During the recent IATA AGM in Berlin I caught up with Malaysia Airlines chief executive Azmil Zahruddin. Its nearly a year since Zahruddin took the helm of the airline last August, after Idris Jala – who he had worked closely worked with on the transformation of the airline since 2005 – left to take a job in the Malaysian cabinet.
This of course was at the height of the economic crisis, when as Zahruddin observes, nobody knew if there was any light at the end of the tunnel (though as it turns out, for Asia there has been no shortage of light). So what have the first ten months been like?
“It’s been manic,” he sums up. “I probably have had an easier time in terms of transition as the problems I am worrying about are the same ones I was worrying about before. [The difference is] before there was probably someone who was worrying more than I was, but not any more.”
As if dealing with the economic crisis was not enough to contend with, Azmil also has a high profile and expanding low-cost carrier on its doorstep in the shape of AirAsia (and its long-haul sister operation AirAsia X). So what’s it like competing with them?
“It’s like being on a treadmill, you have to keep running,” he says. “With AirAsia we have been competing for quite a while. We are both co-existing and I believe will continue to co-exist. We just have to make sure we are strong in what we are doing.”
You can read the full article, in which Azmil talks about the carrier being ready to enter a new phase of growth, that we published in our second issue of Airline Business Daily News from the IATA AGM here, but here are a couple of extra insights from Zahruddin on current issues which we didn’t have room for in the paper. Asia of course has been at the heart of the economic recovery and, while this has been led by strong domestic growth in the key emerging markets of China and India, Zahruddin says Malaysia has also enjoyed above average traffic growth
“I expect 2010 to be better,” says Zahruddin, pointing to a sharp year-over-year improvement in its underlying performance during the first quarter. “Quarter two is always challenging and remains challenging,” he adds, but will be better than quarter two last year.” He notes it will be the third and fourth quarter that will be crucial, noting only then will it be clear what impact the continued economic problems in Europe might have on the wider global picture.
And what are the worries keeping airline CEOs awake at night? Fuel is certainly on the agenda. Zahruddin points to the steady increase in fuel costs over the last 12 months, which has after a recent relenting in the oil price, steadied at the around the $80 per barrel range compared with $60 a year ago. After the heavy hits airlines around the world took on fuel hedging, I asked Zahruddin what role he thinks hedging plays for airlines now in mitigating the fuel impact.
“Hedging is not a solution,” he says, describing it as a “smoothing mechanism”. He adds: ”It doesn’t alter the fact that costs are going up. It merely postpones it, but does not avert it. If it [fuel] is going up, your costs will go up.” And he notes that even if you mitigate your costs by using more fuel efficient aircraft – Malaysia Airlines is itself about to embark on a major fleet renewal - ultimately if fuel prices go up, the extra costs will eventually have to be passed to the consumer. “At the end of the day, you still burn fuel.”