Ties that bind

Déjà vu because the two were originally one carrier, Malaysia-Singapore Airlines, or MSA, jointly owned by the two governments and launched in 1966.

That wedding fell apart just six years later in 1972 when both governments decided to set up their own carriers.

Basically, the reason was a difference of opinion over growth strategy. Malaysia wanted to focus on developing a domestic network before moving to regional flights and, eventually, long-haul. Singapore wanted to get going on developing international routes.

We all know the highly successful growth of SIA, its expansion into one of the world’s most admired long-haul operators with exceptional service standards and a reputation for leading the way, from new cabin product to the latest aircraft. Malaysia Airlines, on the other hand, has been something of a yo-yo, alternately jumping from record profits to record losses in remarkably short periods of time.

In the past few years it has had numerous chief executives, none of whom have really been able to revive its fortunes. Thus the reports throughout this year that the government owners were either going to sell off a stake to a strategic partner, sell it altogether, or even close it down.

The latter, the airline’s latest CEO Captain Izham Ismail said recently, would not be the right thing to do. While he ultimately would likely have little say in the matter he declared such a move would incur high costs and also impact its 13,500 employees.

“Shutting down Malaysia Airlines would be a wrong move. This is my personal opinion,” he said. However, he was open to equity investments from investors to come on board to help the carrier’s turnaround. “I welcome these synergies, because not only do they invest in the airline, they bring in new culture and could guide Malaysia Airlines in combating the future market.”

The view wasn’t universal. One local equity analyst suggested the unthinkable: it should consider a merger with SIA! According to Maybank Kim Eng’s regional aviation analyst Mohshin Aziz, it was his personal opinion this would make both airlines more cost-efficient to operate. “This is my firm view,” he said.

Speaking at an Invest Asia 2019 presentation, he said this would first need a change in mentality of the people representing the airlines in their respective countries.

“A merger between them will see a lot of improvements in terms of scheduling. Besides, relocation of assets can also be optimised. If the full service carriers can move away from this mentality, it will be very good for the business,” he declared.

It should be pointed out, however, that his company, Maybank Kim Eng, did clarify in a note that the view(s) expressed by the analyst did not represent the company position.

Nevertheless, tongues were sent wagging and the June announcement by the two carriers simply intensified the speculation. Their joint statement said that enhanced ties could include “a significant expansion” of codeshare flights beyond Singapore-Malaysia routes as well as enhancements on the frequent flyer program front.

Other potential co-operation could include cargo as well as maintenance, repair and overhaul (MRO) services, all subject to regulatory approval of course. The co-operation will also include SIA’s low-cost units SilkAir (eventually to be merged into SIA) and Scoot, as well as Malaysia Airlines budget Firefly.

SIA chief executive Goh Choo Phong says the two airlines operate in a region with a rapidly growing air transport market, presenting significant growth opportunities for both carriers. “Both airlines have extensive operations within ASEAN as well as large networks that cover many other parts of the world. We are proud to announce this MOU to expand the scope of our co-operation, increase global connectivity for Malaysia and Singapore, and enhance our service offerings for our customers.”

Was there a hint to the future, however, in Capt Izham’s comment? “Malaysia Airlines has always historically had strong commercial and cultural links with Singapore Airlines. My team and I are extremely pleased to be able to build on that close relationship even further, this time across many areas of both airlines’ ecosystems.”

Actually, historically, they have not always had the strongest of ties and there have been spats between the two countries (over airspace for example, as flights approaching Singapore’s Changi airport from the north have to fly through Malaysian airspace).

Whatever the future holds, intensified co-operation there will be. As for the very thought of a full merger? Given national pride, patriotism and the like, serious observers doubt very much it is on the cards.

‘My team and I are extremely pleased to be able to build on that close relationship even further’
CAPTAIN IZHAM ISMAIL