Skies wide open?

Former Emirates and Aer Lingus executive Dermot Mannion, now vice chairman of Royal Brunei, argues the case for a global open skies policy
By Beatrice Thomas
Sat 30 Nov 2013 03:31 AM

Royal Brunei Airlines deputy chairman Dermot Mannion knows better than most how cutthroat the long-haul air travel business can be.

Along with his current role, the former Emirates executive and CEO of Aer Lingus has seen first-hand the way in which the likes of Emirates have gained market dominance in this area.

So it is no surprise that reshaping the way state-owned Royal Brunei operated in this sphere was his first order of business after taking the helm in late 2010.

The decisions, in a period of consolidation for many Association of South East Asian Nations (ASEAN) carriers, were tough. The airline axed three long-haul routes in Australia and New Zealand where it believed it was “competing excessively” with Gulf carriers, and consequently cut staff by 25 percent from 2,000 and 1,500.

It switched to a regional focus, and identified long-haul routes that were “strategically important” — Dubai and London in one direction and Melbourne, Australia, in the other.

All this while rebranding itself under the new tag, “Betterfly Royal Brunei” and committing to a $250m upgrade of Brunei International Airport, which is due to finish next year.

“Long haul has become a very tough business for airlines in Europe and airlines right across Asia and into Australia, New Zealand,” Mannion, speaking at the Dubai Airshow, says.

“It’s no coincidence that in the same period the Middle East Gulf carriers have grown tremendously on the traditional Kangaroo routes. For many airlines in our region long haul has become very, very competitive.”

Royal Brunei needed to “re-fleet” and central to its strategy was the introduction of the Boeing 787 Dreamliner. It has ordered five of the state-of-the-art planes, with two delivered, a further two scheduled for delivery early next year and a fifth due later.

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They will replace its fleet of 777-200ERs, which had been on short-lease from Singapore Airlines and will be returned.

Mannion says the move is a “game changer” as Royal Brunei will be the first airline to operate the Dreamliner on the London-Dubai route when it introduces the plane to the segment on 1 December. When the jet is added to its Melbourne-Brunei-Dubai route on 1 April, it will be the only airline flying only Dreamliner aircraft on its long haul flights.

“We feel we’ve got the right aircraft, we feel we’re offering the right product and we think being the first Dreamliner operator to London is going to turn out to be a significant advantage for us,” Mannion says.

He says the plane, which is branded the most technologically-advanced plane in the skies, has “unsurpassed” passenger comfort with features such as bigger windows with a lower cabin altitude that reduced jet lag. It is also at least 20 percent more fuel efficient. While it initially had not planned to, Mannion says there are also “the beginnings of a case” to operate the 787 on sector lengths of five to six hours.

Its well-documented operational problems, he says, including fuel leaks and battery wiring faults, were “teething problems”. He has been around long enough to know it is not uncommon in a new plane and says issues also emerged when Boeing’s 777 was first introduced.

“Our overall position is we’re confident but we’re not complacent,” he says.

He is also confident the plane can also create opportunities to further grow the airline’s services to Dubai, where it has operated for 25 years.

“We’re taking it step by step,” he says. “Let’s see where we go with that, but certainly we are confident of being able to grow activity in Dubai as a result of this.”

Mannion says it is also looking to refresh its short-haul fleet from six into “double figures”. It is looking at the Boeing 737-MAX jet and Airbus A320neo, with a decision expected by the end of the year and delivery, hopefully, around 2015.

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Mannion says that in the highly competitive Asian market Royal Brunei had positioned itself as competing with both low-cost carriers such as Jetstar, Air Asia and Cebu Pacific as well as full-service operations such as Singapore Airlines and Malaysia Airlines.

“Our focus in the initial three years of my involvement has been ‘let’s get the internal structure right’,” he says. “We’ve restructured and right-sized the organisation and now we’re confident that without any further splitting of the business we can compete very well with full service on long haul and low cost on short haul.”

He says Asia is different to Europe and North America in the sense that even on shorter journeys the market likes business class.

“That gives us an advantage, because the LCCs don’t provide business class on short haul,” he says. “Even if you provide a full-service product, which we still do, we can drive costs very hard and we do that as well. We have become a more efficient airline now and we are able to confidently compete with the LCCs.”

Mannion says it has not ruled out re-establishing routes back to Australian cities after axing flights to Brisbane and Perth, along with its flight to Auckland in New Zealand. However, if re-introduced it will use the next-generation, single-aisle aircraft, which is better for range and fuel economics.

He confirms it is also looking at extra route opportunities to China and southern India, in addition to the 10 Asian cities it services such as Jakarta, Singapore, Hong Kong and Shanghai.

“So, in terms of the next four or five years our focus is much more on developing regional expansion,” he says.

Mannion says Royal Brunei has not ruled out a strategic partnership with a single airline, “which may well be in our best interests”.

What form and with which airline is “a subject for another day”. But, he isn’t interested in joining any existing alliances, which in his experience does not favour smaller airlines.

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“We don’t need a strategic partner to justify the type of growth that I was talking about,” he says.

“But, I think one has to be realistic. The whole thing about this industry is achieving relevance, you’ve got to be relevant as an airline and in that sense a strategic partner would be useful to us to go above and beyond what we’re currently targeting to achieve.”

Mannion, who oversaw the privatisation of Aer Lingus in 2006, says privatisation was a decision for Royal Brunei’s owners (the government) and his job was to put the airline into the best possible shape.

However, he firmly believes full deregulation of the skies, a hot topic at the Dubai Airshow, is “only a matter of time”.

Emirates Airline Group chairman and CEO Sheikh Ahmed Bin Saeed Al Maktoum used the airshow to criticise countries that blocked international airlines’ expansion by limiting landing rights at their airports.

Mannion, who was president of group support services at Emirates at the time he left for Aer Lingus in 2005, says Royal Brunei has extensive bilateral agreements in place for landing rights.

However, it is expecting ASEAN open skies from 2015, in addition to the intra-European arrangements and Europe and North Africa that already exist.

“The world is moving in the direction of deregulation,” he says.

“The momentum for that is unstoppable and irreversible. It’s really only a matter

of time.”

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