Perth-Kuala Lumpur overcapacity eases as AirAsia X pulls back

AirAsia X’s decision to cut one of its two daily flights to Perth should ease the overcapacity situation on the Kuala Lumpur-Perth market, benefitting Malaysia Airlines and Malindo Air.


Summary:

  • AirAsia X to reduce Kuala Lumpur-Perth frequency from 14 weekly flights to daily from Feb-2018;
  • The combination of double daily services from AirAsia X, which operates 377-seat A330s and the launch of flights from Malindo led to overcapacity in the Perth-Kuala Lumpur market;
  • With the reductions from AirAsia X and Malaysia Airlines, total Perth-Kuala Lumpur capacity will be down by approximately 60% year over year in Feb-2018.

AirAsia X has operated 14 weekly flights to Perth since mid-2016. The airline initially upgraded Perth to two daily flights in late 2013 but cut capacity to Perth in early 2014 before reinstating the capacity two years later.

AirAsia X recently loaded a new schedule for Perth which includes only seven weekly flights from early Feb-2018. The plan at least for now is to maintain just the one daily flight year-round. It has been several years since AirAsia X has operated seven or fewer frequencies to Perth year-round; before it introduced the second daily flight additional frequencies were offered during peak periods.

The combination of double daily services from AirAsia X, which operates 377-seat A330s and the launch of flights from Malindo led to overcapacity in the Perth-Kuala Lumpur market.

Perth became the first destination for Malindo and the Lion Group in Nov-2015. Malindo has since served the Kuala Lumpur-Perth route with 10 to 12 weekly flights. Malindo is a Malaysian full-service airline under Indonesia-based Lion and has served Perth with a combination of 162-seat two class 737-800s and 180-seat two class 737-900ERs.

In the first 21 months of operating the Kuala Lumpur-Perth route (Nov-2015 to Aug-2017), Malindo’s average load factor was only 66%. AirAsia X cutting capacity in half should enable Malindo to improve its Perth load factor and yield, which has generally been low.

Malaysia Airlines cut capacity to Perth in May-2017 by 44% as it down-gauged its daily Perth-Kuala Lumpur flight from A330-300s to 737-800s. The airline cited overcapacity and low yields in deciding to reduce capacity to Perth, which freed up widebody aircraft for more profitable medium haul routes within Asia.

See related report: Malaysia Airlines permanently reduces capacity to Perth despite being the 2nd largest source of international visitors to WA

Yields have been under intense pressure the last two years in the local Perth-Kuala Lumpur market as well as in the broader Perth-Asia market. Malaysia Airlines, AirAsia and Malindo all compete for sixth freedom traffic from Perth to several markets in Southeast Asia, South Asia and North Asia.

The other Asian carriers serving Perth should also therefore benefit from AirAsia X’s reduction although not as significantly as the two Malaysian competitors. Asian carriers serving Perth include Cathay Pacific, Garuda, Jetstar Asia, Scoot, Singapore Airlines and Thai Airways.

With the reductions from AirAsia X and Malaysia Airlines, total Perth-Kuala Lumpur capacity will be down by approximately 60% year over year in Feb-2018. The roughly 5,700 weekly one-way seats in the Perth-Kuala Lumpur market from Feb-2018 will represent the lowest capacity level since 2013.

Kuala Lumpur is Perth Airport’s third international largest route after Singapore and Bali. The upcoming reduction will see it slip into fourth place behind Dubai.

As it the case with Dubai, a majority of Perth-Kuala Lumpur passengers travel beyond Kuala Lumpur. However, the portion of transit traffic should reduce following the capacity cuts. This in turn should improve the yield and route profitability for all three competitors.

The overcapacity situation which has persisted in the Perth-Kuala Lumpur market over the last two years proved unsustainable.