Lion Air Group Malaysian affiliate Malindo Air is planning to add capacity to India and Thailand in 4Q2014 as part of the next phase of its international expansion. Services to North Asia including mainland China are expected to be launched in 2015 as part of a subsequent phase.
Malindo has been focusing on Bangladesh, India and Indonesia since it launched international services just under a year ago. Malindo also now serves Bangkok in Thailand.
Malindo so far this year has concentrated on domestic turboprop expansion but will resume growing its international operation in 4Q2014 as it adds two 737-900ERs. The two aircraft will be Malindo’s first additional jets in over a year and will likely be followed by faster expansion of the 737 fleet in 2015. This is the second of a two part report on Lion Group’s Malindo.
Malindo eyes China services for 2015
Mr Muthy says Malindo also is preparing an application for Chinese authorities. But he says the process of being authorised by the CAAC will take three to six months. Malindo is aiming to complete the process by early 2015, allowing it to begin serving China as part of its 2015 expansion. For the next six months the focus will be on strengthening its current network in South and Southeast Asia.
Malindo also has been looking at Hong Kong and Taipei for 2015. Malindo’s business plan envisions 10 additional aircraft for 2015, which should give it the capacity to launch several more international routes including multiple points in North Asia.
How the 10 aircraft are allocated between turboprops and jets has not yet been decided. But it would be logical for Malindo to focus primarily on 737 expansion in 2015 given the focus in 2014 has been on turboprops. While growing the turboprop operation in 2014 was a sound strategy, that sector of the market may start approaching maturity, limiting further growth opportunities.
Slower growth and waiting until 2015 to serve China could be a blessing for Malindo
The focus so far this year on expanding the turboprop fleet and the decision to delay adding to the 737 fleet until the fourth quarter means Malindo will fall short of its original goal of carrying 3 million passengers in 2014. Mr Muthy says Malindo will likely end the year with 2.5 million to 2.7 million passengers. The carrier transported about 1 million passengers in 2013 – not a bad showing given it only operated for nine months.
The slower growth for 2014 could end up working in Malindo’s favour given the current market conditions in Malaysia. If Malindo had pursued faster international expansion and entered the China market in 2014 the results could have been disastrous given the huge drop in inbound demand from China following the MH370 incident in Mar-2014.
By focusing its expansion on its short-haul turboprop operation and a sector of the market where there is less competition, Malindo has had an opportunity to catch its breath and consolidate its position.
From a market share standpoint the slower than expected growth is not such a big deal as overall growth in the Malaysian market has slowed from almost 20% in 2013 to 12% in 1H2014. For the full year in 2014 the Malaysian market is expected to grow by only about 7%.