‘You can dislike me and you can paint me as the bad guy but you cannot ignore what is happening around the world.’
– AirAsia CEO Tony Fernandes, 2019
Oh, the satisfaction of being able to say, “I told you so!” MYAirline, which made a flashy debut last December, proudly parading with its ninth Airbus A320 and boasting about its two million passengers, now finds itself in a difficult situation.
Anyone with a bit of common sense could have predicted this. It’s what happens in industries where profit margins are as thin as a supermodel’s waist, like the aviation sector’s laughable 1.2 percent. Even if people started flying as if there were no tomorrow, it wouldn’t guarantee success for every airline.
I’ve always said that the Malaysian domestic market isn’t a case of “the more, the merrier”. Quite the opposite, actually! If every aspiring entrepreneur thought they could make a quick buck by whisking us through the skies, they would soon find their dreams grounded. Need proof? Just look at the short-lived Rayani Air.
Let’s face it, it’s no secret that giants like Malaysia Airlines (MAS) and AirAsia (AA) have been dominating the market for a long time. Whatever MYAirline thinks it’s bringing to the table, the big players have already had it for breakfast. And with Batik Air Malaysia (BAM) entering the scene, along with Firefly lurking in the background, it’s abundantly clear that there’s hardly any room left in these skies.
I remember making a cheeky remark the other day about MYAirline’s strategy to capitalise on AirAsia’s rumoured misstep. It’s like trying to snatch a fish from a limping cat. AirAsia, despite its setbacks, still holds half of the market share – a solid 50 per cent. Just think about that. It’s not just any ordinary David and Goliath story. In this version, Goliath is armed with a battalion of economists, statisticians, route development specialists, and a public relations brigade that David wouldn’t dare mess with.
So, what did our resilient AirAsia do? It slashed fares, filled up their planes, and cleverly led MYAirline on a wild goose chase. The largest airline in the country, with the most extensive fleet and destinations, even expanded into territories so obscure that even a seasoned traveller would scratch his/her head and consult Google Maps – places that even MAS wouldn’t dare venture into.
Recently, some wide-eyed investors were puzzled when I mentioned that MYAirline’s rapid growth could be its downfall. You see, there’s a fine line between rapid expansion and sustainable growth. MYAirline’s strategy? Borrow, spend, and hope for the best. It’s a desperate move if you ask me. It completely missed the basic economic principle: price wars, while exciting, usually leave everyone bruised, especially the newcomers.
Some of my investment banker friends pondered the idea of a shareholding shift to improve MYAirline’s credit standing. I, of course, strongly disagreed. Let’s not fool ourselves, alright? In a market of 33 million people, when you have heavyweights like MAS, Firefly, AA, AirAsia X, and BAM, what’s left for the newcomers?
For those who are crunching the numbers, consider this: aircraft leases and fuel costs are rising, both conveniently priced in US dollars. Combine that with lukewarm market demand and MYAirline’s confusing frequency cutbacks (despite having more planes), and you have a perfect storm. Add in post-pandemic banks with tighter lending policies than a duck’s behind, along with MYAirline’s daily cash drain of RM370-380 million, and it’s hard to ignore those warning signs waving frantically.
Now, MYAirline had big dreams. Twenty aircraft by the end of the year. But with the A320 lease rate at a staggering RM1 million per month, once again, the math doesn’t look good. Their recent balance sheet? A loss of RM12.51 million in FY2022, and remember, it only started last December. At this rate of burning through cash, the airline might want to reconsider its plans for a New Year’s celebration.
Let’s not be overly dramatic. If MYAirline goes under, the sky won’t come crashing down. Between the four major players – MAS, AA, BAM, and MYAirline – there are 280 planes. The absence of MYAirline’s nine planes won’t be sorely missed. As for other newcomers like SKS Airways, only time will tell. But if they’ve been paying attention, they would know what pitfalls to avoid.
The entry of MYAirline is like a new carrier starting flights from Ireland to London, hoping to compete against the behemoth and highly competitive Ryanair (and Aer Lingus). Even easyJet, which attempted that years ago from London Gatwick to Cork, Knock, and Shannon, received a beating and quickly retreated.
It serves as a reminder of why many new airlines focus on underserved routes. That’s what innovative carriers do. They identify niche markets with limited competition and cater to specific customer needs. But MYAirline’s attempt to challenge the established players head-on was a risky move, to say the least.
So, here we are, witnessing MYAirline’s struggle for survival. Will it manage to turn things around? It’s hard to say. The aviation industry is notoriously unforgiving, especially for newcomers without a solid foundation and a unique value proposition. But hey, stranger things have happened, and miracles do occur. Maybe MYAirline will surprise us all and find a way to soar in the skies. Only time will tell.
I sincerely hope that MYAirline won’t be like Icarus in Greek mythological story. His father, Daedalus, a skilled craftsman and inventor, created wings made of feathers and wax for them to escape from the island of Crete. Daedalus warned Icarus not to fly too high as the heat of the sun would melt the wax and cause the wings to fail. However, Icarus ignored his father’s advice and flew too close to the sun. His wings melted and he fell into the sea and drowned.
The views expressed here are those of the writer and do not necessarily represent the views of the New Sarawak Tribune.
