Malaysia Airlines head Idris Jala on industry consolidation

JalaW200.jpgBlogging here from Kuala Lumpur at the close of the Airline Business/UATP Airline Distribution conference where the rather inspirational Malaysia Airlines chief executive Idris Jala has this morning waxed lyrical about the carrier’s turnaround plan and it’s vision for a sustainable profitable future.

He has also been talking about industry consolidation.

Below is the story I have written for our 24-hour news wire service Air Transport Intelligence on what he said:MAS ready to consider consolidation opportunities

Malaysia Airlines will look at consolidation options over the next few years with the emphasis being on a deal that would boost revenues rather than one based on cost reduction, said the carrier’s chief executive Idris Jala, speaking today at the Airline Business/UATP Airline Distribution conference being held in Kuala Lumpur.

“When there is overcapacity consolidation is inevitable,” said Jala, noting that over 400 new aircraft will enter the Asia-Pacific market both this year and in 2009. This will create problems for weaker players and some will not survive: “It will be tackled through blood,” he said.

However, MAS does not need to rush into any deal. “We will look out for opportunities for consolidation,” he said, stressing that the carrier has not entered any formal talks with potential partners.

The carrier’s financial turnaround over the past two years, which has seen it move from dramatic losses in 2006 to a profit in 2007, has put MAS in a much better position to discuss merger opportunities on a more equal footing with other carriers. “You must be looking for consolidation from a point of strength,” he said.

Jala also stressed that a merger would work best if the partners are able to focus on revenue enhancement rather than cost cutting. “It’s about complementarity,” he said. “If you marry someone you don’t want your wife to look like you.”

Jala said that while MAS is still talking to all the global airline alliances about becoming a member, he is not certain the carrier will sign up to one. “If you come late there is a heavy penalty to pay,” he said, with the views of neighbouring and established carriers in alliances to contend with.

Instead, MAS has developed a network of bilateral codeshare deals with carriers like Australia’s Virgin Blue, China Southern Airways and South African Airways to increase it network reach, said Jala. “The only one left on the map is India and we are in discussions with Jet Airways to connect with them in India,” he said.

Jala is happy with this approach for the time being. “That’s the best line – for my mind,” he said. “We will only join an alliance if it’s better than what we have now.” ATI Story ends.

For another view, this is what Reuters wrote following Jala’s comments.

For more on the MAS turnaround read our interview with him that was featured in the April issue of Airline Business.

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