GEORGE TOWN: flymojo, a new Malaysian private airline scheduled to start operating next month in Johor Baru and Kota Kinabalu, is likely to see a delay in its plans as it has yet to receive an air operator’s certificate (AOC).
The new airline currently has a provisional air service licence that does not qualify it to operate. An AOC is a certificate authorising an operator to conduct commercial air transport operations.
Department of Civil Aviation (DCA) director-general Datuk Azharuddin Abdul Rahman told the digitaledge DAILY that the airline has yet to receive its AOC as the authorities are still processing its application.
“Fly Mojo Sdn Bhd (operator of flymojo) cannot operate flights yet [without an AOC], but it does not stop the company from buying planes. Fly Mojo needs to first comply with all the regulatory requirements, including the number of pilots, engineers and technical staff, and their qualification [before they can fly],” he said.
The announcement of the new airline was made by Prime Minister Datuk Seri Najib Razak at the Langkawi International Maritime and Aerospace Exhibition in March, which also saw it signing a letter of intent with Canadian aircraft maker Bombardier Commercial Aircraft to purchase 20 CS100s, with an option for another 20. flymojo is expected to take delivery of its first CS100 next year.
However, it is feared that delays in the licensing approval process could cause flymojo to begin services later than first hoped.
Nonetheless, analysts see the delay in rolling out flymojo may be a blessing in disguise, given the challenging market conditions and uncertain economic outlook, which have forced Malaysia Airlines to undergo a dramatic restructuring, and AirAsia Bhd and AirAsia X Bhd to cut costs and defer plane deliveries.
Shukor Yusof, founder and an analyst of aviation research firm Endau Analytics, said it does not make business sense for flymojo to fly certain routes within Asean, due to unproven aircraft economics and that the destinations the new airline would want to fly may already be served by other airlines.
“The entry barrier into the airline industry is low, and hence the relative ease of setting up a carrier and to fly within [a] short period of time. However, it is not easy to make money in this business. Richard Branson (founder of Virgin Group) aptly said ‘if one wants to make millions in the airline business, one needs to have billions to start with’,” he told the digitaledge DAILY.
“In my view, flymojo is unlikely to make a profit if it were to take off anytime soon. Only AirAsia has been a phenomenal success from day one, meaning that it made money for its investors.
“Then again, we now live in a completely different business environment. I am not privy to the investors behind flymojo, but I hope these people have very deep pockets because money burns quickly in this industry,” Shukor added.
Fly Mojo managing director Datuk Janardhanan Gopala Krishnan is unperturbed by the potential delay to start its operations and the challenging airline environment.
“Given that Malaysia Airports Holdings Bhd and other regional airports have continued to report increased passenger traffic year-on-year, and the Airports Council International has also predicted a growth in passenger traffic within the Asia-Pacific region, we do not see this as an area of concern,” he said in an email interview.
“We are aware of the nature of the industry and remain fully committed to provide passengers with an alternative choice,” he added.
Janardhanan said flymojo is proceding with its preoperational activities and that its business model is in line with market demand.
On the difficulties it faces in obtaining an AOC, Janardhanan said: “As you know, the regulatory requirements in Malaysia are among the most stringent and for good reason.
“We have and will continue to comply with all requirements by [the] DCA and other regulatory authorities”.
An analyst, who declined to be named, sees flymojo having overlapping routes with AirAsia and Malindo Air, making it difficult for the new airline to operate profitably.
“flymojo would need better management, capacity and strategy. This is a game of endurance. The current low fuel prices may be good for airlines, but not for those operating premium flights. The exchange rates are also not good,” he said.
According to data obtained from the Companies Commission of Malaysia, Fly Mojo is owned by Azharuddin Satyapal Das Abdullah and Ismail Hue Kor Ming. The airline is targeting the travel market within Asean and the regions bordering it.
This article first appeared in digitaledge Daily, on September 21, 2015.