" to lower costs and increase revenue through programmes like its Everyday Low Fares initiative.

Commenting on the state of the industry in Asia-Pacific, Andrew Herdman, AAPA director general said, ââ¬ÅâœFor the first five months of the year, international passenger traffic registered growth of 3.5% in RPK terms, slightly slower than the 4.2% growth seen in 2007."

He added,ââ¬ÅâœAirlines are being severely pressured by the relentless increase in oil prices, and expectations of slower economic growth.

"Fuel hedging programmes may soften some of the immediate impact, but the painful reality is that the doubling of oil prices over the past year is making travel significantly more expensive. Weakening consumer confidence could further dampen the outlook for the rest of the year.ââ¬~

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  Asia is becoming like US/UK now with reduced commissions but we can live with that, what to me is totally unacceptable is that Emirates is the only airline with a brain to keep the fuel costs in the fare so whilst now we only get 5% we get 5% of a sensible figure, not like Qatar who give us 5% on a fare that soon will be less than we have to collect for fuel, secuiry and tax. I really cannot comprehend why they do not all do the same as Emirates. The public has lost the plot long ago, and nowadays we have to quote incluisve prices anyway.

  By guy, Tuesday, July 1, 2008