If I understand correctly the agreement between MH
and PMB, MH
receives a subsidy to operate the domestic flights. How is the agreement structured? Is it a fixed subsidy or a variable one that ensures no operating losses in domestic operations on MH
's balance sheet? Separately, one wonders how PMB itself does financially?
I would guess that AK
's operating costs are significantly lower than MH
's. So, even if some routes will still be loss making (but need to be maintained for one reason or another), AK
will be closer to breakeven. AK
is turning out to be a bright spot in Malaysia's airline industry, one that promises to augment the country's position in the regional market. That AK
is now wielding more clout with the government is not surprising in that respect. One almost senses a reversal in policy, even going as far as to consider re-opening SZB
to larger scale commercial operations if one remembers how AK
was forced to move to KLIA before.
It is perhaps not pure coincidence that this discussion comes at around the same time as AK
's RFP and MH
's statement about prioritising F50 replacement (implicitly, over B737 replacement). I would guess that AK
taking over some B734s is being discussed. The routes that are negotiated are probably the B734-sized ones, with smaller F50 routes and rural air services likely remaining under MH
I believe MH
will at least maintain ex-KUL
domestic flights mainly for feeding international flights. They can be grouped around 3-4 daily banks. For that purpose, the B734 may be too big for connections to, say, IPH. That's where the E170/190 can come in.
My guess is that, if the deal works out, some B734s (possibly a significant number, say, even half the fleet) gets moved over to AK
, and in the longer run, be replaced with AK
's new acquisitions (if AK
continues to do well, they should have an easier time issuing shares and obtaining loans to finance purchases, instead of PMB shouldering the entire burden should MH
undertake the renewal). The remaining B734s at MH
will then partly be replaced with E170/190 aircraft, partly with 737NG/A32X aircraft of different sizes; so MH
's domestic fleet renewal will involve smaller numbers.
So this is not just a case of good-for-AK, bad-for-MH. It may turn out to be a smart redistribution of resources to match growth potential in domestic airline market. Just my 2 sen.