MASkargo set to spread a new set of wings

Having come through not one, but two turbulent periods - first the restructuring and rationalisation of the passenger division of Malaysia Airlines which heavily impacted available belly capacity and secondly the economic turmoil of last year, MASkargo is deep in planning for a reinvention of sorts. By Donald Urquhart.

“We are taking a bold step in terms of owning our own fleet and we’ve just confirmed the purchase of four A330 freighters,” MASkargo managing director, Shahari Sulaiman said. The first aircraft will be delivered in September 2011, the second one in November, third in January 2012 and the fourth following in April. “With this aircraft it allows us to reinvent our network and to have a very strong presence especially with intra-Asia shipments. It will enable us to connect the main trade lanes within Asia and that means China to India. It also gives us the opportunity to explore the African market with this aircraft.” “I think Africa will definitely be the market for the future. We don’t know exactly when it will open up and when it will be accessible, but definitely in the future, especially with a lot of investment from China into Africa, there will be a lot of movement between the two countries. It’s on our radar, but we haven’t decided how we are going to do or when we are going to do it,” he added. At moment MASkargo’s only capacity into Africa is into South Africa with passenger bellies. “Our strategy is basically to put the right aircraft into the right market,” Sulaiman says and this could mean for instance replacing two weekly flights with the B747 into a particular market with two A330 flights, “so we can spread it over the week”. “We feel this aircraft will allow us to have a much better product and we feel this aircraft will be a nice fit with the development of all the Low Cost Carriers (LCCs) within Asia. A lot of flights will in a matter of time be down-graded to narrow body aircraft so this will help position us in a much better position for palletised cargo.” He said there has not been any decision on whether to keep or sell the two B747-400s and noted that the A330F was a good aircraft with multiple stops, but was not suitable for direct long haul into Europe. “From next year have the opportunity to reinvent ourselves and reposition ourselves in the market and we’re working very hard to maintain our brand and product at the same time,” Sulaiman said. Another key development which will have a beneficial impact on the cargo side, is an order for 15 A330 passenger aircraft. “This is an encouraging development because over the last few years there has been a contraction on belly side and with this order there will be some growth next year in belly capacity so that’s a good development for cargo.” He did note that there will be some belly capacity taken out as some of the passenger B747s will be retired. He estimates that the ratio of freighter to belly capacity, which during the crisis dipped as low as 35/65 respectively, has now returned to about 50/50 where it will more or less remain. Other investments While the cargo department is busy working on its network reinvention, plans are well underway to upgrade some its domestic ground handling capabilities. Going forward MASkargo plans on continuing its investments in its ground handling operations which it undertakes at four airports in Malaysia. This includes a fair investment in Penang to upgrade the facilities there, with the bulk of the investment going into its hub at Kuala Lumpur International Airport (KLIA). The upgrading of Advanced Cargo Centre (ACC) will see its annual capacity rise from the current 650,000 tonnes a year to one million tonnes, and will also see a major upgrade of its IT systems as well. “It will increase capacity, address obsolescence issues because it’s close to 12 years old and it allows us to also improve our processes and reduce throughput time.” The contract is expected to be awarded by end of 2010 with physical construction starting after the second quarter of 2011, with the US$30 million project to span about three years. Business as usual In the meantime MASkargo will focus on its existing freighter services to Shanghai, Hong Kong, Narita, Sydney and Melbourne, Jakarta, Dubai, Tashkent, Amsterdam, Frankfurt and Basel. Amsterdam will remain a key hub for MASkargo in the long term as “we have established ourselves in this market for many years and our load factors are quite good here, about 75 per cent,” added Sulaiman. The cargo division of Malaysia Airlines has also undertaken its first new major network expansion in some time following a change in ACMI provider from Air Atlantic Icelandic to Southern Air earlier this year. With its fleet of five B747 Classic freighters wet-leased from Southern and two owned B747-400 freighters, MASkargo recently started twice weekly flights between its Amsterdam hub and New York JFK. “With additional aircraft we were able to expand the network and this is the first destination,” says Sulaiman. Compared to last year he says MASkargo increased the capacity on its freighters by more than 55 per cent, thanks to the new wet lease agreement. The lure of the pharmaceutical trade that wooed many a carrier into the highly specialised perishables trade has caught the attention of MASkargo, but no decision has been made yet according to Sulaiman. “We’re exploring, but haven’t made a commitment yet as it’s a very specialised field – but we do have a team looking into it.” “In terms of livestock we’ve managed to develop into quite a reputable carrier,” he says pointing to the more than 80 per cent market share out of Australia with mainly cattle and goats with substantial charters into Turkey, China, Taiwan and some charters from Europe into the CIS. The bulk of the livestock goes to Malaysia via the carrier’s KLIA hub.The Australian trade has been doing well and Sulaiman says with the strong Aussie dollar – basically on par with the US – he expects a jump in import shipment into Australia Market recovery ” In terms of market recovery, we have seen good volumes for most of this year, however I think the ‘super good’days are over and things are leveling out a bit now,” he said. While normally October, November and December is the peak period, this year is relatively quiet, particularly compared to last year when the peak was “extraordinary” because of the restocking demand, Sulaiman notes. “This year people are a bit more prepared so already we are starting to see negative growth towards end of the fourth quarter – not that it’s a bad thing, the only thing is the volume has stagnated but not come down.” In terms of revenue for the first three quarters this year, MASkargo has seen an increase of more than 65 per cent with load factors improving more than 11 per cent to about 72 -75 per cent and yields have improved by about 21 per cent, but this is in comparison to the crisis environment, Sulaiman highlights. “But I think the important thing is we managed to take advantage and ride the wave when things improved. So in terms of performance we are having, maybe a ‘stellar’year would the way to put it, in line with other carriers, so we’re not doing anything that much different from others.” Charter revenue has been an area of healthy growth for MASkargo with more than 50 per cent growth, in large part facilitated by the growing fleet. “It’s not steady, but at least when you take on a charter you know how much you are going to make – that’s very important these days!” Sulaiman says with a laugh. Overall looking ahead he reckons carriers are managing their capacity a lot better now as they they’ve learned a lot from the crisis. “It was something that took some people time to realise, that sometimes it’s better to keep aircraft on ground than to fly.”