MAB boss forecasts a golden decade for airlines

Malaysia Airlines group managing director, Peter Bellew, may only be midway through his transformation of the carrier, but he has absolutely no doubt about the profits ahead for Asia-Pacific airlines.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

September 1st 2017

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A “Golden Decade” is ahead for airlines, the group managing director of Malaysia Airlines, Peter Bellew, predicted at Sydney conference last month and added the cost of fuel will be even lower than it is today. Read More »

“The massive investment in renewable energy by banking giants such as Goldman Sachs and Morgan Stanley, other investment banks and sovereign governments will result in a sea change in the price of oil,” he said.

'At a time when everybody else is starting to skim people for these things – luggage, food, entertainment and credit card use - we’re not going to do that. We want to regain our position in the next couple of years as a quality five-star carrier dealing with business people'

Peter Bellew Malaysia Airlines Berhad group managing director

“Around late 2019 or in 2020 we will reach an inflection point with the usage of oil. Renewables will be coming on stream in big, big, big numbers and that will lead us in the next decade to oil stabilizing at around $30 to $35 a barrel.”

The low fuel price would have an impact on the construction costs of aircraft. Lower fuel costs and lower fuel by-product costs would make it cheaper to manufacture composites and therefore cheaper to produce aircraft, he said.

Bellew, a self-confessed technology geek who spoke at CAPA’s Sydney conference last month said the first mobile enabled phone, the Nokia 7110, was revealed to the world in 2000.

“By 2010 European carrier, Vueling, was the first airline to have full mobile check-in. These things happen so fast. As an industry, we need to keep up with technological change. If we don’t, we are going to have our bread and butter stolen by the technology companies,” he said.

“The market is going to play into our hands. Even if we do nothing there are a billion people in the world today with passports. In a short number of years there will be 1.7 billion people with passports.

“That’s 700 million more people who want to travel compared with today. It is breathtaking to me to see the growth in the number of people from China that travel and to see where they travel, how often they travel and what they to do when they get there.”

He believed airlines outside China have been very poor about developing websites and skilled staff to address this market. “The small number of airlines getting their acts together about China’s potential will make a lot of money. My personal experience has been that the Chinese are very open to carriers from around the world operating in their market as long as you show them some proper respect,” he said.

“Among many of my colleagues we don’t. A lot of these new people who are travelling, these new market people, they’ve never heard of global distribution systems or APEX tickets. They don’t have the legacy thinking we have.

“They want to buy a seat on their mobile phone in a minute and not be caught up in the complexity we generally have in the transaction.”

Bellew also believed the artificial intelligence that is being applied to the development of autonomous cars would progress to aircraft in the next decade. “I don’t think we will see one pilot aircraft, but I do think the manning of aircraft with four pilots on some long-haul aircraft will go down to three or two,” he said.

“Over flight costs will be reduced because of rapid advances in performance based navigation. There will be much shorter routes into and out of airports and on final approach. There will be more airspace because there will be more efficient use of airspace.

“In maintenance, we are starting to see the earliest, earliest benefits of technology. The two principal manufacturers are much, much better at using the data streams coming off aircraft to carry out predictive analysis of maintenance requirements. Modern aircraft, generally, are more reliable. All these factors will lead to a golden decade of opportunity for airlines to start making some money.”

He said that some of the airlines he has visited in recent months have their customer service run by Chat Box. “It’s very, very effective. Chat Box can process a customer’s query seven times faster than a human and there’s a lot less attitude,” he said. Chatbox is a digital messaging platform that enables collaboration between businesses and their customers.

“I’ve been a geek and a hacker since I was very young and I am already seeing, because I’m plugged into so many new technologies, airlines sending me predictive messages and booking engines telling me you are going here on this date, this is the flight you should be taking. That’s going to happen. Voice services are going to become very common.”

“Somebody will come up with a new GDS that will cost much less than the rest. We all pay mostly 1.5% to 3% in credit card processing costs and charges. Bitcoin probably won’t be here anymore. It will be something else. Maybe IATA should have set up its own blockchain payment system by now so we don’t pay any costs for processing payments. That’s going to happen.”

In the meantime, MAB’s five year transformation program is well underway, with Bellew expecting the carrier, which already is in the black on a quarterly basis, to return to full year profitability in 2018. The brand has recovered from the battering it took from the loss of two aircraft and 537 passengers and crew in 2014 and is seeing load factors above 80%. He said the tragic accidents are still having a massive impact on staff.

“I’ve no doubt there are many people who have a negative perception of us because of what happened. But the brand, I believe, has recovered very well in pretty much all marketplaces. You don’t get load factors of over 80% if there’s something wrong with your brand,” he said.

“In the month of last December, we hit a network wide load factor of 90%. That was the highest load factor of any full service carrier in the world last December so there is nothing wrong with the brand. The brand is strong.’’

Bellew is committed to preserving the airline’s status as a full service carrier and has reversed decisions by his predecessors to increase business through the internet and away from travel agents. He also has axed plans to unbundle fares and said the airline would not be charging extra for bags, food, entertainment or credit card use.

Last month, he revealed he is working with Northern Ireland’s Thompson Aero Seating on a customized flat-bed configuration, with direct aisle access from every seat, for the premium cabins of his incoming fleet of 10 B737 MAX 10s.