This morning I was feeling sorry for Malaysia Airlines CEO Peter Bellew, see my earlier post. He’s in the papers again today and understandably bullish whilst reporting load figures for last year.
“We had 90% load factor in December 2016 and we are whacking Singapore Airlines (82.9%, Garuda (77.4%) and Cathay Pacific (85%). We are doing pretty good,” Bellew told the Business Times Malaysia as he did backflips around the office.
OK I made that last bit up but he’s obviously pleased as punch. So I thought I’d have a quick look at the industry to see how the carriers’ performance stacked up.
According to the International Air Transport Association (IATA) Air Passenger Market Analysis report, revenue per passenger kilometer (RPK) increased 6.3% in 2016, way above the 10 year average of 5.5%.
International passenger traffic rose 6.7% in 2016 compared to 2015. This in turn took the average load factor to a record full-year average high of 80.5%.
In Asia Pacific demand was even better with carriers seeing demand increase 8.3% over 2015, which was the second-fastest increase in the world. Average load factors are at 78.6%.
The good news for the industry has continued into January 2017 as the RPK rate rose 9.6% year on year and load factors above 80%. This should help Malaysia Airlines should continue on the path to profitability.
So Malaysia Airlines is carrying more passengers than competitors but we don’t know by how much they are undercutting those competitors because we don’t have their RPK figure.
Malaysia Airlines did report that average fares dropped 3% in 2016, despite a 5% increase in passengers in the last quarter. This would suggest then that those improved figures are coming at a cost. The key once those passengers have flown with Malaysia Airlines is whether or not they will fly again, once fares have increased.
It’s common knowledge that Malaysia Airlines has slashed it’s fares to grow market share. The problem is the brand and offering is a shadow of it’s former self so those flying the airline are getting little more than a LCC product.
Service may have improved but once fares go up, that may not be enough to hold off the competition.
Perhaps that’s when the Malaysia Airlines brand retention strategy will kick in. Probably built around the frequent flyer programme. I don’t see much happening in that area at the moment but I’m sure it’s only a matter of time.