This article first appeared in The Edge Malaysia Weekly on July 1, 2024 - July 7, 2024

SKS Airways Sdn Bhd’s plans to become the first operator of the Embraer E195-E2 out of Sultan Abdul Aziz Shah Airport in Subang, Selangor (Subang Airport) appear to have hit a bump. The commercial airline under Johor-based SKS Group — which engages in property development, hospitality and credit finance — may have called off plans to take delivery of the 10 E195-E2s from US-based aircraft lessor Azorra Aviation Holdings LLC.

The move came after the airline failed to secure enough landing and take-off slots at the airport, sources say.

Azorra has approached potential lessees to take on the narrow-body jets left by SKS Airways, according to a person familiar with the matter. SKS Airways, Azorra and Embraer did not respond to a request for comment from The Edge on the matter.

With two 19-seater DHC-6-300 Twin Otter turboprops in its fleet, SKS Airways was gearing up to expand its operations to include jets. The E195-E2s were supposed to form the core of its expansion plans out of Subang Airport.

Industry insiders say the airline had applied to operate 40 flights per day to ensure the economic viability of its operations, but the number of slots granted by airport operator Malaysia Airports Holdings Bhd (MAHB)(KL:AIRPORT) — of about four to five daily flights — knocked back that plan.

“The business plan was for SKS Airways to become a major jet operator at Subang Airport, but when the slots were opened for application to all airlines, the number granted [to SKS Airways] was insufficient to support its operations using the Embraer planes,” a source tells The Edge.

In May last year, SKS Airways signed a 12-year operating lease agreement with Azorra for 10 E195-E2s. Based on the list price of an E195-E2, the 10 jets are worth more than US$840 million (RM3.94 billion). It also signed a deal with Brazilian aircraft manufacturer Embraer Commercial Aviation for the repair and maintenance of the aircraft.

Sources say the airline had been due to take delivery of its first E195-E2 in June, delayed from January initially, but faced further delays as Subang Airport is not ready to handle jet operations.

In May, Transport Minister Anthony Loke was reported as saying that he expects jet operations in Subang Airport to resume in the third quarter of 2024. 

Since 1998, Subang Airport has been limited to handling only propeller-driven aircraft to avoid cannibalising the traffic at Kuala Lumpur International Airport and to make KLIA a strong aviation hub in the region. But in February 2023, the government gave the go-ahead for the return of scheduled jet passenger and cargo flights under the revised Subang Airport Regeneration Plan.

Sources say the aircraft delivery delays were also due to SKS Airways having to undergo technical certification by civil aviation safety regulator, the Civil Aviation Authority of Malaysia, for its aircraft and crew.

The airline has also downsized its staff and relocated its headquarters from Citta Mall in Petaling Jaya, Selangor, to a smaller workspace in nearby Oasis Square amid ongoing uncertainty about when the aircraft will be delivered, sources say.

The E195-E2 is the world’s most efficient single-aisle aircraft with the lowest fuel and noise emissions. It has a range of 2,600 nautical miles (4,800km), the equivalent of about seven hours of flight. SKS Airways’ E195-E2 fleet was to be configured with a seating capacity for 136 passengers.

The latest decision represents a setback for SKS Airways, which has been facing questions about its future following news last November that it was seeking new investors. In response, SKS Airways had said initial payments, including the upfront security deposit to secure the 10 E195-E2s, have been fully paid to Azorra. It had earlier also dispatched seven of its engineers to Brazil for intensive practical training for the E195-E2 led by Embraer.

Sources say the collapse of cash-strapped low-cost carrier MYAirline Sdn Bhd less than a year after taking to the skies had “more or less impacted SKS Airways’ plans”.

MYAirline abruptly halted its operations last October. Since then, it has also lost both its air service licence (ASL) and air operator’s certificate (AOC). Airlines require both the ASL and AOC to operate a scheduled passenger airline business.

However, unlike MYAirline, the aircraft cancellations have little or no impact on SKS Airways’ passengers as its flights to Tioman and Redang islands have been suspended since October 2023, citing the monsoon season for safety and commercial reasons.

“At that time, they also wanted to focus on the entry into service of the Embraer planes,” says a source close to the airline.

SKS Airways has yet to break even since it took off in January 2022 during the Covid-19 pandemic. Companies Commission of Malaysia (SSM) data shows that its net loss widened to RM32.28 million for the financial year ended Dec 31, 2023 (FY2023) from RM23.95 million in the previous year. Revenue rose 3.9% year on year to RM3.21 million from RM3.09 million. Its accumulated losses stood at RM85.67 million as at end-December 2023.

The fate of SKS Airways remains uncertain. Its ASL is due to expire this Dec 31 and its AOC on Sept 30, 2025.

According to sources, the airline will have until October to come up with a new business plan and provide financial and operational reports to economic regulator the Malaysian Aviation Commission if it wants to renew its ASL.

An SSM filing shows that Cindi Sim, who is the group managing director of SKS Group, has 59.85% equity interest in SKS Airways, while SKS Airways director Datuk Majid Manjit Abdullah, who sits on the boards of directors of Ekovest Bhd and PLS Plantations Bhd, has a 40.15% stake. Majid Manjit is also chairman of Tree Movement (M) Sdn Bhd, a manufacturer of electric vehicles whose shareholders include the Pahang royal family. 

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