Other carriers may benefit from MAS route cuts

PETALING JAYA: Malaysia Airlines' recent route cuts may provide other carriers a chance to enlarge their markets with AirAsia Bhd being the biggest beneficiary.

In fact, AirAsia and other carriers were already benefiting from the route cuts, OSK Research analyst Ahmad Maghfur Usman said. “AirAsia, which is already garnering a bigger market share and yields after the termination of Firefly's (which is a subsidiary of MAS) jet operations to Sabah and Sarawak, is also the only carrier flying the highly lucrative Kuala Lumpur-Bandung route,” he said in his report.

Shares in MAS fell three sen to RM1.52 while AirAsia's stock ended yesterday higher by one sen to RM3.66. The termination of Firefly services on the Langkawi-Penang-Singapore route had also enabled AirAsia and Silk Air to improve yields, Ahmad noted.

“MAS pulling out of its Kota Kinabalu hub for flights to North Asia and Sydney would create opportunities for AirAsia to strengthen its presence, notably for flights to Hong Kong and South Korea. “In addition, the termination of its other longer long-haul routes to destinations such as the Americas and Dubai creates opportunities for SIA (Singapore Airlines) and Emirates to expand their respective market shares,” he added.

MAS announced recently that it would begin rationalising several unprofitable routes in an effort to stem its losses. The national carrier reported for the first nine months to Sept 30, 2011, a net loss of RM1.24bil against a net profit of RM8.55mil a year earlier. Its cash and cash equivalent have depleted to RM968.5mil as at Sept 30 compared with RM1.92bil a year ago.

A new business plan unveiled recently is expected to see the company turning itself around mainly by cutting capacity, wooing back its customers, enhancing costs and focusing on its core business. “Fundamentally speaking, its earnings turnaround is not foreseeable until 2013,” Ahmad said, maintaining his “sell” call on the counter. None of the 19 analysts covering MAS has a “buy” call on the counter at the moment, according to Bloomberg data.

-thestar online.