Malaysia Airlines expected to benefit from oneworld membership
June 7, 2011
SINGAPORE: Malaysia Airlines’ (MAS) move to join the third largest global airline group, oneworld, marks a significant development for the carrier at a time when global carriers are hoping to extend their reach to tap the growth in Asia Pacific.
This should bode well for the national carrier in terms of traffic numbers and income in the longer term.
Yesterday, MAS announced that it was unanimously elected as a designated member of oneworld and its managing director, Tengku Datuk Azmil Zahruddin, said “the time is right for us to join a global alliance and oneworld is clearly the best option for us.”
He could not elaborate on traffic and income numbers as it was still early days but the journey to become an airline member had been long although the benefits from the company and passenger perspective far outweigh that.
In one swoop MAS passengers will gain access to the alliance’s global network which covers almost 950 destinations in 150 countries. MAS Enrich frequent flyer members will be able to earn and redeem rewards on oneworld’s carriers and vice versa.
Qantas will sponsor MAS’ entry into oneworld and MAS will only start flying as part of oneworld late next year as the process to become a member takes 18 months.
More importantly, carriers like British Airways and Qantas that left Malaysia a decade ago and which are members of oneworld are trying to get a slice of the action in South-East Asia. They now see MAS as an airline that can give them access to the region.
Qantas chief executive officer Alan Joyce confirmed this, saying that the arrival of MAS into the oneworld alliance offered Qantas opportunities to expand its presence in South-East Asia.
‘We are very keen to talk on how we can cooperate and get into the Malaysian market and other South-East Asian markets. It is the fastest growing region and we want to increase our market share there,” Joyce told reporters at the 67th International Air Transport Associa-tion AGM in Singapore yesterday.
But he added that Qantas would remain committed to growing its base in Singapore via Jetstar, saying that “we still will have a big operation in Singapore.”
Between the two countries there is a sizeable amount of traffic and this will be strengthened and Azmil said he would be discussing that with Joyce.
Malaysia Airports Holdings Bhd managing director Tan Sri Bashir Ahmadwhen asked to comment said: “I am pleased with this announcement by MAS that it is joining the oneworld alliance. This move by MAS to join an alliance is indeed a good one. Both British Airways and Qantas which are members of oneworld were major airlines operating to KLIA and pulled out during the financial crisis. We hope both airlines will consider re-commencing their services to KLIA in the near future. We welcome them.”
Analysts were rather split in terms of their views on the significance of MAS’ plan to join oneworld, pointing to the lack of details on the terms and conditions under the agreement. While there were few who thought it would not help much in terms of MAS’ business operations, others felt the new development could imply something else.
For instance, one analyst from a local research house was concerned that MAS’ plan to join oneworld could signal a departure from the company’s previous business turnaround measures, which involved the airline cutting down unprofitable routes.
“By joining an alliance, which presumably involves capacity commitment, there will be less flexibility for the company. The airline would then have to fly to a particular route, regardless of whether it is a profitable one or not. In that case, it will depart from what it had originally planned a few years ago to cut costs and improve yields. Then again, it really depends on what are the terms and conditions set for MAS under the agreement to join the oneworld alliance,” he said.
“On the positive side, though, joining such an alliance would allow MAS to leverage on the global network that the organisation has, and that could be beneficial for MAS’ business,” he added.
The question is, as another analyst pointed out, whether joining the alliance would benefit MAS or the other members more.
When MAS becomes part of oneworld, members of its Enrich frequent flyer programme will earn and redeem rewards on any of oneworld’s 14 other carriers.
At the same time, frequent flyer cardholders of oneworld’s established airlines will be able to earn and redeem rewards when flying on MAS.
“With more options available, what will be the net effect? Some of the Enrich members might prefer to fly with other airlines, and of course, there will be some frequent flyer cardholders of other airlines under the alliance who would turn to MAS,” he said.
Another analyst from a local fund management company, however, said she did not foresee MAS’ joining of oneworld to impact much on the local airliner’s business.
“At the end of the day, it is really the fundamentals that are driving the company’s business. In this case, I think MAS has to work harder on improving its operations, particularly after such poor showing in its first quarter ended March 31, 2010,” she said.
MAS will be the 15th member of oneworld. Other than British Airways and Qantas, the other members are Cathay Pacific, Royal Jordanian, American Airlines, Japan Airlines, Finnair, LAN Argentina, Malev Hungarian, Iberia, Mexicana, and S70 Airlines. India’s Kingfisher and AirBerlin will be members after their 18-month process period.
The biggest global airline alliance is StarAlliance in which Singapore Airlines is a member. The other alliance is Skyteam.
Azmil hoped MAS’ entry into oneworld would encourage carriers already part of the alliance to fly to Kuala Lumpur. For now MAS has code-share agreements with Cathay Pacific and Royal Jordanian.
“As a company we are highly focused on quality service. We are immensely proud to have been invited to join the highest quality alliance with the best airline partners offering a global network that best complements our own,” Azmil added.
MAS also has a longs-tanding relationship with KLM, including code shares to Australia and Amsterdam. Azmil said the deal with oneworld would not preclude MAS for maintaining its relationships with KLM but there would be a review on its network and its preference was to have further code-share agreements with oneoworld members.
The airline yesterday also signed an agreement via its travel and tour arm, MASHolidays, to become a member of Universal Air Travel Plan (UTAP) to provide travellers with another payment option for their ticketing with MAS.
“UTAP is the card of choice for corporate travellers and MAS can now accelerate its corporate market share growth by using this leading payment system,” said MAS chairman Tan Sri Munir Majid. He said MAS intended to become a UTAP shareholder immediately and would focus on global issuance of a MAS-UTAP programme.