Malindo shakes up Perth market with low fares and South/Southeast Asia connections

    Malindo Air’s Kuala Lumpur-Perth service, which has been operating since Nov-2015, has been an experiment of sorts for the Lion Group in Australia. Lion previously never operated any services to Australia but has long held aspirations to offer several routes to Australia from both Indonesia and Malaysia as well as potentially launch a domestic Australian airline.

    Indonesia’s Lion Air established Malaysia-based Malindo in 2013 and Malindo has since emerged as one of the fastest growing airlines in Asia, quickly expanding its network to 43 destinations and its fleet to 45 aircraft (as of early Mar-2017).

    Malindo says the Kuala Lumpur-Perth route has been highly successful, leading it to add capacity to Perth and prompting its sister Indonesian airline Batik Air to select Perth as its first Australian destination. Malindo currently operates 12 weekly flights to Perth using two class 162-seat 737-800s, which gives it approximately a 22% share of capacity in the local Kuala Lumpur-Perth market and a 4% share of Perth’s total international market.

    Malindo has quickly captured a relatively significant share of the Perth-Southeast Asia and Perth-South Asia market. A majority of its Perth passengers transit beyond Kuala Lumpur – with India a particularly popular destination.

    Malindo serves six destinations in India and another four (soon five) in other South Asian countries.

    In the Perth-India market, Malindo competes with other Southeast Asian airlines – namely AirAsia, Malaysia Airlines, Scoot/Tigerair, Singapore Airlines/SilkAir and Thai Airways/Thai Smile. Qantas also offers connections via Singapore with codeshare partner Jet Airways.

    Malindo has very competitive fares

    Malindo is typically very competitive, with economy fares from Perth to southern India starting at slightly over AUD300 return and to northern India starting at AUD500 return. There are no non-stop options between Perth and India and the only non-stop flights from Perth to Australia, operated by Air India, require several hours of backtracking via Melbourne or Sydney.

    Malindo also carries passengers from Perth to Thailand (three destinations), Vietnam (two destinations), Indonesia and Singapore. Singapore and its Indonesia destinations (with the exception of Medan) require backtracking and is convenient compared to nonstop options but Malindo sometimes undercuts its nonstop competitors.

    Malindo’s offering represents good value as it provides a full-service product in both cabins with meals, drinks, seatback in-flight entertainment monitors and 30kg of checked luggage. Malindo also offers a corporate programme with both managed and self-managed options.

    Perth also has emerged as a top selling destination under Malindo’s interline with Turkish Airlines, which was implemented in 2Q2016 and enables Turkish to offer Perth as an offline destination via Kuala Lumpur. Malindo’s near double daily schedule at Perth allows for a range of connections both with other Malindo flights and interline partners.

    Malindo’s initial performance in Perth has hardly been stellar but has been improving and should continue to improve as the airline continues to expand its network and portfolio of interline partners. Malindo plans to add at least 10 international destinations in 2017, up from 28 at the start of the year. Several of these will connect well with Perth – such as Chittagong in Bangladesh (launching 30-Mar-2017) and Yangon in Myanmar (launching 3-Apr-2017).

    Malindo also plans to add seven interline partners in 2017. Some of these new partners do not serve Perth and will use Malindo to provide offline access to Western Australia. Malindo currently has four interline partners with two (Turkish and Oman Air) not providing online access to Perth while the other two (Etihad and Qatar) have their own flights but use Malindo to supplement their own offerings.

    In the first 14 months of its Perth operation (Nov-2015 through Dec-2016), Malindo carried 138,000 passengers and offered 218,000 seats for an average load factor of 63%. Low load factors are typical in initial months of a new international route as it takes time to build awareness, particularly in Malindo’s case as it had never flown Australia before and did not have a known brand in the Australian marketplace.

    Malindo’s load factor has been improving in recent months but is still relatively low.

    In Dec-2016, the most recent month of available BITRE data its load factor was 71.5%.

    Malindo had an average load factor of 70% on Kuala Lumpur-Perth in 4Q2016 compared to a 61% average the first 10 months on the route (Nov-2015 through Sep-2016). Malindo’s Perth load factor was at least 60% every month in 2H2016 while in the first eight months of operating the route it posted a load factor above 60% only once. But now Malindo seems to be starting to gain traction in Perth as consumers, agents and corporate become more familiar with its offering.

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    Source: Australia BITRE