Malindo targets profits within first year of operations amid expansion plans

Kuala Lumpur
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Within four months of starting operations, Malindo Air has grown to a fleet of five aircraft and carried over 200,000 passengers.

Its chief executive Chandran Ramamuthy tells Flightglobal Pro that the Malaysia-based carrier has an aggressive expansion plan, and he is confident that the airline will turn an operating profit within its first year of operations.

"Right now we're targeting to be profitable within a year, which we believe we can definitely do because we have a good product," says Chandran. "If you look at an apple to apple comparison, our fares are either competitive or lower than the LCCs [low-cost carriers]. I'm sure that with our 80% load factor, we can surely make an operating profit."

The hybrid carrier is a joint venture between Indonesia's Lion Air and Malaysia's National Aerospace and Defence Industries. It started operations at Kuala Lumpur International Airport on 22 March with services to Kota Kinabalu and Kuching, using brand new Boeing 737-900ERs. It now has jet operations to a total of five destinations in Malaysia including Sibu, Miri and Tawau.

Chandran says services to Kuching and Kota Kinabalu have average load factors of above 70%, while those on the newer routes are also "slowly coming up to that level".

In June, Malindo also launched turboprop operations with an ATR 72-600 out of Subang's SkyPark Terminal. It started services to Johor Bahru, Kota Bharu and Penang, competing head-on with flag carrier Malaysia Airlines' turboprop arm Firefly.

"Our turboprop operations are doing good because people love it, the fares are cheap. Previously, it was a monopoly market, now people have a choice," says Chandran.

He adds that Malindo decided to start turboprop operations because it would be a "waste of money" to serve these hour-long routes that needed coverage with jets.

"It was an opportunity for us and we grabbed it, not wanting to miss out. We have the aircraft, the people, the capability, so why not?"

He reiterates that Malindo has been able to keep costs low because of the economies of scale in the areas of aircraft purchase and maintenance it enjoys as part of the Lion group.

This year, the carrier will take delivery of five more aircraft - two ATR 72s in July, another in August and two 737s in September - to form a fleet of 10. The plan is to grow to a fleet of 100 aircraft within 10 years of operations.

In August, Malindo will also launch its first international service with daily flights from Kuala Lumpur to Dhaka. This will be followed by services to the Indian cities of New Delhi and Mumbai, Chinese destinations such as Hong Kong, Guangzhou and Shenzhen. Subsequently, the carrier will enter the Indonesian market by year-end with services to Jakarta, Medan, Surabaya and Bali.

"This is a giant jigsaw," explains Chandran. "Lion has completed the Indonesia part, another is being started in Thailand, and Malaysia is 30% completed. Once I connect the dots between Kuala Lumpur and Jakarta, Medan, Surabaya and Bali, they can start feeding passengers to me."

By the end of next year, Malindo will also set up its second hub in Kota Kinabalu, so that Lion's passengers from Indonesian cities such as Makassar and Manado can use Kota Kinabalu as a transit hub to connect to Japan, South Korea and China more efficiently.

"My dream is to have 90% load factor with 10 aircraft in operation. This is a target of 1-1.5 million passengers, which I think is achievable," says Chandran.