Price war among Malaysian airlines intensifying

“There are clear signs that competition will intensify in 4Q16 and 2017. The new Malaysia Airlines Bhd chief executive officer Peter Bellew recently said that MAS will have to address chronically low load factors, which averaged below 70 per cent,” CIMB Research said.

Lower fares
“It will soon price 15-20 per cent of its seat inventory at lower fares, in an effort |to wrest back market share. MAS will also introduce six |to seven new destinations |in 2017, possibly from KLIA2 and Kota Kinabalu to China,” the research house added. Kuala Lumpur International Airport’s Terminal 2 nor-mally serves low-cost carriers.
Meanwhile, Malindo Air will also be adding more capacity and CIMB expects more aircraft to be delivered into its fleet during the rest of the year.
“Malindo, which started the year with the express goal of expanding by six to 10 aircraft, finally added a couple of new planes. One [Boeing] 738 arrived in late June, and two more were delivered in July, taking its total jet fleet from 16 to 19. It also took delivery of two new ATRs in July, raising its turboprop fleet from 11 to 13-strong,” it said.
The research house noted that the aviation industry was cyclical, swinging between decreasing and rising competition.
It highlighted that in 2013, the Malaysian aviation environment was intense with the entry of Malindo and with the management of MAS flooding the market with capacity.
“This was followed by a competitive truce during 2014, before conditions improved significantly from August 2015 post-MAS restructuring. But the pendulum is in the early stages of a swing in the other direction,” CIMB Research said.