Malaysia Airlines seeks partners for Hajj-focused service using A380s

CEO Peter Bellew has said with parties in Asia and the Middle East involved in the tourism and aviation industries
By Bloomberg
Wed 26 Jul 2017 08:54 AM

Malaysia Airlines is in talks with potential investors for new charter flights to carry Muslim travellers on the annual  Hajj pilgrimage, a service planned to give a new lease of life to surplus A380 superjumbos at the unprofitable carrier.

The carrier will apply for a license with Malaysian authorities this quarter and expects the service -- a separate venture from the main airline -- to be fully operational in about a year, CEO Peter Bellew said in an interview. Malaysia Airlines has held talks with parties in Asia and the Middle East involved in the tourism and aviation industries, he said.

The airline, taken private by sovereign wealth fund Khazanah Nasional Bhd. following two fatal air crashes in 2014 that sank demand, is looking for additional revenue steams after cutting jobs and unprofitable long-haul routes to keep the business afloat. About 2 million Muslims journey to Islam’s holiest city of Mecca during the Hajj each year and carriers including Saudi Arabian Airlines lease dozens of jets to cater to them.

“We think there is a great sustainable business” which would be profitable and put the A380s to good use, Bellew said in Kuala Lumpur. “It is not just specifically money that we are looking. We are looking for somebody who can bring something to the business.”

Seat configuration

Bellew had said planes used for the Hajj would accommodate as many as 700 people in a single class -  modified from their current 494-seat layout with Malaysia Airlines - the densest configuration of any superjumbo.

Malaysia Airlines also faces additional costs from the ringgit, which has weakened more than the company had expected, the CEO said in the interview. The currency fell 7.8 percent against the dollar in the last quarter of 2016 and earlier this year reached the lowest level since 1998.

The Malaysian currency was trading at about 3.2 to the dollar when Khazanah unveiled a 6 billion-ringgit turnaround plan Malaysia Airlines in 2014. The ringgit currently trades around 4.28 to the U.S. currency.

The strength of the dollar will increase costs by about 300 million ringgit ($70 million), more than what was projected, Bellew said. Still, the ringgit’s weakness won’t derail Malaysia Airlines’ goal to break even in 2018 and list on the local stock exchange the following year.

The company should be cash-positive in the second half of 2018, he said. Forward bookings from the international segment continue to be strong while those for domestic flights are slightly lower from a year ago because of intense competition, said Bellew.

The airline is focusing on business class and premium cabins as well as transporting passengers from other carriers to increase revenue, the executive said. China, India, Japan and Taiwan are its growth markets, and the airline will add more routes to these destinations over the next few years, he said.

The carrier needs six more aircraft next year and a similar number in 2019 to serve its busiest routes across Asia, Bellew said. Malaysia Airlines is studying leasing options and new purchases and will wait for a “good price” since it isn’t in a hurry, he said.

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