I think a lot of foreigners mistake MH
for an entity that is business-focused. It is not. So, the normal airline business analysis does not apply here. Any airline weighing a strategic partnership with MH
should keep that in mind and always at least have a plan B, C, or even D for when MH
(or rather the Malaysian government) flip flops on previous agreements; and watch out for political shuffles. CEO's come and go. They are appointed by the government and tend to be in the social circles of the Malaysian aristocracy. Their main job is to go along with what the government wants to see in the airline and be creative about spinning it into an attractive proposition. These are the people who authorize key strategic plans, and not the good veterans who have been seeing to the airline's daily operations for years. That is why many of the airline's visions and goals are clearly out of touch with the realities of the industry.
From what I can see, the recent notable exception was Idris Jala, who made the mistake of actually trying to do a job. He came in when MH
was on life support again several years after the widespread asset unbundling (WAU) (which was essentially a creatively packaged billion dollar government bailout). Perhaps at that time, the government felt that WAU was still fresh in the people's memory and feared a voter backlash, and thus brought in Jala to give the impression of cleaning up. I believe that Jala took it seriously; the business turnaround plans that were launched during the earlier part of his tenure contained serious evaluations of the airline's operations and drew conclusions that were in line with what most in the international airline business saw in the Malaysian air transport market. Later, the execution did not run smoothly, and it doesn't take much imagination to suspect resistance in the government to austerity measures as a major reason for the plans' incomplete implementation. Jala's departure was sudden, and for a ministerial position that was created by the government; it is unclear to this day the purpose of that position, so I don't it is unfair to suspect that the move was simply to get Jala out of the way. Jala's overall contribution to the airline is arguable, but what I'm trying to convey is the manner in which MH
is managed at the very top.
The A380s were ordered in 2003, at a time when MH
was riding on a post-bailout high. Within the airline, there were doubts as to whether or not the aircraft was suitable for MH
operations. During the time after there were successive announcements of the production delay, I believe a deal was made with Airbus to push back the delivery, a delay which now the airline attributes entirely to Airbus' production problems. There were calls during Jala's time to cancel the order for an aircraft type that was clearly incompatible with what the turnaround and transformation plans were aiming to achieve. Ultimately, the airline stuck to the orders, especially since the actual delay compensations later proved rather useful in propping up the airline's bottomline during the most recent global downturn.
The recent shuffle in the top management and various interviews/reports from the "new" team signal a worrying potential return to the days of excessively lavish products - matching the best-in-class offerings, reducing the seatcount on the A380s to be delivered. It seems the co-operation with AK
and the implied reduction in direct yield-busting competition has now been taken as an excuse to invest in a makeover which will once again return MH
to its trophy airline days. "Focus on improving the yield" according to government airline management appears to equate to expanding and upgrading its premium offerings; just like joining an alliance equates automatically to a big step up in projected income. People somehow expect Tony Fernandes and Kamarudin Meranun to translate AK
's success onto MH
. But some of us question the AK
guys' motives. With MH
share prices already in the dumpster, and MH
bankruptcy very unlikely, there's not much downside. AK
has already been rewarded with immediate removal of homeground low cost competition and official government support. On the government side, at the top of the "new" faces are folks who were responsible for the widespread asset unbundling (WAU) in 2001. It's not unreasonable to expect them to come up with another "creatively" packaged taxpayer bailout. Such is the cost of maintaining five dubious Skytrax stars.
Skyteam's oft-discussed hesitation may be because they deem MH
an unreliable business partner, if they had been paying attention to the goings-on at MH
. Or more likely they are unsure of the value of a KUL
hub, at which AK
is now stronger than MH
. It may be a convenient way to increase capacity during boom times but a yield dumpster during downturns. Having one more airline in oneworld is not a bad thing, but I doubt getting closer to MH
in these times will be beneficial. A codeshare on MH
to lower yield longhaul destination would be a good enough way to increase reach without major investment. Otherwise, increasing co-operation with AY
in addition to BA
could be another good way to go. Meanwhile, a selective JQ
(Air Asia X) co-operation for India/Europe/Middle East could be considered. That would eat into MH
's market share in those markets, but perhaps the Malaysian government will not think it's a problem. After all, they are determined to think that full service and low cost carriers do not compete directly.