Malaysia’s Malindo Air is accelerating expansion as it prepares for a rebranding aimed at firmly positioning the Lion Group affiliate as a full service airline. Malindo now plans to add 10 Boeing 737s in 2016 and end the year with a fleet of 37 aircraft, including 26 737NGs and 11 ATR 72-600s.
Malindo has been rapidly expanding its international network, adding seven destinations over the last four and a half months. It plans further expansion of the network in 2016 including potential new destinations in Australia, South Korea and Japan, which would be served as part of one-stop fifth freedom routes via Indonesia and Taiwan.
However, Malindo will implement a brief hiatus from expanding its international network over the next few months, instead focusing on capacity increases and schedule changes to existing destinations. Malindo is also now focusing on its 15-Mar-2016 move back to Kuala Lumpur International Airport’s original terminal (KLIA1), which will reinforce its full service position and support a new brand being rolled out in mid-2016.
Malindo takes short break from expanding its network
Our last analysis report on Malindo also flagged Taipei and Wuhan as new destinations planned for 1H2016. However Malindo has not yet set a launch date for any new international routes and Mr Raj said at the CAPA Summit that Malindo plans to take a pause in its international expansion to focus on frequency adjustments and service delivery.
Network expansion will inevitably resume in 2H2016 as Malindo rapidly expands its 737 fleet. By early 2H2016 the airline will also have completed a rebranding and a transition to Kuala Lumpur International Airport’s original terminal (KLIA1), enabling Malindo to focus on network expansion again.
More Chinese destinations are still in the pipeline for 2016. In addition to Wuhan, Malindo has been assessing several other Chinese destinations including Guangzhou and Kunming. Malindo will rely heavily on block bookings from Chinese agents – as it does with the Penang-Sanya service – while it expands its Chinese network.
As CAPA highlighted in the last report, the Malaysia-China market is expected to grow rapidly in 2016, driven primarily by inbound demand. Several airlines are now planning new Malaysia-China routes, including AirAsia and Malaysia Airlines, and to add capacity on existing routes. Malindo is obviously keen to carve out a stake in this increasingly important market.
New Taipei operation may include fifth freedom sectors to Korea and Japan
Malindo is also still considering services to Taipei, but is now considering not only a Kuala Lumpur-Taipei service but also linking Taipei with destinations in South Korea and Japan.
Malindo was previously planning to launch services to Korea and Japan in 2017 using 737 MAX aircraft which, unlike the current generation of 737s, will have the range to reach South Korea and most of Japan from Kuala Lumpur nonstop. However, Malindo was recently informed that it will not be allocated aircraft from Lion Group’s initial batch of 737 MAX 9s, to be delivered from 2017.
The 2017 fleet plan could still change as Lion Group maintains an extremely flexible approach to fleet planning. However for now Malindo is not expecting to receive any 737 MAX aircraft in the near to medium term, and is therefore now considering services to Japan and South Korea via Taipei from 2H2016.
Malindo should be able to secure rights to pick up passengers from Taiwan to South Korea and Japan since fifth freedom rights are part of the relevant air service agreements between Malaysia and these countries. Several other Asian airlines now serve the Taiwan-South Korea and Taiwan-Japan market on a fifth freedom basis. For example, Singapore Airlines LCC subsidiary Scoot operates from Taipei to Tokyo Narita and Seoul Incheon and is planning to launch a second Taiwan-Japan route in 2H2016. Another Singapore-based LCC, Jetstar Asia, operates from Taipei to Osaka Kansai.
From the FSC sector, Cathay Pacific has fifth freedom flights from Taipei to Osaka Kansai, Tokyo Narita and Seoul. Thai Airways also serves Taipei-Seoul, while Delta Air Lines serves Taipei-Tokyo Narita.
These are potentially large enough routes to support another fifth freedom operator, particularly given the recent growth in passenger traffic in the Taiwan-South Korea and Taiwan-Japan markets. However, Malindo is a relatively unknown brand in the North Asian market and therefore will likely need to offer very low fares to stimulate demand, in apparent contrast to its overall strategy to position itself more firmly as a FSC.