Endau Analytics

There are some things money can’t buy. For everything else, there’s Qatar Investment Authority.

QR 772LR GRU Nov 2015 - a

a qatar airways boeing 777-200lr. pic/shukor yusof


At HKD5,162,266,000 (USD662 million) or HKD12.35 per share, Qatar Airways felt the 378,188,000 shares of Cathay Pacific Airways it bought from Hong Kong-listed Kingboard Chemical Holdings were value for money.

Indeed they were, and the Qataris now own a 9.6% stake in one of Asia’s (if not the world’s) top carriers – for a song.

The Qataris are astute and smart investors, a lot smarter than their Gulf brethren at Etihad who, as part of ex-CEO James Hogan’s ill-thought “equity investment strategy”, bought into now bankrupt Air Berlin and perennially loss-making Alitalia.

Etihad also made other foolish equity investments in Air Serbia, Jet Airways and Air Seychelles.

What’s behind Qatar’s purchase then?

Akbar al-Baker, the airline’s often bellicose and brusque chief executive, is a very clever man with very deep pockets. Deeper in fact than Etihad and Emirates combined, some people in Doha tell us.

There is method to his madness. He sees opportunities in the face of adversities. Politically Qatar is facing a horrendous time from its neighbours, including Saudi Arabia and the UAE (where Emirates and Etihad are based), after the two countries and several others cut off diplomatic relations and imposed a blockade on June 5.

Almost five months on, Qatar and its flag carrier remain very much in business. Nobody has become destitute in that tiny peninsular. Dairy products and other foodstuff are airflown daily from Turkey and Iran.

More importantly, Qatar Airways continues to grow and ever hungry to buy new aircraft and new assets. It has some 200 planes in its fleet with almost 100 on order. The airline flies probably the world’s youngest fleet, with an average age of five years.


clever guy with deep pockets: qatar airways ceo akbar al-baker. pic/shukor yusof

For Qatar, buying into foreign airlines isn’t so much about return on investment (ROI), more about getting something intangible – influence. That’s what money buys: the ability to exert (soft) power and to go into places where the next phase of growth is located.

China is one of those places. And that is why HKD12.35 a share in Cathay Pacific was a bargain in al-Baker’s arithmetic. The share price is now hovering around HKD13, thanks to Qatar’s move. Expect to see the stock move up at least 5% to 10% by Christmas.

Al-Baker had tried to buy a 10% stake in US carrier American Airlines (AA) back in June, at the height of the blockade, but the Americans rebuffed him. AA’s boss then said he wasn’t particularly “excited about Qatar’s outreach” and found it “puzzling”.

Qatar already had a 10% stake in International Airlines Group (IAG), the holding company of British Airways, Aer Lingus, Iberia and Vueling, when it paid EUR444 million (USD515 million) for another 10% share in August 2016.

The purchase came right after the UK decided on Brexit and stock prices had tanked. The share is trading around GBp620. This acquisition gives Qatar access to the lucrative trans-Atlantic market.

The airline is also part owner of South America’s biggest carrier, the Latam Airlines Group, after buying a 10% stake in December 2016 for just over USD600 million.

As with IAG and Latam, Qatar’s investment in Cathay Pacific is partly to diversify its assets and get a piece of the action on mainland China, given that Air China is also a co-owner of Cathay Pacific with 30%. The Swire Group remains a majority shareholder with 45%.

This purchase of Cathay Pacific equity has to be seen beyond a mere investment in a world class carrier; it’s Qatar Inc, via sovereign wealth fund Qatar Investment Authority (QIA), making a carefully crafted move into the planet’s largest aviation market.

For those who feel this latest Qatari excursion is an alliance fraught with cultural conflicts that could lead to a complex cohabitation, fret not. Qatar is the world’s richest country, now with a direct link to Air China – flag carrier of what will soon be the globe’s largest economy.

As al-Baker will probably tell you – if he’s in a good mood – money can’t buy love, but it improves your bargaining position…




Does Malaysia need a national airline?

MAS 3 - MAS 777 Landing K61992

gone but not forgotten. a MAS B777-200ER about to land.

Malaysia Airlines (MAS) is once again in the centre of a maelstrom following the departure of Peter Bellew, its second expatriate chief executive in as many years.

The airline has had a chequered past, marked by persistent losses (over MYR20 billion or USD4.8 billion, in two decades), mismanagement and most recently the loss of over 500 lives on board two of its aircraft.

In view of the debate currently raging in Malaysia over the future of MAS, which unfortunately has spilled into the political arena, it is timely to ask if some countries actually need a national airline.

Consider this: Malaysia has injected billions into MAS since the late 1990s, buying aircraft (like the Airbus A380) that didn’t fit into its fleet and network, and serving many unprofitable destinations.

The airline’s sole shareholder, Khazanah Nasional, has dabbled in numerous turnaround plans for MAS, including the latest one costing taxpayers MYR6 billion. Embarrassingly MAS has seen nine CEOs come and go in less than 20 years.

It is evidently clear MAS has failed, and failed miserably.

At a time when low cost carriers are gaining more influence and Malaysia’s AirAsia growing larger, stronger and crucially making money domestically and internationally, what is MAS’ raison d’être?

Much has been argued about its role in serving Malaysia and promoting its interests and brand name globally, but at what price to its taxpayers and for how long?

Is there a case to continue using public money to support a carrier with such a dismal financial record? Why should MAS be treated differently from any other unprofitable companies?

Likewise, where’s the pride in having a national airline that consistently misuses and loses money? In Malaysia, AirAsia is already performing the role of a national carrier – it has a larger fleet and flies to more destinations.

The irony is, despite having Khazanah as its own ATM, MAS still needs cash and that’s the reason it’s now looking for a minority (foreign airline) shareholder.

Many national airlines have gone the way of the dodo, including Greece’s Olympic, Belgium’s Sabena and Ghana Airways. Even the wealthy Swiss have no flag carrier. Germany’s Lufthansa is now the owner of the flag carriers of Austria, Belgium and Switzerland.

Other European flag carriers are in trouble. Korean Air rescued CSA Czech Airlines in 2013 and Italy’s Alitalia is once again on the brink of bankruptcy.

While privatising airlines (as Khazanah has done with MAS) appears a logical move, many have failed or stagnated, such as Air Malawi, Air Jamaica, Air Botswana and Kenya Airways. Air India is also considering privatisation.

One airline privatisation success was British Airways in 1997, although the airline later became part of the International Airlines Group (IAG), which counts wealthy Qatar as one of its major shareholders.

Interestingly the United States, the world’s largest economy and the country with the most number of carriers, has no ‘national airline’. But then the US has seen the demise of some of the industry’s iconic names, including Pan American (PanAm) and Trans World Airlines (TWA).

* This opinion piece first appeared in the Singapore Business Times on October 24, 2017. Click here (for subscribers only)

The French Connection

Airbus Bombardier management

the four musketeers. l-r: pierre baudoin (bombardier chairman), tom enders (airbus president & ceo), alain bellemare (bombardier president & ceo), and fabrice bregier (airbus coo & president commercial aircraft). pic/airbus

Apart from AirAsia, at least two Southeast Asian carriers are believed to have expressed interest in Bombardier’s CSeries planes after Airbus announced it would take 50.01% control of the troubled programme on October 17.

It is understood informal talks have started. Although details are sketchy, the carriers are exploring acquiring between 20 and 30 planes. So far in Asia Pacific, only Korean Air has placed orders, for 10 CS300 aircraft.

In August this year AirAsia co-founder and CEO Tony Fernandes visited Mirabel in Montreal and said his company was keen on both the CS100 and CS300 variants.

In spite of Bombardier’s widely reported funding problems with the CSeries, the aircraft itself has been well received by airlines and those who have flown in it. Among the wow factors include generous seat layout, a very quiet cabin and low fuel burn (at least 30% less than an Airbus or Boeing narrowbody plane, according to Bombardier).

CSeries aircraft are currently in service with Swiss and Air Baltic. Both carriers said the planes have performed better than expected.

Malaysia appears to be a perfect launching pad for the CSeries in Southeast Asia. Other than AirAsia, the CSeries had also attracted interest from smaller startups.

In March 2015 Malaysia’s prime minister witnessed a signing ceremony between Flymojo and Bombardier for up to 40 regional jets. Unfortunately, the planned acquisition did not materialize because of financial issues as well as delays and uncertainty surrounding the CSeries programme.

Regional jets are perfect for Southeast Asia, given its geography and economic growth. The planes, typically between 70- and 160-seaters, offer certain airlines opportunities to operate in sectors that are currently either not served or underserved.

The CS100 is typically configured with 108 to 133 seats while the CS300 comes with 160 seats (in a single configuration) or 130 in a two-class configuration. Endau Analytics understands a couple of airlines are already revving up their interest following Bombardier’s tie-up with Airbus.

What the Airbus acquisition means

The dynamics behind this marriage of convenience are quite obvious for both parties. Airbus pays nothing for a 50.01% interest in C Series Aircraft Limited Partnership (CSALP) while Bombardier and Investissement Quebec (IQ) own some 31% and 19%, respectively.

Airbus clearly sees a demand for the CSeries, even at the expense of its own (not so popular) A318 and A319 models. It also opens up a new dimension for the European manufacturer. For example, there is a possibility of developing a middle of the market (MoM) plane that rival Boeing has been bullish on by stretching the CS300.

For Bombardier, having Airbus as a stakeholder lends not only credibility and better sales and marketing reach, but would critically overcome the 300% import levy imposed by the US after Delta bought 75 CSeries aircraft Boeing alleged at “absurdly low” prices.

Politically, too, the deal seems to be kosher. It ensures 1,000 jobs in Northern Ireland, where the CSeries wings are made, are safe. Airbus already has a factory in Alabama, where future CSeries production will be added, thus circumventing the US imposition of tariffs.

Could this arrangement have been achieved if John Leahy, Airbus’ acerbic American chief salesman, isn’t retiring at the end of 2017? After all he had dismissed the CSeries aircraft as a “cute little airplane.”

Look at the photo above. Check out the bonhomie between Airbus’ Fabrice Bregier and Bombardier’s Alain Bellemare – it isn’t just about broadening business between two aerospace companies – it’s about the bond between two Francophones.

All this leaves Boeing in a not so very nice spot and it should be worried. The pendulum has swung to Toulouse.

Will Boeing try to seduce Brazil’s Embraer – the world’s third biggest aircraft maker – into some sort of partnership? Embraer has a large footprint in the US. In 2012 both companies signed an accord to work together on many areas, including airplane “efficiency, safety and productivity.”

Embraer hasn’t said much, other than saying this latest development underscores big opportunities in the 100-150-seat market. The folks in São Paulo will have to come up with a clever game plan. Soon.


The greatest turnaround flop?

Bellew in Manila

read my lips: malaysia is the most wonderful country…

Ravi’s Banana Leaf Restaurant in Mont Kiara, located in a leafy, upmarket suburb in Kuala Lumpur, is about to bid farewell to a loyal customer.

Malaysia Airlines Berhad (MAB) CEO Peter Bellew has done a U-turn. He is leaving his job after just a year as boss of the beleaguered airline and is heading back to Ryanair and to Ireland, his homeland.

But what made Bellew’s departure intriguing was this: apparently his employer was unaware of it until news of his move was made official by Ryanair via the London Stock Exchange. To say the MAB board and stakeholder were left with red faces is an understatement.

MAB Bellew statement

Barely a month ago Bellew was at pains to convince the Malaysian media that he had no intention whatsoever of leaving MAB and Malaysia. He described Malaysia as “the most wonderful country…” and that he was “perfectly happy” as chief of the airline. Read here.

Maybe Ryanair CEO Michael O’Leary made Bellew a deal he can’t refuse. Maybe Bellew missed the Irish/UK rugby scene, and its affiliated attractions: having a pint or two of Guinness with mates after a hard fought game. Or could it be something simpler… maybe at heart he felt MAB was a lost cause?

He declared publicly that helping MAB to turn around would be “the greatest achievement of my life”. Indeed, Bellew’s ego was boosted by the hacks touting him as the one to finally rejuvenate the troubled carrier. He was said to have the “Irish touch”.

Malaysia’s national airline is in a deep rut. Not only did it lose two B777-200 aircraft and over 500 lives in 2014, the carrier subsequently lost its first foreign CEO when Christoph Mueller departed in mid-2016 after just a year on the job. Now it has lost its second CEO in as many years. Has the airline also lost its credibility?

The short answer is yes.

Malaysians would be remiss if they do not question why their national airline, bailed out using MYR6 billion (USD1.42 billion) of taxpayers’ hard-earned money in 2014, is in such a sorry state of affairs, notwithstanding the prime minister’s gallant effort to “rehabilitate MAS now” and to “save MAS now“.

In our view the airline is beyond rehabilitation and saving until and unless certain hard-nosed decisions are made. That means the immediate removal of those who are incompetent and inept.

That’s just a start. Ironically MAB is in no better position today despite having been “transformed” by Malaysia’s sovereign wealth fund, the airline’s owner. Is the sovereign wealth fund prescribing the wrong medication? Is the sovereign wealth fund the problem?

Bellew has spoken – almost as frequently and as fervently as when he dines at his favourite Indian joint – about how great the airline’s load factor is. But as most astute airline CEOs know, load factors are meaningless if yields aren’t positive.

Unfortunately for MAB, when the CEO leaves in December, its reputation is yet again in tatters and its future uncertain. What is certain is the arrival of eight Boeing Dreamliners, six Airbus A350s and six A330-200s. And it would seem nobody is quite sure what to do with all those planes.

For Bellew though, the experience in MAB and living in Malaysia appeared to have been a thoroughly enjoyable one, banana leaf meals included. He traveled extensively since becoming CEO and probably visited more places in the past year than he ever did in his decade with Ryanair.

The next CEO…

Is likely to be someone close to either the sovereign wealth fund or the powers that be in MAB.

The government-owned New Straits Times has its own take. Read it here. Both men have something in common: they have good pals in the sovereign wealth fund.

Oddly, however, there was no mention of one Capt Izham Ismail, a veteran at the company with almost 36 years experience as cockpit crew and in management (briefly with MAB subsidiary MASWings). He is currently the airline’s Chief Operations Officer, the position Bellew held before becoming CEO.

In 2016 Capt Izham completed an Advanced Management Programme at Harvard Business School, a hint perhaps of what’s in store for him? More importantly, he is said to be well-liked by MAB’s influential chairman.

Whoever is eventually chosen by the stakeholder and board of directors to replace Bellew will make little (if any) difference.

It’s akin to watching a sandiwara, or as the Brazilians call it, a telenovela. The plots and themes are predictable. And many of the characters are unsavoury, repugnant rodents.

As long as MAB continues to be funded by the government, and the government is unwilling to let it be run by responsible, trustworthy professionals who truly understand the business, then the airline is bankrupt of ideas. It is no longer relevant or viable. It lives, but only just.



Big Data


Discussing big data. l-r: Stephen Leung (Lazada), Venky Pazhyanur (UNISYS), Endau Analytics, Luqman Azmi (MASkargo) & didier Lenormand (Phoenix aero Consult)


What’s big data analytics and how can this be used to drive profits in the aviation industry?

That was the big question posed in one of the sessions at the Payload Asia Conference on Oct 12 in Singapore. Endau Analytics was invited by the organiser, Payload Asia (a publication focusing on the global airfreight industry), to moderate the discussion on big data.

According to Google big data is a “buzzword to describe a massive volume of both structured and unstructured data that’s so large it’s difficult to process using traditional database an software techniques.”

Big data itself essentially is a high volume of data stream that originates from multiple sources and in a variety of forms. Analysing and interpreting it can be extremely tough due to the many factors involved, but it’s too important to ignore and neglect.

The panellists came from diverse sectors of the industry:

  1. Luqman Azmi, CEO of MASkargo;
  2. Venky Pazhyanur, Senior Director Freight Solutions at UNISYS;
  3. Didier Lenormand, Founder of Phoenix Aero Consult;
  4. Stephen Leung, SVP – Crossborder, Lazada eLogistics
Luqman-Payload-Big Data 121017-1

maskargo ceo luqman azmi sharing with the audience how his company is embracing big data

Actionable knowledge

In a nutshell the panellists agreed businesses linked to the airline industry, such as logistics and software solutions, can now better understand their customers and how to communicate better using big data analytics.

But the true value of big data is, in our view, not fully exploited yet. For instance, airlines and MRO (maintenance, repair & overhaul) are not always sharing the data with their partners.

In any case, not everything in big data is of value. The intrinsic value is in the ability to extract relevant information and then analysing that to help in making accurate decisions.

What does the future hold for big data? Clearly there are challenges, such as filtering the huge amount of data and translating it to make the right decisions. Data analytics on the weather, for example, can be transformed into actionable knowledge.

There’s massive potential when big data is mined by specialists. Hence, having the right talent is critical in enabling information to be used accurately and responsibly to increase revenue and improve safety in the aviation industry.




It’s “engagement” more than “investment”, says Malaysian minister of Boeing plane purchase

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Mustapa Mohamed: Criticisms of Boeing deal misplaced, misinformed. Pic/shukor yusof

A month after Malaysia’s prime minister stunned the world by revealing his country, whose GDP is many times smaller than that of California, was buying Boeing planes to help strengthen the US economy, a minister who accompanied him on that trip has said the main purpose was actually to “engage with the Americans”.

During a networking dinner with Malaysian professionals held at the Malaysian embassy in Singapore on Oct 11, we asked Mustapa Mohamed, Malaysia’s trade minister: the premier said Malaysia Airlines was buying Boeing planes to help prop up the US economy but the airline’s CEO has clarified the planes will be leased, not purchased, thus it wasn’t an investment. So who’s telling the truth?

“Well, let me put the record straight… it’s all very technical,” the minister replied. “First of all, we have a big trade surplus with the US, some USD25 billion. Second, we’re a small country, so we need to invest overseas. Third, Malaysia Airlines’ planes are old and the airline needs to improve its bottomline.”

The minister is 67 years old. But he looked sprightly and although we doubt if he could dance, he waltzed around our question for about 6-7 minutes with such relative ease and composure (without actually answering) it was almost impossible not to like him. “There’s controversy surrounding the US trip, especially on social media, and the criticisms were misplaced, misinformed.”

And with that he deftly disarmed the pesky prober by moving on to his favourite topic: politics, a subject he clearly was more adept at than aviation. “Elections are just around the corner,” he teased, “and we’ve had an exceptionally strong economic growth in 2017.”

Go figure.

Boeing MAS MOU 0917

malaysians “engaging” with Americans in Washington DC on Sep 12. Malaysia’s trade minister is standing, second from left.

AirAsia to buy GE engines?

The trade minister also confirmed something interesting: that AirAsia was buying four GE engines over the next decade and that this was part of a package for maintenance, repair and overhaul (MRO) purportedly worth USD15 billion. See here.

There’s just one problem: this is 12-year old news and it’s USD1.5 billion over a 20-year period. AirAsia inked the deal with GE, which has a joint venture with France’s Safran, to make CFM engines used by the airline’s A320 fleet. Read it here.

Here’s confirmation AirAsia uses CFM engines and Rolls Royce engines for its A330 planes deployed by AirAsia X.


Yes, Prime Minister

Bellew with Najib & Boeing

can you pick out who is and who isn’t a “shrinking violet”?


When Peter Bellew first took the job of Group CEO of Malaysia Airlines (MH) on July 1, 2016 he said: “The goal will be to fly customers safely to places they want to go with great value fares and superior service on clean modern aircraft.” Read the statement here.

A year later this mission seemed to have changed. From flying customers to destinations they’d like to go to, Bellew now sings a different tune. The Star quoted him as saying: “If the stakeholders feel we should fly into the US, Europe or even Africa, then we will do that.” Read the whole article here.

Isn’t that remarkable? MH’s highest paid employee has succinctly revealed one of his KPIs (key performance indicators) is akin to that of a postman – to deliver what his paymaster wants.

In just one sentence Bellew has opened himself up to further scrutiny; now his detractors may have a reason to label him as a yes-man, a lackey, a stooge, rather than a commercially astute airline boss.

Anyone who has closely analysed or reported on MH would know the company was largely unprofitable in the past precisely because stakeholders meddled in its affairs, like telling management what aircraft to buy and where they should go.

MAS 1997-98

blast from the past – handout from mh’s analyst briefing in 1998. pic/shukor yusof

History of horrendous decisions

In May 2010 MH’s then CEO said he was thrilled the airline was starting twice-weekly flights to Dammam in Saudi Arabia, via Dubai. Less than three years later Dammam was axed, along with several other Middle Eastern cities.

Sadly, Bellew has fallen into the same quagmire.

If only he had studied the airline’s history he would have discovered one of MH’s perennial issues in the past was that it was often manipulated, misguided and misled by the whims and fancies of its stakeholders.

Indeed, the current prime minister himself confirmed the airline’s stakeholders had done the company in. “The history of Malaysia Airlines is fraught with horrendous decisions, and it was a nightmare inflicted on the airline by one of my predecessors,” he said.

The purchase of six A380s for USD1.2 billion (MYR4.9 billion) is a good example. Launching flights to cities with no prospects of profitability is another. Hubris is a word often associated with MH and for good reason.

Around two decades ago, while Bellew was busy establishing Irish Cottage Club in 1998 and later dabbling in online travel management, MH was already flying (at a loss) to, among other destinations: Beirut, Buenos Aires, Cairo, Male and Zagreb.

MAS route & fleet 1998

some of the places mh used to fly to 20 years ago. pic/shukor yusof

If Bellew had pored over MH’s chequered past he’d have found many things; destinations are often chosen and determined (by stakeholders) not for commercial reasons but for political mileage. Zagreb was in the flight schedule because Malaysia was the only country to send a battalion to Bosnia during the Balkan war (1991-2001).

What about Buenos Aires, what’s the value proposition of MH flying to Argentina then? Not much but Argentina is renowned for its horses and Malbec. Apparently some people within the airline’s stakeholders found riding horses on the Pampas therapeutic and well, you know, it’s fun to chill out 16,000km away from home, enjoying the tango and imbibing in a glass of red…

History is about to repeat itself. Allowing stakeholders to dictate where MH ought to fly or what its strategy should be is like giving liquor-laced chocolates to a recovering alcoholic, particularly when the stakeholders have had an atrocious history of interfering in MH’s operations, which partly led to its bankruptcy.

Not a shrinking violet

It makes us Malaysians ponder: did the stakeholders promote Bellew after Christoph Mueller left because of his airline skills or because they think he is malleable, with an uncanny ability to acquiesce? Can we trust him?

After all, this is the same person who bizarrely (and unrepentantly) banned checked-in luggage on flights to Amsterdam and Paris in January 2016. The reason: strong headwinds might cause MH planes to run out of fuel.

But Bellew told a Singapore newspaper he cares not what people, including Malaysians, feel. “If people aren’t happy there’s a foreign CEO, well, boo hoo. I’m a big boy. I should be able to take that. If you can’t, then you shouldn’t be on the job. This is not a normal job and it’s not for shrinking violets.”

His claim of being disinterested in “anybody’s politics”, however, have rung hollow. MH found itself inadvertently embroiled in a high stake, global political gamesmanship when the Malaysian premier assured the US president of an impending aircraft investment worth over USD10 billion within five years, money which would strengthen America’s economy. Or so it seemed.

Within days Bellew had to do some “damage control” – and he gave the game away when he revealed the purported aircraft purchases weren’t exactly that – MH was actually going to lease the planes, not buy them. So boo hoo, Mr Trump…

Project Amal

Here’s another interesting development currently being concocted by MH. Called Project Amal (initially known as Project Hope), the plan is to deploy six of MH’s loss-making A380s for use in transporting Hajj and Umrah pilgrims. A new separate entity (airline) has been formed, with its own management team and its own P&L. The project is slated to launch in 2019.

The initiative is commendable but the project also has another equally important purpose – to remove the A380s from MH’s books. The A380s have been bleeding the carrier since it first arrived, amidst much fanfare, in mid-2012 and are a big red blot on MH’s balance sheet.

Shifting the six A380s to another airline would, in one clean swoop, also mean shifting the burdensome assets to another vehicle. With the six A380s gone, there’s every chance MH could break even or even eke out a profit.

Smart, yes? Not really, because the A380s will remain in Malaysia and will likely continue to incur losses for the new company but who cares as long as MH and its CEO look good, right?


What’s going on, Malaysia Airlines?

MH 738 takeoff

an mh b737-800 taking off. pic/boeing


On Sep 20 Malaysia Airlines Berhad (MAB) managing director Peter Bellew told The Malaysian Reserve MAB would not pay for the acquisition of 16 Boeing aircraft, but rather leased them. This contradicted a statement made by the Malaysian premier on Sep 12 that “Boeing planes to be purchased by MAS… within five years, the deal will be worth beyond USD10 billion.”

Is this some kind of legerdemain to lull us into thinking Malaysia is making a major investment in the US economy, when all it really is, is Malaysia Airlines (MH) leasing some Boeing planes, plain and simple?

On Sep 15, when the PM arrived home at KLIA he reaffirmed his statement made at the White House and said: “The decision was made by MAS. I merely conveyed the message to US President Donald Trump.”

So what is it, MAB – did the PM not get a full briefing on how the aircraft are to be acquired, did he misunderstood or was it just a case of words being lost in translation?


boeing 787 dreamliners in mh livery. pic/boeing

Sweet Dreamliners are made of these…

In an email sent out to MAB staff on Sep 15, Bellew explained MAB had inked an MoU with Boeing in Sep 2017, switching eight of a firm order for 25 B737 MAX8 to eight B787-9 Dreamliners. On top of that, MAB also placed “purchase rights for an additional eight B737 MAX8, all while maintaining the total firm order at 25.”

The 737s will be funded through current progress payments along with sale and leasebacks done with international lessors. As for the Dreamliners, Bellew said the carrier plans to buy direct from Boeing and subsequently fund them via sale and leasebacks and operating leases with leasing companies.

At list prices, the 787s cost USD2.5 billion. Typically an airline receives anything between 20% and 40% discounts, depending on its financial strength and how badly the aircraft maker wants to sell the planes.

Nobody’s disputing the efficiency and economics of the Dreamliner but what’s uncertain is how it fits into MH’s game plan, if MH has one, that is…

Bellew claimed it’s being acquired to “add capacity to our widebody fleet and provide a high level of quality on our most lucrative routes.” From what it looks, the planes, which will start arriving in 3Q19, are being sought for use on routes that are as yet to be determined because MH’s network has shrunk considerably.

The initial Dreamliners are, according to Bellew, for use on Asian sectors; he emphasised that their range capabilities allow for flights from Kuala Lumpur to “any point in Europe” and “cities on the West coast of the USA.” The Dreamliner, he added, offered MH “great flexibility… over the next 20 years.”

Huh? On the one hand Bellew is keen for MH to stay ahead of the competition with new state-of-the-art aircraft. On the other hand, he suggested MH stick with the 787s 20 years down the road? Does anyone in the airline’s management seriously believe MH can make money offering premium seats from KLIA to the US west coast? Or any point in Europe, for that matter?

Why is MH investing heavily in premium products when traditionally strong premium carriers in Asia like Cathay Pacific and Singapore Airlines are struggling with theirs?


MH A350 in Toulouse. Pic/Airbus

Cutting capacity, adding capacity… A330, A350, A380…

The confusion doesn’t stop there. Bellew said in March this year he wants to cut capacity in the single-aisle segment while raising capacity in the twin-aisle fleet. If we understand correctly, he wants to cut capacity and then increase it?

“I need bigger planes. It’s kind of a no-brainer,” Bellew said in that article. What about the six A380s MH has in its fleet, each with almost 500 seats – are those not big enough for you?

As part of Bellew’s grand plan to make MH’s restructuring as the “greatest turnaround” ever, the company is taking no prisoners when it comes to other aircraft acquisition.

Two of six A350s on operating leases are slated to start delivery starting January 2018 (to London), and four more A350s will join the fleet by June 2018 ostensibly when MH reopens flights to Amsterdam, Frankfurt or Paris or maybe all three?

And that’s not all. The MH boss is on a no-holds barred shopping spree. Bloomberg reported he’s also going after Airbus A330neo planes!

MH’s desire to add widebodies is nothing short of mind boggling. It is already running a fleet of 15 A330 aircraft, including three A330-200 freighters and 12 relatively new A330-300s (see table below).

Malaysia Airlines A330 Fleet

Regn Build Year Type Engine Owner Financier
9M-MUA 2011 A330-200F PW4000 MAB
9M-MUB 2011 A330-200F PW4000 MAB
9M-MUD 2012 A330-200F PW4000 MAB
9M-MTA 2011 A330-300 PW4000 Standard Chartered
9M-MTB 2011 A330-300 PW4000 Standard Chartered
9M-MTC 2011 A330-300 PW4000 JSA Int’l Syndicate of banks
9M-MTD 2011 A330-300 PW4000 JSA Int’l Syndicate of banks
9M-MTE 2011 A330-300 PW4000 MAB BNP Paribas
9M-MTF 2012 A330-300 PW4000 FE Novus Fin 1 Ltd NordLB
9M-MTG 2012 A330-300 PW4000 MAS A330 Cayman I Syndicate of banks
9M-MTH 2012 A330-300 PW4000 MAS A330 Cayman I Syndicate of banks
9M-MTI 2012 A330-300 PW4000 MAS A330 Cayman I Syndicate of banks
9M-MTJ 2012 A330-300 PW4000 MAS A330 Cayman I Syndicate of banks
9M-MTK 2013 A330-300 PW4000 MAB
9M-MTL 2013 A330-300 PW4000 MAB DVB Bank
9M-MTM 2013 A330-300 PW4000 MAB DVB Bank
9M-MTN 2013 A330-300 PW4000 Sama Aircraft Fin 1 Ltd BNP Paribas
9M-MTO 2014 A330-300 PW4000 MAB

Data compiled by Endau Analytics

Bellew argued he needed new A330neos and used A330s to replace “older” B737-800s but where will all these planes fly to – China? We know the MH chief is extremely optimistic on Chinese traffic. “I will expect China to move from about 8% to 9% of our business currently to about 20% in the next two to three years,” Bellew told the media on the sidelines of Invest Malaysia 2017 recently.

But even if it does reach 20%, isn’t it unwise to splurge on all these widebodies, especially when MH is still a structurally frail airline? The best way, in our view, to make money from China is not by using widebodies but with A320s or B737s or even regional jets on some sectors between Malaysia and southern China. Don’t believe? Ask Tony Fernandes…

Remember, the airline industry is notoriously cyclical. This cyclicality is due partly to the relative high-income elasticity of demand for air transport services. Demand and revenue-cyclicality on airlines’ financial performances is multiplied many times by their financial leverage. In other words, interest-bearing debts surge. Before MH was delisted, it was paying around USD420 million annually on interest alone.

Airlines typically order aircraft when the going is good and take delivery of them when the economic cycle becomes bearish. Overcapacity will be worsened, resulting in many planes being stored.

In his email to staff, Bellew concluded by saying “management will continue carefully evaluating all options available to us to ensure our purchases make both business and operational sense.”

It’s hard to see how all these acquisitions make sense. Unfortunately for MH, old habits die hard, and this avaricious appetite for widebodies will likely do it more harm than good.


In the airline business politicians are best seen, not heard

Boeing MAS MOU 0917

Boeing’s Mou with Malaysia Airlines on Sep 12


“I think you all know that I’ve always felt the nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.” –  former US President Ronald Reagan, August 12, 1986


Thirty-one years ago and the words still ring true. The Gipper was an astute president and not ashamed to admit that many of the problems during his two terms in office were caused by the government’s long history of conflicting and haphazard policies.

On September 12 the Malaysian government, led by its prime minister (PM) and several key cabinet ministers went to the White House in Washington DC and announced that Malaysia Airlines (MH) would buy Boeing 787-9 and 737 MAX aircraft. At catalogue prices, the planes cost just over USD3 billion.

Regrettably the PM, perhaps unwisely advised, said this of the aircraft deal: “We want to help you in terms of strengthening the US economy… we intend to increase the number of Boeing planes to be purchased by MAS… We will also try to persuade AirAsia to purchase GE engines.

Additionally, he added that Malaysia’s Employees Provident Fund would make a sizeable contribution to the US economy by pumping “three to four additional billion dollars” in infrastructure redevelopment.

Predictably his remarks elicited a furore in Malaysia and understandably so as it appeared the investments were either to appease or to curry favour from the Americans.

Was there a political posture to the aircraft purchase? We think not but because the head of government said it, it is unfortunately perceived as such.

The fact is, MH had indicated its interest in buying widebody aircraft as far back as January 2017. It is well known in the airline industry MH wants to expand and was evaluating twin-aisle aircraft – either the Airbus A330neo or Boeing’s 787 Dreamliner.

Therefore, it didn’t really surprise the aviation community when the PM made that statement. What startled observers was: (i) him attributing the acquisition as a sign of Malaysia’s support of the US economy and (ii) the number of aircraft ordered.

The anger and allegations of political chicanery over the national airline inking a MoU with Boeing could have been avoided had the statement been made by MH’s managing director or its chairman or both since they were part of the PM’s delegation.

Think about it: why pay millions a year to a chief executive, fly him half way round the world to DC and not let him be accountable for the airline’s decisions and justify the move to buy planes to Malaysians back home?

The MH boss sings well and we believe he would have no problem serenading Malaysians on the virtue of spending a few billion bucks on Boeing aircraft. At an industry event in Manila last November 2016, the Irishman’s rendition of Stand By Me was pretty cool – check out this video.

Plane silly

No airline in its right mind would risk buying aircraft just to help create jobs in another country. It’s plane silly, pun intended. And Malaysians have the right to question the deal given that MYR6 billion of taxpayers money were used to bail out MH over two years ago.

This isn’t about the airline’s choice of Boeing aircraft, or even its ability to fund the planes. MH is fully backed by the sovereign, whose strong credit rating would provide easy and inexpensive access to the debt market. That’s not the issue.

The issue is about fiduciary duty. Given the airline’s tattered financial track record MH’s management has a responsibility to: (i) explain why it needs those aircraft, (ii) where it intends to deploy those aircraft, (iii) say if the planes are to be leased or purchased outright, (iv) assure Malaysians the assets would not end up like the A380s and finally, (v) ensure the purchase wouldn’t lead to uncontrollable debts (before it was nationalized end-2014 MH was paying close to USD500 million annually in interest alone).

The other burning question is this: why is the Malaysian government interfering in the running of AirAsia by trying to nudge it to buy GE engines? While it is a Malaysian carrier, AirAsia is a public listed company and answerable to its shareholders, not to Putrajaya.

Moreover, AirAsia is not the flag carrier and is being run competently. The airline makes purchases based on what’s good for the company and its equity holders, not on how it would benefit a certain engine manufacturer.

GE laggard

GE a laggard – could this be a reason to make Airasia buy GE engines? Grab pic taken off TV on Sep. 15

Pro aviation

The PM has been a staunch supporter of aviation for a long time, even when he held the defence portfolio. In his capacity as deputy PM, he personally welcomed an Airbus A380 prototype at KLIA in November 2005, after MH agreed to acquire six of the superjumbos.

Sadly the six A380s bought by Malaysia – which arrived barely five years ago – for over USD1 billion (MYR4.2 billion), have proved unsuccessful for MH. The A380s are now being refurbished (at great cost) for use on Hajj and umrah flights, a futile attempt in our view of trying to make something good out of the bad assets.

Although AirAsia is a huge success story, Malaysia’s aviation landscape is littered with the carcasses of failed airlines: Rayani Air, Pelangi Air, Silver Fly, Saeaga Airlines, Ked-Air… and the PM is well aware of it.

In March 2015 during the biannual Langkawi International Maritime and Aerospace show, the PM and transport minister witnessed a signing ceremony between a Malaysian company, Flymojo, and Canada’s Bombardier, for up to 40 regional jets. The PM made no public remarks then.

flymojo LIMA Najib March 2015

where’s the mojo gone to?

Flymojo was capitalized at MYR3 million and planned to have its bases in Johor Bahru and Kota Kinabalu. Its management team was helmed by chairman Alies Nor Abdul, coincidentally a former political secretary to the PM when he was deputy PM. Flymojo is believed to have lost its mojo and is now no longer active.

That the PM continues to be an active supporter of Malaysian carriers and the aviation industry is indisputable. Not many leaders pay such close attention to their countries airlines. Fewer still have the gumption to make tough decisions, even if it appears irrational and rash.

During a visit to China in May this year, he witnessed the MoU signing between AirAsia and Everbright Group and Henan Government to launch a discount carrier in mainland China. Much to his credit, the PM refrained from speaking publicly about it.


AirAsia Everbright Najib

airasia & china’s everbright group to form lcc jv



Adieu A380


Building the A380, from scratch. Pic/Shukor Yusof


“The more sand that has escaped from the hourglass of our life, the clearer we should see through it.” – Sartre

What would Jean-Paul Sartre make of the Airbus A380? Imagine, if you will, Sartre expressing his love for Simone de Beauvoir in the sumptuous Suite of a Singapore Airlines A380 as he coos, “Try to understand me: I love you while paying attention to external things. At Toulouse I simply loved you…”

In Toulouse today, they are more focused on profits than on philosophy, on “Love at First Flight” than on decoding what de Beauvoir means when she says, “One’s life has value so long as one attributes value to the life of others.”

It is a safe bet that Fabrice Brégier and Tom Enders, the two Airbus helmsmen, understand perfectly the philosophy of making money. Both know and recognise why the A380 hasn’t succeed and that it probably never will in years to come. But can Airbus turn it around?

The A380 programme is living on borrowed time, in our view. Inject a couple more billion euros in it or cut the losses? Airbus has broached this idea before – read it here. The European planemaker has cut A380 production to 12 in 2018 and eight in 2019.

A380 MSN 2 - a

the A380 MSN 4 while on a visit to changi in 2006. pic/shukor yusof


Last week the first A380 operated by SIA (the A380 launch customer) reportedly has been taken out of service. The airline said it plans to hand it back to its German owners instead of renewing the 10-year lease. Three other SIA A380s are also slated to return to the lessor by June 2018.

To rub salt to the wound ratings agency Moody’s has downgraded bonds issued by transport financier Doric due to worries over the fate of the A380 programme.

SIA took delivery of the world’s first A380 on October 25, 2007 amidst much fanfare and expectations. We’ve been skeptical of the A380 since Airbus first announced it was building it.

First, there wasn’t a market big enough for such a huge plane, so the economics were off. Even under the current climate of low fuel prices, it’s still costly to run the four-engined A380 – ask Malaysia Airlines or Thai Airways. Second, the trend is pointing to (more) people flying point-to-point, rather than from hubs. Third, there’s a case to be made of an over-capacity in long-haul flights.

Turn back the clock a decade ago and these were our comments on the A380 – here and here.

A380 wing Broughton

a cross section of an a380 wing at broughton, north wales. pic/shukor yusof


The A380 is a marvelous aircraft from a technology standpoint: cosy, efficient and quiet. It’s fun to ride in, too, especially on SIA and Qatar Airways, but definitely not on British Airways’ Club World – never understood how they could allow those odd backward and front-facing seats to be installed in the first place.

The A380 has mostly benefitted just one carrier in the past decade – Emirates – with 96 currently in service. Even SIA, with 19 in its fleet, has discovered the plane isn’t a cinch to make money. And so SIA deploys some of its A380s to destinations that appear tricky to extract good yields, such as Auckland, Hong Kong and Zurich.

Dubai-based Emirates has ordered 140 A380s, which is 40% or almost half the total A380s on order. It works for Emirates because Dubai is a mega air hub that connects passengers from say, the Far East or Australasia, to those in Europe and the UK (especially slot restricted Heathrow).

Unfortunately, for second-tier airlines such as THAI and Malaysia Airlines, this sort of strategy isn’t for them. So why on earth did they buy the A380s? They aren’t very smart carriers to begin with… does anyone seriously think the A380s will rake in money from Hajj flights?

To paraphrase Sartre, more money will likely escape from the Airbus hourglass, but can the folks at Toulouse see any clearer?

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