Malaysia Airlines Bhd (MAS) has benefited from a combination of aggressive marketing strategy and the adjustment in passenger service charges (PSC) for flights within the Asean region.
Forward bookings at MAS for the next six months are 50% more than a year ago, said its group chief executive officer Peter Bellew.
“The airline has had tremendous group booking enquiries from the Asean region, spiking by almost 400%,” he said.
Apart from an aggressive sales campaign by the airline over the past months, Bellew said the “equalisation” of the PSC has had an even better impact than expected on the airline”.
The new PSC charges come into effect on Jan 1, with uniform charges for all Asean destinations at RM35 in both the KL International Airport (KLIA) and KLIA2.
It replaces the old structure where it is RM65 for all international travels, which includes Asean, at KLIA and RM32 in KLIA2, which is positioned as an airport for low-cost carriers.
“We are seeing great forward bookings and our loads are good … this would be a great boost for us and Malaysian tourism,” he said in response to queries from StarBiz.
Although the forward bookings are encouraging, yields are depressed, a worldwide conundrum given the intense competition. The weaker ringgit will have an impact on the airline, as will the stronger US dollar, as most of its costs are in dollars.
“Yields dipped slightly in the third quarter, but this is something affecting most airlines. We expect this to improve in the fourth quarter,” Bellew said. “We do expect heightened competition with over-capacity in the market, with both players (AirAsia Bhd and Malindo Air) bringing in extra aircraft into Malaysia. This would be good for the customers, but would put pressure on the airlines,” he added.
MAS’ yields for the third quarter ended September 30 was 21.75 sen, down from 22.5 sen in the second quarter, despite passenger revenues for the third quarter rising 12% over the second quarter, led by aggressive sales campaigns. The yield has a direct impact on the bottom line of the airline operations.
Traditionally, the fourth quarter is the best quarter for airlines, but the ringgit’s weakness has been intense after Nov 8.
Bellew said the weaker ringgit would have an impact on airline operations and would be made worse by the keen competition in the Malaysian market. “The volatility of the dollar is a major concern, given that most of our costs are in US dollars. However, the lower cost of fuel, which we have hedged as much as possible, will balance out the rise of the US dollar,” he said.
“We will have to be extra diligent and focused on costs in 2017, but we remain cautiously optimistic.”