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What's behind the partnership between Singapore Airlines and Malaysia Airlines?

​The tie-up between Singapore Airlines (SIA) and Malaysia Airlines (MAS) that both sides announced last month reads like an old unpublished story that has long been waiting in the wings before finally being given the green light.

What's behind the partnership between Singapore Airlines and Malaysia Airlines?

The author says that it is interesting that the partnership is happening at a time when MAS is awaiting a white knight to come to its rescue.

The tie-up between Singapore Airlines (SIA) and Malaysia Airlines (MAS) that both sides announced last month reads like an old unpublished story that has long been waiting in the wings before finally being given the green light.

Known as Malaysia-Singapore Airlines until 1972 when it split into two separate national airlines, the pair has taken nearly half a century to move from being rivals to hopefully becoming partners beyond the mere code-sharing of flights.

MAS chief executive Izham Ismail said it would be “more than a conventional partnership” while his SIA counterpart Goh Choon Phong hailed it as taking the partnership “to a new level”.

So what's new and what does it mean for both airlines?

SIA and MAS are already code-sharing flights to Singapore, Kuala Lumpur, Penang, Kota Kinabalu and Kuching.

The new deal will increase the number to 16 domestic destinations in Malaysia, and will include SIA's subsidiaries SilkAir and Scoot as well as MAS' budget offshoot Firefly. This will pave the way for more code-share flights to destinations beyond the two countries.

There is talk of expanded connectivity, seamless transfer, co-ordinated flight schedules, joint marketing activities and the development of a common “airpass” for customers of both airlines to enable travel on a single ticket to multiple destinations.

Also in the works are joint fare products, the alignment of corporate programmes and tie-ups between their frequent-flyer programmes. But the boldest proposal yet is revenue sharing on flights between Singapore and Malaysia, a move that requires regulatory approval. 

WHICH AIRLINE WILL BENEFIT MORE?

Some observers think it is SIA which will gain from the arrangement since it will, together with SilkAir and Scoot, have access to more Malaysian destinations.

But it is unlikely that SIA as a group would be interested in operating to every port. What matters is accessibility, and both sides will benefit from seamless transfer between the airlines.

MAS will benefit from the feed from SIA's strong international network. Revenue sharing should ensure that neither party is unduly disadvantaged. Malaysia too can expect increased tourism.

Others question the wisdom of SIA as the more profitable partner entering into such an agreement, even viewing it as philanthropy to help a close neighbour in trouble.

Certainly the partnership, as recognised by Mr Izham, will extend MAS' otherwise shrinking reach and enhance its global presence through connections with SIA's wide network.

But the partnership will also provide SIA with the opportunity to relocate its resources to more profitable routes and take advantage of MAS' connections in regions where the latter has a stronger presence. This is a similar arrangement which Qantas has with Emirates, which gives Qantas customers access to a multitude of destinations in the Middle East, Africa and Europe on Emirates via Dubai.

It makes more sense for SIA and MAS to complement each other rather than compete when they operate in close proximity to each other and tap into the same market. Together they will be better positioned to take on the competition both regionally and globally. 

WHAT’S NEXT?

It is interesting that this is happening at a time when MAS, faced with a deepening financial crisis, is awaiting a white knight to come to its rescue.

Four parties were initially said to be interested, but none has raised any excitement except Qatar Airways. Its chief executive Akbar Al Baker has since ruled out his airline's interest though he expressed a willingness to help turn MAS around.

The other prospects are believed to be local investors with limited or no experience in managing a major airline.

More recently, there has been speculation that Japan Airlines (JAL), which has signed an agreement with MAS to open up access to each other's destinations in Japan and Malaysia, might be interested.

The argument went that the pair would be a good match since JAL itself had not too long ago survived bankruptcy. That likelihood too has since been put to rest.

Interestingly, industry experts think MAS' best bet is AirAsia, a budget carrier whose success has come at the expense of the national carrier. But AirAsia's chief executive Tony Fernandes has said his carrier is not interested.

Inevitably, the question will be asked of SIA, which industry experts do not doubt could be one most capable of turning the ailing Malaysian carrier around.

Would SIA move towards acquiring an equity interest in MAS?

To be sure, it would be premature to assume that is SIA's goal in its recent agreement with MAS on wider cooperation. Similarly, it would be naive to assume that every code-share agreement that MAS signs with another airline — the latest being British Airways covering 14 destinations — points to a possible equity partnership in the offing. 

But the opportunity is there for SIA to consider. It has been 20 years since SIA invested in a foreign carrier, first in Virgin Atlantic and then in Air New Zealand. However, both ventures have performed below expectations and incurred heavy losses, particularly the latter.

Understandably SIA would be wary about MAS as many parties had tried to restructure and steer the airline back into the black and failed. This is perhaps why there has been a lack of interest in the industry to take up MAS' invitation.

SIA too cannot assume to understand MAS culturally just because they are geographical neighbours and came from the same mould. They are in fact operationally very different airlines, whose rivalry since their break-up has been exacerbated by their antipodal fortunes.

SIA has gone on to become one of the world's most successful airlines, having garnered many awards for service and financial performance, while MAS struggles to stay afloat, undergoing several failed renewals under foreign leadership appointees.

How much SIA could change at MAS, and how ready MAS would be to go the SIA way are crucial questions to be answered.

For now that issue is best left on the burner as the two airlines work their way back to being more partners than rivals.

 

ABOUT THE AUTHOR:

David Leo is a published author and an aviation veteran, having worked in airline and airport operations for 30 years.
 

Related topics

Singapore Airlines Malaysia Airlines aviation tourism travel

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