Can new carrier add mojo to Malaysia aviation?

AGGRESSIVE START:Malaysian airline flymojo has signed a US$1.5 billion deal with Bombardier for 20 new CS100s. News of the carrier's emergence has been greeted with deep scepticism, partly due to the lack of details on its key backers.


    Mar 19, 2015

    Can new carrier add mojo to Malaysia aviation?

    UPSTART firms rarely evoke confidence, particularly in the aviation scene, which is bursting with competition from established players and riddled with overcapacity.

    So it is with deep scepticism that observers greet the news of the emergence of flymojo - a newly created airline endorsed by the Malaysian government, owned privately by Malaysians and in partnership with Montreal-based Bombardier.

    "Let's just say that I'm very sceptical about the business model and especially the choice of aircraft," says Endau Analytics analyst Shukor Yusof.

    This is not the first time that the Malaysian government has been actively involved in cranking up competition in the country's airline space.

    Exactly two years ago, through a tie-up with Indonesia's Lion Air, it launched Malindo Air and broke the duopoly on domestic trunk routes enjoyed by state-owned Malaysia Airlines (MAS) and Tony Fernandes' AirAsia. Alongside rising competition and much-pleased air travellers who benefited from more low-priced options, passenger traffic grew, allowing Malindo Air to grow rapidly, albeit from a much smaller base.


    But the Malaysian government's move this time to allow another private player to land in the air travel space, at a time when sovereign wealth fund Khazanah Nasional is attempting a major overhaul of flagging and disaster-stricken MAS, raises doubts over whether it is a well-thought-out move.

    This even before ailing MAS, which was taken private by Malaysia's state investment arm last year, has sharpened its business claws to set itself on a profitable path by end-2017 under an ambitious reform plan.

    "The entrance of another player into a crowded Malaysian aviation space is negative for dominant players MAS and AirAsia," says UOB Kay Hian airline analyst K. Ajith.

    The new airline flymojo will be based out of Johor Baru's Senai Airport and Kota Kinabalu in East Malaysia, evidently eager to tap air travel between the Malaysian peninsula and East Malaysia, and the larger region. It may boast of being the only airline using Malaysia's "southern corridor" as its headquarters, but AirAsia has in fact already been serving the area quite well with A320s.


    Malaysia's new airline has signed a US$1.5 billion (S$2.1 billion) deal with Bombardier for 20 new CS100s, with an option to buy 20 more of the medium-range jets for up to US$2.9 billion.

    Bombardier is under intense pressure to bring the C-series into the market after many years of delays and cost overruns. It has struggled to find buyers for the plane, which is being promoted as a rival to the Boeing 737 series and Airbus A320 family. Moreover, 20 jets for a fledgling airline flying within Asean appears to be a tad too aggressive.

    "Granted, there is a need for more connectivity between peninsular and East Malaysia. But 20 CS100s sounds (like) quite a big number, even flying within Asean and its borders," Mr Shukor says. "If it hopes to capture the Singapore market, then access into Senai needs to be made easier and cheaper."

    The scepticism over flymojo's business model is also partly due to the lack of details on the airline's key backers.

    AirAsia first burst into Malaysia's aviation scene in 2001 led by a headstrong, street-smart Fernandes, and not too long after became the region's top budget airline. Five years later, FireFly, wholly owned by state-owned MAS, started its full-service short-haul operations, giving air travellers another option in the low-cost travel realm.

    Competition has heightened but passengers have benefited, translating into burgeoning growth in passenger traffic. But with passenger traffic expected to grow in the low single digits this year, and with competition that has kept a lid on rising yields and dominant players making big capacity cuts, not many appear to be holding out for the new airline to live up to its name and show some, well, big mojo.