How the Malaysia-Singapore tiff is hurting Firefly

This article first appeared in The Edge Financial Daily, on January 17, 2019.

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KUALA LUMPUR: The dispute between Malaysia and Singapore is inflicting “significant” damage on loss-making FlyFirefly Sdn Bhd’s revival plans. The turboprop sister airline of Malaysia Airlines Bhd has suspended all flights to Singapore since Dec 1 last year and a resumption of the flights is not yet in sight.

“The current impact on our top line and bottom line has been significant,” Malaysia Airlines group chief executive officer Captain Izham Ismail told The Edge Financial Daily in an email reply.

While he did not disclose the amount of losses incurred by Firefly during this period, Izham pointed out that the Singapore route represents the second largest within the turboprop airline’s network after its Subang-Penang route.

“Firefly operated 20 daily flights to Changi Airport. It was operating at an average passenger load factor of 65% to 70% and a full load during festive periods such as Chinese New Year,” he said.

Izham was previously quoted as saying that the revenue lost from the suspension is about RM15 million to RM20 million per month.

Firefly managed to narrow its net loss in the financial year ended Dec 31, 2017 (FY17) to RM36.65 million compared with RM249.56 million in FY15. Revenue, however, declined 9.1% to RM301.9 million from RM332.16 million in FY15. Its financial statements for FY16 were not available on the Companies Commission of Malaysia’s online system.

To ease the impact, Izham said Firefly has started to look at deploying its assets to secondary markets such as Penang.

“Firefly has [also] been working closely with Malaysia Airlines to accommodate its booked passengers as much as possible,” he said.

As recent as on Tuesday, Singapore Foreign Affairs Minister Vivian Balakrishnan was reported as saying that the island republic would do its best to discuss all outstanding bilateral issues with Malaysia in a calm, reasonable and focused manner, but warned of “consequences” if other nations embarked on “adventures and antics” against it. Yesterday, his Malaysian counterpart Datuk Saifuddin Abdullah reportedly said Malaysia-Singapore relations remain good despite the need for further discussions on several matters.

Changi Airport on Dec 1, 2018 moved Firefly’s slot to Seletar Airport, as part of its plans to transfer all chartered business jets, private jets and turboprop operations to Seletar, freeing up slots at Changi for larger aircraft.

However, the Malaysian government has declined to approve a route between Subang and Seletar, saying that Seletar’s instrument landing system (ILS) would encroach upon the Pasir Gudang airspace, resulting in safety concerns.

Subsequent to a bilateral meeting between both countries’ foreign affairs ministers, Malaysia agreed to immediately suspend its permanent restricted area in the airspace over Pasir Gudang, while Singapore will suspend its implementation of the ILS procedures for Seletar Airport.

In anticipation that the deadlock in talks between the two countries is prolonged, Izham said Malaysia Airlines is currently in discussions with Changi to explore other options to re-establish Firefly’s flight connectivity between Subang and Singapore.

“We are in discussions with Changi to explore different options to re-establish connectivity to Singapore be it via Seletar or Changi from Subang. As a sister company within the Malaysia Aviation Group, Firefly’s suspension of Singapore does have an impact on the group but not directly on Malaysia Airlines,” he said.

Already behind schedule in its turnaround plans due to the volatility of currencies and oil prices and a shortage of commercial pilots, Malaysia Airlines now hopes to break even in 2019 and become profitable by 2020.