Analysis: With flight cuts and disruptions upsetting passengers, how can Malaysia Aviation Group bounce back?

KUALA LUMPUR: Following the Malaysia Aviation Group’s (MAG) move to cut network capacity for three of its airlines that had led to flight cancellations, disgruntled customers continue to air their grievances over travel plans that were thrown into disarray. 

But analysts laud the firm’s decision to put safety over profitability even as they warn that MAG’s move highlights deep-rooted issues that need to be rectified quickly in order to regain customers’ confidence.  

Many affected customers had taken to social media platforms such as X - formerly known as Twitter - and Facebook to express their frustrations and disappointment especially towards Malaysia Airlines (MAS), the country’s national carrier. 

MAG had cut 20 per cent of its capacity for Malaysia Airlines as well as low-cost subsidiary Firefly and Amal - the Haj and Umrah pilgrimage arm of MAS - until December amid a shortage of planes, labour and parts. 

Among those affected by the capacity cuts is construction manager Anwar Hashim, who told CNA that he had booked tickets with Malaysia Airlines to celebrate his first wedding anniversary in Kuching, Sarawak.

Unfortunately, his departing flight to the Borneo state on Sep 14 was cancelled and the returning flight retimed. 

The 30-year-old’s queries on the status of his tickets on the airline’s social media pages went unanswered while calls to customer service hotlines were disconnected after being put on hold for 30 minutes.

Frustrated, Mr Anwar marched to the customer service centre in Kuala Lumpur to enquire about his flights.

 The flights on his original date of departure were full and he had to settle for a night flight the day after.  

“Delaying and retiming a day may be acceptable to a certain extent, but when dates are moved without compensation, it impacts the travellers. Frequent fliers would be down, and move to another airline after years of loyalty, such as myself, who's a frequent flyer on Malaysia Airlines,” he told CNA.

Meanwhile, others continue to vex their frustrations on the airline’s social media pages. 

“My flight on Sept 21 has been cancelled, and I am yet to receive an update regarding the new flight schedule. I have been trying to contact you via X, online chat and feedback form to no avail. Your call centre has not picked up my calls either. What am I supposed to do?,” read a post on X by a disgruntled customer on Wednesday (Sep 4) to Malaysia Airlines.

Another X user complained that while their departing flight from Malaysia had been cancelled, the return flight was not. 

“I've no idea if my refund request is in progress and whether it covers both flights or only departure. Your call centre is also not picking up my call. What should I do?,” read the post. 

Separately, the president of a travel industry body has called on Malaysia Airlines to do more to help its affected customers.

“It would help if MAS helped sort out the customers who were directly affected,” the Malaysian Association of Tour and Travel Agents president Nigel Wong told CNA.

He added that the move has caused inconvenience to travellers, though there has yet to be a significantly overt effect on the tourism industry.

In announcing its reduced flight capacity, MAG on Aug 29 said the move was to ensure safe and reliable operations.

“While it is a difficult decision, our focus is to prioritise customers first, ensuring we can deliver credible flight schedules and ensure the best possible customer experience moving forward.

“The reduced network involves 20 per cent of our capacity, comprising Malaysia Airlines, Firefly and Amal’s routes in domestic Malaysia, ASEAN, North Asia, Australia, New Zealand, Greater China, South Asia and the Middle East,” its statement read. 

This comes on the back of at least four incidents in August, including a Malaysia Airlines flight to Shanghai that was forced to turn back to Kuala Lumpur on Aug 20 due to a suspected cabin pressure issue. 

And just earlier this week, a Seoul-bound Malaysia Airlines flight was forced to return to Kuala Lumpur International Airport due to similar issues, local media reported. 

An aviation analyst predicted that around a million passengers are expected to be affected by Malaysia Airlines' decision to reduce its network between now and December 2024.

Prime Minister Anwar Ibrahim, who is also the chairman of Malaysian state fund Khazanah Nasional that owns MAG, said that while efforts to revive Malaysia Airlines have commenced, it will take time. 

“I want to tell Khazanah and Malaysia Airlines, that we, as a government, will remain completely committed to ensure the success of the airline because it is our national airline and it has to come back to perform,” he said during an event commemorating Khazanah’s 30th year anniversary celebrations on Sep 3.

Malaysian Airlines, long beset by high costs and a bloated workforce, struggled following the disappearance of its MH370 flight and the downing of MH17 over Ukraine, both in 2014.

Khazanah Nasional then took MAG private in a rescue bid that year.

Malaysia Airlines made significant strides in the 2024 Skytrax Awards, climbing eight places from a year before to rank as the 39th best airline in the world.

The improvement in ranking came amid an RM766 million (US$177 million) net profit posted by MAG in 2023, its first annual profit since the group was formed following the privatisation of Malaysia Airlines.

But MAG’s upward trajectory has hit a snag, with the Civil Aviation Authority of Malaysia (CAAM) reducing the validity of Malaysia Airlines’ air operator certificate (AOC) from three years to one year.

An AOC is a certificate authorising an operator to carry out specified commercial air transport operations. 

Transport Minister Anthony Loke said on Aug 28 that CAAM made the decision to ensure that the airline complies with the mitigation plan that was announced by MAG to address flight disruption issues that had previously been identified during an audit in June. 

RIGHT DECISION MADE, SAY ANALYSTS 

Aviation analysts said that the decision taken by MAG to reduce their capacity was the correct one, with Endau Analytics’ Shukor Yusof stressing that the move was about safety and nothing else.  

He said that while there may have been other carriers that seemingly cut corners and put profit above people, Malaysia Airlines “was not in that category”.

“It is absolutely 100 per cent the right decision. When you have these issues, you cannot take the risk. They know that it would hurt them, and they would lose money, but it was something that needed to be done,” Mr Shukor told CNA, adding that back-of-the-envelope calculations suggest that this could amount in losses in the “hundreds of millions (of) ringgit”. 

Independent aviation analyst Brendan Sobie echoed Mr Shukor’s view. 

“This is absolutely the right move for Malaysia Airlines to put safety above everything else including profitability,” he said in a Linkedin post on Aug 26, adding that beyond monetary losses, the group may suffer from the impact of possible reputational damage. 

According to Aeroroutes - a website dedicated to providing comprehensive and up-to-date information on global airline schedule and network changes - domestic one-way flights from Kuala Lumpur have experienced a significant decline, with a 29.5 per cent reduction in flights and a 29.8 per cent reduction in capacity on Sep 1 compared to Aug 18.

Meanwhile, for international one-way flights from Kuala Lumpur, there has been a slight decrease of 8 per cent in flights and 10.2 per cent in capacity during the same time frame.

WHAT LED TO THIS SITUATION? 

MAG said in its press statement on Aug 29 that its decision to cut capacity was made proactively in response to challenges such as supply chain disruptions, global shortages of spare parts, and delays in new aircraft deliveries.

It said that global shortages of resources have led to delays in the production of spare parts by aircraft and parts manufacturers and this has resulted in longer turnaround times for engine overhauls and repairs, affecting MAG's fleet.

It also added the entry of new aviation Maintenance, Repair, and Overhaul (MRO) players into the Malaysian market has led to the attrition of skilled workforce but that it was working to address this by collaborating with partners and improving remuneration packages.

Mr Loke - the transport minister - said last week that 63 of the 411 skilled workers at the Malaysia Airlines’ engineering department had left the company since January of this year.

Analysts acknowledged the issues faced by the firm but noted that some of these problems could have been mitigated earlier. 

Mr Sobie - the aviation expert - said that all airlines have faced similar manpower, supply chain, aircraft part shortage and new aircraft delivery issues.

“How airlines have responded and managed these challenges is where there are differences with MAG being impacted more than virtually anyone, leading to drastic measures,” he wrote on LinkedIn.

He also pointed out that Malaysia Airlines’ on time performance (OTP) - which is the percentage of flights that depart within 15 minutes of their scheduled time of departure - have been relatively poor for the past two years. 

In the last three months the carrier’s OTP for international flights from the Kuala Lumpur International Airport (KLIA) has declined from 69.1 per cent in May to 65.5 percent and 56.1 per cent in the subsequent months, according to the Malaysian Aviation Commission (Mavcom).     

“To be fair the AirAsia Malaysia and Batik Air Malaysia OTP also has been much lower than what consumers deserve in recent months. A lack of spares and aircraft on ground is a common problem in Malaysia. Capacity discipline is the right approach not only commercially but operationally,” Mr Sobie wrote. 

Meanwhile, Mr Shukor said a combination of factors as well as poor planning compounded by stoppages during the COVID-19 pandemic led to the situation Malaysian Airlines finds itself in today.  

“The combination of poor planning and disruptions caused by the pandemic, including production stoppages and logistical challenges, has created significant supply chain issues that are now becoming apparent,” he said, adding that airlines such as Cathay Pacific were also facing similar issues.  

The Hong Kong carrier has cancelled flights this week and had started inspecting all its Airbus A350 jets after the in-flight failure of an engine component.

Mr Shukor also warned that legacy issues that go back decades are creeping up.

"In hindsight, some of the challenges could have been mitigated, similar to changing car oil at the recommended intervals. Despite the best intentions, MAG faced a confluence of factors that impacted its operations more than other airlines,” he said.

Mr Anwar during his speech on Sep 3 had alluded that much of the ongoing issues faced by the firm came from political decisions made to benefit certain cronies, without specifying who.

“I must remind (you) that sometimes political decisions that are not transparent, that favours one or two cronies, damage a company that we were once proud of.

“And because of these mistakes the effects are felt by us until today. We can’t erase this factual history,” he said.

WHAT ARE THE STEPS FORWARD? 

Experts believe that while MAG can recover from its operational challenges in the coming months, more must be done to ensure its sustainability in the long-run. 

The head of the Universiti Kuala Lumpur Aviation Technology Institute search and rescue department Professor Mohd Harridon Mohamed Suffian told CNA that MAG should develop a sophisticated mathematical model to accurately predict the failure of aircraft components in order to prevent massive service disruptions. 

“This would enable predictive maintenance, ensuring that the airline has a system in place to anticipate and address potential issues.

“By thoroughly exploring and implementing such a model, MAG can effectively optimise its maintenance practices," Prof Harridon said, adding that having a readily available supply of spare parts is essential for efficient maintenance processes and timely replacement of faulty components.

He also stressed that MAG should consider all factors and opinions - both technical and non-technical - from individuals at all levels.

“Combining these perspectives will guide (the firm) in making informed decisions. For Malaysia, national pride is paramount, and every opinion matters," he said.

Meanwhile, Mr Sobie said that there were bigger and longer-term questions that MAG needed to answer.    

“Will the deep-rooted issues that have plagued Malaysia Airlines for decades be resolved? Losing skilled workers to other MROs and manpower efficiency issues are not new. MAG may need another restructuring.

“I think they need to step back and have another reset. Not financial, because they are in pretty good financial shape this time but more of a reset from a manpower perspective, from an operational perspective and potentially from a commercial and strategic perspective.” he wrote on LinkedIn. 

Mr Shukor meanwhile believed that the faults and flaws that have wormed its way into MAG have to be identified and then fixed, adding that the Malaysian government has a duty to ensure its sustainability.

And while financial bailouts were once necessary, they are no longer required due to the airline's strong balance sheet.

“If MAG fails, Malaysia fails because they are a microcosm of Malaysia and a country is only as successful as its national airline,” he said.