Malaysian Planning for the 90s

One of the proposals Hassan is looking at is to recruit foreign pilots with commercial licences and train them further to take their places in the Fokker F50s and Boeing 737s of the domestic fleet. Already, Hassan has liberalised Malaysia’s policy towards expatriates. They are now offered training on the advanced fleet in exchange for extended contracts, where previously the policy was to recruit only those with endorsements in equipment Malaysian operates and then only for three year contracts.

The new policy opens the possibility of an extended career for many of the 200 Australians who joined MAS after they resigned from the Australian airlines during the 1989 pilots’ dispute. The Australian recruits form two thirds of the 300 expatriates in the MAS900 strong technical air crew roster. Most of these pilots are driving either F50s or 737s in the domestic fleet although MAS does employ some senior expatriates on its 747s and DC-10s.

Hassan is looking at many solutions for his crew problems. For instance, MAShas signed a pact with Scandinavian Airlines System to take on secondment a number of the northern European carrier’s cadets after they graduate from flight school. They go on to regional services in East Malaysia flying DHC-6 Twin Otters or on to the Borneo outback. Sort of our equivalent of ‘cutting your teeth’ in the challenging and often lethal New Guinea environment. The cultural and professional shock to the young recruits can only be imagined.

Malaysia Airlines is gearing up this year for – among other things – major expansion into southern Europe and also hopes to fly into its first northern European port, the hub of Copenhagen. In the south, negotiations are nearing completion to secure rights for Madrid and Rome, while the airline would also like to fly to Athens. The southern and northern destinations will round off present European services into Vienna, Frankfurt, Amsterdam, Paris and London.

Elsewhere, Malaysian is negotiating to open services into Africa using Harare, Zimbabwe in addition to expanding services into North America. With four flights a week into Sydney and Melbourne, it would like to operate daily services and also to bring its planned 747F into Australia. MAS, which also operates into Brisbane, Perth and Adelaide, would like more frequencies into these cities as well.

Powering this 20 year old carrier is the growing strength of its own and regional economies. Malaysia is looking at a 91/92 growth of 8. 6% in its gross domestic product, down from last year’s 10% but this comes at a time when much of the rest of the world is in recession. It is an example of the shift in airline economic strength – as Boeing and Airbus repeatedly point out in their market studies – from North America and Europe to the western Pacific rim countries, from Indonesia to Japan and Korea.

Malaysia’s surge marks its expansion from primarily an exporter of tropical commodities to manufactured products, largely electrical goods and electronics. Japanese, Hong Kong, and Taiwanese firms, finding labour costs getting too high at home, are investing in Thailand, Malaysia, Indonesia and the economic development zones of southern China.

The result in Malaysia is the development of new industrial areas around the capital, Kuala Lumpur, near Penang on the North west coast and in Johore in the south. The output from these is distinguished by being valuable and relatively small in size and light in weight. It is ideal for air freight distribution. Consequently is also high on the Malaysia Airlines priority list. MAS will replace its DC-10 freighter in September with a Boeing 747-200F. Meanwhile, two of its B747-400s are kombi versions in a 55 tonne/288 passenger configuration (the freight payload is almost the equivalent of the DC-1O’s 62t). With total cargo uplift running at 170,000t a year, the airline is hard pressed to lift all that is offering.

Malaysian Airlines System traces its origins back to 1937 when a British trading company inaugurated air services in peninsular Malaya using DH Rapides. After wartime Japanese occupation, Malayan Airways Ltd started up in 1947. The name changed to Malaysia Airways in 1963 when the Federation of Malaya and the crown colonies of Singapore and Penang achieved independence, then later Malaysia-Singapore Airlines (MSA). The joint venture broke up in 1971, after Malaysia and Singapore went their different ways, to become Singapore Airlines (SIA) and Malaysian Airlines System.

The acronym MAS retained the initials of the airline that was then establishing itself strongly on regional and world routes. They make up the Bahasa Melayu word for gold, which has fortunate connotations. The new airline went on to adopt the logo of a stylised kite of the type flown in ceremonies in the east coast state of Kelantan.

Today’s unusually profitable MAS has a 42% public holding and is quoted on the Kuala Lumpur stock exchange (its $M1 shares are running at about $M6 or about $US2. 17). The federal government has a similar holding and two of the East Malaysia states have holdings of 10% each.

The control reflects the role MAS is charged with in national development – in building trade, promoting tourism and helping build up the nation’s technological base. The government stake (which includes a controlling “golden share”) helps promote social objectives as well. The eastern states of Malaysia, which are along the north coast of Borneo, understandably feel remote from the peninsular mainland and their shares help influence maintenance of domestic services, which generally run at a loss because the fares are controlled.

For this reason, MAS operates basically three businesses.

There are the domestic flights linking the mainland Malaysian cities as well as eastern Malaysia and including Twin Otter flights into remote areas of the Borneo states, regional services to neighbouring countries of the Association of SE Asian Nations (ASEAN) such as Singapore, Bangkok and Jakarta and intercontinental flights ranging from Australia and New Zealand in the south to the US and Europe in the east and west and Japan and Korea in the north.

The MAS board and the government recently looked at splitting off the domestic services and commissioned a study by the British Airways subsidiary Speedwing. However, the upshot was that they will be retained in the main airline but probably operate separately as a profit centre. Separation of the social services will allow costs to be identified and expose the subsidies, at present buried in cross payments within the MAS accounts.

There is an equally strong emphasis on retaining the independence of MAS, even in the face of the growth of international megacarriers and world markets. Typical comments from senior executives are “we see no need to merge” but “we’ll always be flexible if the advantages are there”. This reflects to some extent the prickly, counter western vision of Prime Minister, Dr Mahathir Mohamad who is seeking to build up Malay business skills and population to ensure by 2010 a strong nation based on Malay traditions in the face of powerful Chinese influences, not only within Malaysia but also throughout the Asian region emerges.

While the airlines and governments of the ASEAN countries discuss projects such as rationalising maintenance and fleets, the Malaysian view is that specialisation can come only after technical self sufficiency has been reached. Singapore can be said to have already achieved this level while Indonesia and Malaysia are rapidly increasing their capabilities.

The various roles of MAS have obviously ensured a mixed fleet. The airline’s plan calls for a simplification by 1997 towards Boeing 747-400s at the top end for intercontinental routes, Airbus A330s for regional services and Boeing 737-400s for thinner regional and domestic routes. For the low traffic regional services there is the Fokker 50 and DHC-6 Twin Otter.

However, the requirement for capacity has so far upset the basic rationalisation plans. The airline has consequently been forced to retain aircraft such as its older 747s using three different engine types to maintain services and meet the demands of growing traffic. A ‘problem’ that many airlines around the world would presently love to have!