Malaysia Airline CEO Shares his Concern over long-haul Traffic for Asian Carriers

In a recent interview given at the CAPA Airline Fleet and Finance Summit early March in 2017, Malaysia Airlines CEO Peter Bellew evocates the perspectives of Asian airlines, finding that “something is going very wrong in the Asian long haul market”. they are now to many aircraft in the market, according to Bellew. Here are siome extracts of the interview given to the Centre for Asia Pacific Aviation:

Since the end of 2016 Malaysia Airlines has been looking for additional widebody aircraft to meet short term needs. Mr Bellew said that the availability of aircraft, particularly A330s, has consistently increased over the past several months while lease rates have steadily come down in price. “The prices of second hand widebody aircraft are plummeting by the week at the moment”, he said.

In recent weeks Malaysia Airlines has been inundated with calls from airlines and leasing companies seeking to offload A330s at short notice. “I got a call on March 2 at 1am when I’m fast asleep, from an airline in distress”, Mr Bellew said. “A big airline with three A330s they want to shift in the next three weeks. We can’t actually take in all the offers at the moment.”

“Of course do contact us, but it is a bit crazy at the moment the number of aircraft. Something has gone very, very wrong in the long haul market – and a lot of people must be hiding the problems – because I’m getting calls from big airlines that on the outward seem to being doing OK but they are quietly trying to shed aircraft and staff and resources quite quickly. It’s quite interesting at the moment.”

Mr Bellew questions the sustainability of the order book in Southeast Asia. The AirAsia and Lion groups alone have over 900 aircraft on order, and Mr Bellew expects that 500 of these have been allocated to the Malaysian market.

“It’s breathtaking the number of orders”, Mr Bellew said. “I asked the manufacturers and one of the senior guys said to me: ‘Peter the way it is we are just offering great deals to pretty much everybody. We don’t know what’s going to happen. We don’t know who is going to be successful. So we sell planes to anyone that has got a pulse.’

“They are just backing them because they can’t be too sure.”

According to the CAPA Fleet Database, Southeast Asian airlines currently have more than 1,700 aircraft on order. More than 1,250 of these orders are from LCCs  or LCC groups. Southeast Asia currently accounts for 30% of global LCC orders – a disproportionate figure, given that Southeast Asia accounts for only 6% of the global fleet.

Malaysia Airlines obviously stands to benefit from plummeting lease rates and airlines desperate to shed excess aircraft. The airline has not yet completed any deals for additional widebody aircraft, despite searching for more than six months and receiving numerous proposals.

Malaysia Airlines has repeatedly increased the number of additional widebody aircraft it needs over the next two to three years (2 half 2017 through 2019) but has still not completed a deal for any aircraft. In the short term (by early 2018) it is now looking for six additional widebody aircraft. The Malaysian carrier has been considering a combination of second hand A330-300s and ordering new 787-9s or A330-900neos.

Mr Bellew believes that Malaysia Airlines’ fleet includes too many 737s and too few A330s. As a result, Malaysia Airlines is now forced to use 737-800s on popular flights to slot constrained airports where there is actually sufficient demand to upgauge to A330s.

“I just don’t have any seats left on many routes today and I need put to widebodies in”, Mr Bellew said. “It’s merely about serving the market as there’s massive overspill at the moment. We have a lot of great slots to Australia, India, Japan, Korea and Taiwan where there will never be any more slots ever again. And I’m stuck at the moment operating some of those with 737s. I need bigger planes. It’s kind of a no brainer.”