KUALA LUMPUR: Malindo Air is all geared up for an all-out expansion as it launches its first aircraft and plans to announce further flight routes by the end of this year.
“We will be receiving 10 more aircraft this year in line with our plans to launch international and domestic flights by the end of this year,” Malindo Airways Sdn Bhd CEO Chandran Ramamuthy said at the launch of the group’s first B737-900ER aircraft last Friday.
The B737-900ER aircraft has 12 business and 168 economy seats with a total of 180 seats.
According to Chandran, the airline currently has two aircraft and will receive one plane every month, bringing the total to at least a dozen by year-end. Malindo is expected to fly to Southeast Asia, China and India by year-end.
The new player will commence operations on Friday. Two aircraft will fly to Kuching four times daily and Kota Kinabalu three times daily from Kuala Lumpur.
Malindo is offering all in-flight standard service airfares from as low as RM38 for the KL-Kuching route and RM68 for the KL-Kota Kinabalu route. These are much lower than Malaysia Airlines’ (MAS) all-in fare of RM159 for similar routes.
“We started selling tickets last week and the pick-up is very encouraging,” said Chandran.
Malindo is a joint venture between Malaysia’s Nadi Sdn Bhd and Indonesia’s largest domestic carrier, Lion Air parent PT Lion Group.
Malaysia Airports Holdings Bhd (MAHB) senior general manager for operations Datuk Azmi Murad, who was present at the ceremony, said the company expects a few more foreign airlines to operate out of KLIA this year.
RHB Research said Malindo’s entry is bound to benefit MAHB despite a keener competition in the local aviation industry.
“Malindo’s entry into the local aviation landscape may have a negative impact on MAS as the new player is offering relatively cheaper promotional airfares,” the research house said in its report. On news Malindo Air is to commence just before the school holidays next week, RHB Research is of the view that it could “ultimately hurt both MAS and AirAsia Bhd”.
“However, we think that the impact may not be prolonged as Malindo is operating at a high cost and it is in its start-up phase. As such, we feel that it would be a matter of time before it stops offering such low fares,” it said.
The research house said MAHB is seen as the “ultimate beneficiary on the entry of Malindo”. It said the potential price war would stimulate air travel as it had always been in the past, which boosted passenger numbers.
According to RHB, the low airfares will entice passengers to spend more at the airport.
“MAHB will be able to generate increased revenue from the higher passenger service charges as Malindo will be operating at KLIA over the next few months until klia2 starts operations.
“After seeing passenger growth slowing down to 5% in the financial year 2012 (FY12), we expect MAHB’s passenger traffic to grow by 11% in FY13, driven by the capacity expansion of local carriers and the entry of Malindo and other full-service carriers,” it said.
This article first appeared in The Edge Financial Daily, on March 18, 2013.