Malaysia Airlines to cut costs with Emirates deal

A Boeing 747-400 9M-MPD of Malaysia Airlines in the special “hibiscus” livery. Source: Wikipedia

Loss-making carrier Malaysia Airlines, yet to recover from two disasters last year, is restructuring with a partnership with Emirates to further streamline operations.

The code-share agreement will see Malaysia Airlines double the destinations it can offer and allow it to abandon loss-making European destinations.

Christoph Mueller, Malaysia Airlines’ chief executive, who joined seven months ago from Ireland’s Aer Lingus, has made several moves to transform profits and image of the flag carrier.

Mueller’s three-year plan hopes to break even by 2018 by refocusing on emerging markets in Asia while cutting jobs and routes. He has already axed 7,000 jobs, reducing staff numbers to 13,000.

The new partnership will stop Malaysia Airlines’ daily services to Paris and Amsterdam by January, with London the only European destination it will fly directly to.

Mueller said: “We’re trying to reduce our partnership arrangements to those that make sense. We will now be more selective than in the past.

“Everybody has reduced flying but still the remaining services are loss-making,” he said.

“People will now buy tickets off Malaysia Airlines to reach these final destinations so we will take back market share in terms of ticket sales.”

In a similar move, Australia’s Qantas in 2012 teamed up with Emirates to cut losses in controversial deal.

Through the deal, Malaysia Airlines will gain daily access to 38 European destinations, and twice daily flights to cities like Rome, Frankfurt, Munich and Barcelona. The troubled airline will also expand services further into the Americas and western Asia, Africa and the Indian Ocean from February.

Mueller is targeting developing Asian markets rather than more competitive European and Australian routes.

Malaysia Airlines has already cut routes to Frankfurt, Istanbul and Brisbane.

It has suffered losses since 2010 and has been in decline since the growth of budget rival AirAsia over the last 10 years.

Last year, Khazanah, Malaysia’s sovereign wealth fund and largest shareholder, took the company private by buying out minority investors. It is recapitalising the airline by investing up to US$1.4 billion on a phased basis.

Mueller, who was credited with turning Aer Lingus around, was hired at the same time.

The airline is still reeling after Flight MH370, carrying 239 passengers and crew, disappeared in March last year. In July 2014, Malaysia Airlines Flight MH17 was shot down over rebel-held territory in eastern Ukraine with all 298 on board were killed.

He now said he aimed to offer flat business class seats and wifi on board.

“We will only take those assets that are commercially viable for us. Aircraft we don’t need we will leave behind for the administrator to dispose of,” Mueller said.

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