Friday 29 Mar 2024
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KUALA LUMPUR: Malaysia’s aviation market will see the launch of a new privately-held airline in the third quarter of this year, which will be based out of the Senai International Airport in Johor and Kota Kinabalu in Sabah.

Dubbed “flymojo”, the airline will position itself “between a hybrid and premium full-service product”, said Fly Mojo Sdn Bhd managing director Datuk Janardhanan Gopala Krishnan.

“We are finalising the routes, which will determine the kind of products that we will roll out. But definitely [the airline] will not be a low-cost or super premium. It will be closer to a full-service carrier,” he told The Edge Financial Daily by phone yesterday.

“The final route selection will also determine the markets that we will serve,” he said.

Janardhanan said for starters, the airline will operate using leased aircraft.

“We are now in talks with Canadian aircraft manufacturer Bombardier Commercial Aircraft to firm up lease plans for at least three aircraft,” he said, without disclosing details about the aircraft type.

Fly Mojo yesterday signed a letter of intent with Bombardier Commercial Aircraft to buy 20 CS100s for US$1.5 billion (RM5.5 billion), with an option for an additional 20 CS100s at the Langkawi International Maritime and Aerospace show. The event was witnessed by Prime Minister Datuk Seri Najib Razak.

Based on the list price of the CS100, a firm order would be valued at approximately US$1.47 billion, and could increase to US$2.94 billion should Fly Mojo exercise all its options. The CS100 seats up to 125 people.

Janardhanan said flymojo is expecting to take delivery of its first CS100 next year, which will make it the first customer and operator of the CS100 in the Southeast Asian region.

In a statement yesterday, Deputy Transport Minister Datuk Aziz Kaprawi said flymojo will play a key role in “improving connectivity between the peninsula and Sabah and Sarawak, as well as other parts of the region”.

Fly Mojo chairman Datuk Seri Alies Anor Abdul said, “We are confident that our model will resonate deeply with our passengers and that the use of the technologically advanced CSeries aircraft will transform the aviation industry in Malaysia and the region.”

When contacted, Alies told The Edge Financial Daily that he is also positive on the Asean Open Skies policy which came into force on Jan 1 this year. 

“With the liberalisation of air services, there will be no limits on frequency and capacity for member countries. With this, we expect higher air travel demand in the region, increase in passenger traffic and movement of goods as well as improved service and quality,” he said via email. 

“In short, there is ample demand, and a new start-up like flymojo will be able to grow in tandem with the demand in the region and China,” Alies added. 

According to data obtained from the Companies Commission of Malaysia (SSM), Fly Mojo is owned by Azharuddin Satyapal Das Abdullah and Ismail Hue Kor Ming. The company has a paid-up share capital of RM5 million. 

Analysts expressed mixed feelings about the launch of the new airline amid three aviation disasters, stiff competition and a weaker currency. 

State investor Khazanah Nasional Bhd has recently taken Malaysian Airline System Bhd (MAS) private as part of plans to revive the loss-making national airline. Budget carrier AirAsia Bhd (fundamental: 0.2; valuation: 0.6) suffered a net loss of RM428.51 million in the fourth quarter ended Dec 31, 2014, hit by higher costs and a weaker currency. It was its first quarterly net loss in two years.

“I do not think the new airline (flymojo) will be a threat to current players such as MAS, AirAsia and Malindo Air,” said HLIB Research aviation analyst Daniel Wong. 

He recalled that MAS and AirAsia had in the past tried to make Senai and Kota Kinabalu as their regional hubs, but had to scale back their strategy after it was less successful. 

“The two destinations lack connectivity [to other hubs] and do not have enough population to support the growth. Also, the [two] areas have yet to become a commercial or financial hub,” said Wong. 

TA Securities analyst Tan Kam Meng believes that the emergence of a new airline is negative to existing market players as it will ignite a price war among the airlines, but a positive impact for customers.

“However, it is difficult for me to judge how aggressive they (flymojo) will be as there is no track record for us to study,” he said. 

Still, Tan is of the view that it is a good time for flymojo to enter the aviation market due to the cheaper jet fuel costs.

Tan is maintaining his positive view of the domestic aviation sector on the back of MAS’ restructuring exercise and the lower fuel price environment.

AirAsia shares closed down 2.56% at RM2.28 yesterday, giving it a market capitalisation of RM6.35 billion.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.

 

This article first appeared in The Edge Financial Daily, on March 18, 2015.

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