Can Malaysia Airlines survive Mueller’s moves, analysts ask

Malaysia Airlines embarked on a rebranding exercise on September 1, 2015 with a focus on turning around the loss-making national carrier. – The Malaysian Insider file pic, March 7, 2016.Christoph Mueller, who took over a Malaysia Airlines reeling from the twin disasters of flight MH370 and MH17, has been credited with rescuing the state-owned airline but questions now arise as to whether his strategy will survive the region’s cut-throat competition.

The chief executive officer, appointed in May 2015, has slashed unprofitable routes and sacked 6,000 workers as part of restructuring efforts, which were expected to help Malaysia Airlines Bhd return to the black in 2018.

Analysts quoted by the Associated Press, however, said Mueller’s strategy was too focused on the short term.

Shrinking its routes made the airline vulnerable to fierce competition from budget carriers, such as AirAsia, Lion Air, Tigerair, Scoot and Jetstar, serving more destinations at a cheaper price.

“They have taken the easy way out,” Shukor Yusof, founder of aviation research firm Endau Analytics, was quoted as saying by AP.

Cutting routes to the bare bones were “the quickest way to eliminate cost, but long term, I don’t think it presents an opportunity to really strengthen or overhaul the fundamental issues of the company,” he added.

MAS dropped the Paris and Amsterdam routes in January, a month after it sealed a 90-city code share deal with Emirates.

The move allowed the carrier access to Europe without incurring “monumental losses”, Mueller said.

Mohshin Aziz, an aviation analyst at Maybank Kim Eng Securities, credits Mueller, a German and the first foreigner to lead the airline, with making tough changes necessary for its future survival.

Other moves include phasing out older Boeing 777s and fuel-guzzler Airbus A380s. MAS has ordered four A350s, Airbus’s latest and most advanced airliner.

But as the second anniversary of the disappearance of MH370 approaches tomorrow, travellers remain wary about the airline’s safety track record.

Traffic at the Kuala Lumpur International Airport main terminal, used by MAS and other full-service carriers, fell 9.2% last year, while traffic at klia2 rose 9.5%.

“The question that needs to be asked is does Malaysia need Malaysia Airlines now?” asked Shukor. “If Malaysia Airlines were to shut down tomorrow there won’t be many people who would feel the absence,” he told AP. – March 7, 2016.