Malaysia’s Malindo has shelved plans for expansion in Australia after parent Lion Group reallocated Malindo’s first three widebody aircraft to another subsidiary.
Malindo is currently an all-narrowbody operator but had been planning to take delivery of three A330-300s in 4Q2017. As Blue Swan previously highlighted, Kuala Lumpur to Melbourne and Sydney were high on the list of A330 routes for Malindo. Melbourne was expected to be launched first with service beginning before the start of the summer peak season.
However, Indonesia-based Lion Group recently decided to allocate the three A330-300s that were initially earmarked for Malindo to Thai Lion Air. Thai Lion does not have any aspirations – at least for now – to serve Australia and intends to use the new fleet of two-class A330s to launch new routes from Bangkok to North Asia.
Malindo currently serves two destinations in Australia, Brisbane and Perth, using its 737NG fleet, although Brisbane is served via Bali. Widebody aircraft are needed to operate Kuala Lumpur-Brisbane nonstop as well the slightly longer Kuala Lumpur to Melbourne and Sydney routes, while Kuala Lumpur-Perth is easily within range of the 737.
Kuala Lumpur-Melbourne and Kuala Lumpur-Sydney are already served by AirAsia X and Malaysia Airlines, both of which operate double daily flights on both routes. Malindo’s decision to shelve plans for competing on these routes obviously benefits AirAsia X and Malaysia Airlines. Both routes are already considered to be oversupplied, resulting in intense competition and low fares. A third nonstop competitor would have exacerbated the overcapacity situation, likely leading to a fare war between the three Malaysian carriers.
The Kuala Lumpur-Perth route has experienced overcapacity since Malindo entered the market in late 2015. Malindo has since operated 10 to 12 weekly flights on the route depending on the time of year. Competition has been fierce, pressuring yields and prompting Malaysia Airlines to down-gauge its daily Kuala Lumpur-Perth service in May-2017 from A330-300s to 737-800. AirAsia X has not blinked, maintaining capacity to Perth and continues to serve the route with two daily A330-300 flights.
Malindo is the only Malaysian carrier now serving Brisbane but AirAsia X serves nearby Gold Coast – and, unlike Malindo, has a nonstop product for the Queensland market. Malaysia Airlines dropped Brisbane in 2015. Malaysia Airlines further cut back its Australia network to just four destinations (Adelaide, Melbourne, Perth and Sydney) in Jul-2017, when Darwin was suspended. Darwin and Brisbane do not currently have any nonstop links to Kuala Lumpur but both are small local markets and previously these routes relied heavily on transit traffic beyond Kuala Lumpur.
Nonstop service to Brisbane is not a high priority for Malindo. The airline remains interested in Melbourne and Sydney and should at some point launch these two routes despite the recent setback.
The Lion Group is looking at acquiring more A330-300s, for delivery as early as 2018, although it does not currently have any more of the type on order (beyond the three being delivered over the next couple of months to Thai Lion). If more A330s are sourced, the group will then decide on an allocation between its affiliates and subsidiaries.
Lion Group has a very flexible approach to its fleet and often changes the allocation of an aircraft at the last second. In this case the three A330-300s were initially allocated to Malindo, which selected the configuration a year ago. The aircraft have been outfitted with lie-flat business class seats and seatback in-flight entertainment screens in both cabins.
Malindo operates under a full-service model, using two class 737-800/900s with seatback IFE monitors in both cabins. Thai Lion operates under a pure LCC model, but with the A330s inherits aircraft that offer a higher level of service because they were initially kitted out by Malindo. Thai Lion has until now offered the same basic product (no IFE and no business class) as Indonesia-based sister low cost airline Lion Air, which operates A330s in single-class high density configuration.