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Firefly in a fix

firefly-atr72-future-is-up-szb

The (uncertain) future is up? A firefly ATR72 sits on the tarmac at Subang Airport. pic/shukor yusof

When you name an airline after an insect, you had better made sure of its relevance to aviation. Fireflies, for example, live only a few weeks, just long enough to find mates and reproduce.

In retrospect, whoever decided to name an airline “Firefly” either: (i) never fully understood this loveable lightning bugs, or (ii) never quite see its connection to aviation (there is none).

Malaysia’s discount carrier Firefly was launched on April 3, 2007. It is a unit of Malaysia Airlines Berhad (MAB) and its raison d’etre was ostensibly to serve domestic towns within peninsular Malaysia as well as connect the main Malaysian cities to key neighbouring centres such as Singapore’s Changi, Medan in Northern Sumatra and Phuket in Southern Thailand.

On December 30, 2016 Malaysian newspaper NST reported that Firefly was going through a restructuring “due to the weak economic environment and overcapacity at Sultan Abdul Aziz Shah Airport”, also known as Subang Airport (SZB).

This doesn’t surprise us as we had already raised the red flag in early October over the problems facing Firefly. Aside from overcapacity, which has been attributed for the restructuring, there are several other factors that, in our view, have contributed to Firefly’s dismal performance (losing money in the past four years).

While airlines losing money is not uncommon, an airline not making money in 2015-16 – when oil prices were low and passenger numbers were high – doesn’t quite make sense.

So what ails Firefly, and can the problems be solved, soon?

Firefly’s woes are mostly inter-connected and are largely financial, political and technical, not necessarily in that order. More importantly, if Firefly is to be successfully restructured (if being the operative word), then it would necessitate several critical changes. One can’t make an omelette without breaking eggs…

Among the issues that need to be considered and act upon include the assets (in this case the ATR72-500/600 aircraft) as well as applying the best strategy for Firefly (and Subang Airport).

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Firefly ATR72s at Subang Airport. pic/shukor yusof

People familiar with Firefly’s financial health say the airline’s bottomline is in quite bad shape, and that’s putting it mildly. Firefly is dependent mostly on one segment – SZB to SIN – so the decision by Singapore to move turboprop flights to Seletar Airport (from Changi) in 2018 will undoubtedly hurt Firefly.

At present Singapore makes up almost all of Firefly’s international capacity. The discount carrier is key to its parent airline (Malaysia Airlines) but is facing intense pressure from Malindo – the joint venture carrier between Lion Air and Malaysia’s NADI.

While this restructuring will improve Firefly’s load factors in 2017, it is unclear if it will lead to better yields, unless drastic, structural moves are made. Hence, Firefly will remain in a precarious position in the near term.

Both Firefly and Subang Airport present such a wonderful opportunity for Malaysia to demonstrate its ability to further develop and expand its aviation sector but this requires political willingness and ultimately, the knowledge to create and innovate…

And on that note, we wish all our friends a joyous and prosperous 2017!

endau-seasons-greetings-2016

 

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