00:00All right, moving next to the next discussion where AirAsia has long been the backbone of Malaysia's domestic and regional
00:07connectivity.
00:08But, you know, the rising fuel prices, mounting costs, pressures and concerns over financial sustainability have reunited question about the
00:17resilience of the country's aviation sector.
00:20With AirAsia accounting for a substantial share of domestic seat capacity, any prolonged reduction in operation could have implication not
00:29only for passengers, but also for tourism, trade and economic activity nationwide.
00:34And as policymakers prepare for Project 2027 upcoming month, attention is increasingly turning to Malaysia's aviation contingency planning.
00:43And if a major carrier faces operational constraints, can other airlines such as Malaysia Airlines and Bartek Air step in
00:51quickly enough to maintain connectivity and for sure to keep fares affordable?
00:57More importantly, does Malaysia have a clear strategy to safeguard critical air links and ensure the sector remains resilient in
01:05the face of future stocks?
01:07We are already online with Mohsin Aziz, the aviation analyst, together today.
01:11Okay, online. Hello, Mohsin, how are you?
01:16I'm good, thank you. Welcome to everybody.
01:19Yes, Mohsin, we're straightforward to the discussion where AirAsia is facing mounting pressures from elevated fuel prices, rising operating costs
01:27and weaker investor confidence, with the share price sliding to a four-year low.
01:33And Mohsin, is the market signaling concern about Asia balance sheet and profitability, or is there growing fear that Malaysia's
01:40low-cost aviation model is becoming increasingly vulnerable to external shocks at this moment?
01:48The big picture is, it has been a very challenging period for aviation airlines globally, because of the onset of
01:58the war between America, Israel against Iran, closure of all the ramblings in the Middle East,
02:07have caused the fuel price, jet fuel in particular, close to about $200 per barrel.
02:17And this is a record.
02:20Even during the height of global financial crisis, it's never been this high.
02:24So, it's safe to say, from an operating cost perspective, it's never been this high.
02:32And that's part of the reason why airlines are suffering.
02:37Now, it's disproportionate.
02:40Some airlines are suffering more than others.
02:43And part of the reason is, it depends on where your clientele is.
02:48AirAsia is very focused on low costs.
02:52So, their fares are low and their costs are low.
02:58But how much fuel you use is kind of what we call uniform against all the other airlines.
03:06Just like your car.
03:08If you have the same model car driving from point A to point B and driving in a similar manner,
03:15you will use similar amount of fuel.
03:18So, that applies to AirAsia.
03:20And as a proportion of fuel costs, because all the other costs are very low,
03:26the fuel is manifesting as the biggest cost.
03:30And that's why they are under far greater pressure than all the other airlines in the country right now.
03:37So, it's very important.
03:39We don't deny that.
03:41Moshe, speaking of that, where we see AirAsia account for a significant portion of Malaysia's domestic aviation capacity.
03:48So, the question here is, if the airline is forced to rationalise roads,
03:53reduce frequencies or slow expansion plans to manage costs,
03:57how exposed is the country to a capacity shortfall?
04:00And realistically, can Malaysia Aviation Group and Bata Air, as I mentioned at the opening,
04:05quickly absorb the gap without costing the highest fare and reduce the most important thing,
04:11there is connectivity.
04:15Well, all is governed by supply and demand.
04:19And given the fact that AirAsia contributes around 55% to 60% market share of the domestic market,
04:28any substantial curtailment of capacity by AirAsia will be felt by the domestic aviation industry.
04:39Now, even a 1%, 2% deficit will give the other airlines all what they need to raise fares substantially.
04:52So, the key word here is, it's very difficult, near impossible, for the other two airlines,
05:00or maybe three, because there's AirBorneo now, to be able to absorb any shortfall in a swift way.
05:09Because airlines, you need the aircraft, you need the pilots, you need the cabin crew.
05:16All are licensed, by the way.
05:18You just can't pull one person out to do the job.
05:22It's not that easy.
05:24It's very highly licensed.
05:25So, we are going to talk about a period of disruption.
05:29Because trying to absorb new capacity, you have to plan for it.
05:35And we're talking about planning at least two months ahead, or three, even further.
05:40If the magnitude is bigger, you even have to talk about procuring aircraft.
05:45And in the current climate, aircrafts are very hard to get by,
05:50because everybody's competing for it globally.
05:52So, it's not easy.
05:56It's going to be very challenging.
05:58And I think, from an operational point of view, if everybody's rational,
06:04it's better to do a plan, rearrangement of capacity,
06:13or the word that you use, rationalization.
06:16If you're going to try to do a market free for all,
06:20under the current situation, under the very, very high expensive fuel prices,
06:26it's not going to be very easy.
06:28In fact, it's going to be very difficult.
06:30Yeah, most in plan is a crucial word to use as of this discussion this morning.
06:37So, one concern that we have to look forward is that domestic connectivity is not just commercial issue.
06:43Many routes that serving Sabah, Sarawak, as you mentioned,
06:46and secondary cities are economic lifeline.
06:49And if, for instance, Asia cuts capacity because margins become unsustainable.
06:55So, the question, the big question mark here,
06:59does Malaysia currently have a contingency framework
07:02to ensure critical domestic routes remain operational,
07:06and most importantly, affordable?
07:10I've been in the aviation industry quite a long time,
07:14and I'm quite familiar with Malaysia.
07:18There are always contingency plans,
07:20but whether it's sufficient for the magnitude of things that will happen,
07:25it's always, you know, when you go through the crisis,
07:29then only you know.
07:30And even, to be fair, right now,
07:34we don't really know the situation of AirAsia.
07:38Not much is mentioned.
07:40They're still operating.
07:41They're still running.
07:43They do have financial difficulties,
07:46as the P&L have shown.
07:49But I think beyond that,
07:52they've been through these challenges before,
07:56many times.
07:57We're talking about tsunami back in the early days,
08:02global financial crisis,
08:04European financial crisis,
08:07MH370, QZ.
08:09So, crisis is part and parcel of airlines.
08:14So, maybe we're getting ahead of ourselves,
08:18the kind of difficulty that AirAsia is facing right now.
08:21But knowing them,
08:23with over 20,
08:25I think close to 25 years of experience right now,
08:29they will have the dexterity
08:31to focus on
08:33where is more important than the others.
08:37Certainly, I think
08:40non-critical international routes,
08:43which are leisure
08:44by nature,
08:46will probably be the first ones to be curtailed,
08:50stopped, or postponed.
08:51Now, Malaysian domestic services
08:55is very competitive,
08:57but it has been a steady bread and butter
09:00for all three airlines.
09:02And therefore,
09:03they will know how to rationalize capacity there.
09:06So, if anything,
09:08I think the foreign flights
09:10will be the first ones to be reduced.
09:13The domestic will be done
09:15in a more staggered
09:17and structured way.
09:18And so,
09:19with a ride,
09:19there are a ride,
09:19and you can get a ride.
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