Malaysian Air in Talks to Offload A380s to Chinese Operators

(Bloomberg) -- Malaysia Airlines Bhd. is in talks with carriers in China and other Association of Southeast Asian Nations countries about offloading its six Airbus Group SE A380 jets because the giant double-deckers are no longer needed in the fleet, according to Chief Executive Officer Peter Bellew.

The company is also negotiating with Airbus to add 90 more seats to each of the 494-berth superjumbos to make them more attractive to second-hand users while retaining the ability to operate the aircraft in a two or three class configuration, Bellew, who took over on July 1, said in an interview Friday.

Malaysian Air stands to become the first A380 customer to cease flying the model, which first entered service with Singapore Airlines Ltd. in 2007. While that might be bad news for a plane that’s already struggling for sales, establishing a used superjumbo market would soften the blow for Airbus, especially should the jet secure a new Chinese operator.

Malaysian Air no longer wants the A380 as it focuses more on Asian flights and prepares to take delivery of six smaller Airbus A350s, which will replace the giant aircraft on routes such as Kuala Lumpur-London. If direct buyers aren’t found it’s prepared to offer the jets for lease with access to its A380 simulator, or complete with pilots and cabin crew, Bellew said, adding that there are a number of airlines in the region “keen to dip their toe in the water.”

More A330s

The Irishman, who spent nine years working under Ryanair Holdings Plc CEO Michael O’Leary before joining Malaysian as chief operating officer in 2015, said the carrier is looking at beefing up its fleet with three of four used Airbus A330s with engines from Pratt & Whitney, like the 18 already in operation.

Airbus’s A321 model, which former CEO Christoph Mueller had said the carrier might buy, is now less likely to join the fleet, Bellew said. Malaysian placed an order for 25 737 Max 8 jets in July for delivery from 2019 and has options including the Max 9 model that could perform longer flights.

Bellew said the airline is in talks about 15 new routes to China, Japan and South Korea as he carries forward Mueller’s Asia-focused strategy. Of those the most attractive three to six are likely to go ahead, with an announcement due as early as next month. Malaysia is a “natural destination” for tourists from China because its own large ethnically Chinese population means they can speak their own language and eat their own food while on vacation, he said.

Improving Perceptions

Passenger confidence in Malaysian Air, now fully owned by sovereign wealth fund Khazanah Nasional Bhd., collapsed two years ago after Flight MH370 bound for Beijing vanished on March 8, 2014 and another of its planes was shot down over Ukraine four months later.

Bellew said perceptions of the company have now greatly improved both in Malaysia and China, which is again one of its strongest markets. Demand from Australia and New Zealand is less stable because of overcapacity, he said.

Malaysian Air said earlier that cost cuts initiated by Mueller should help deliver a reduced loss this year 15 to 20 percent better than previously anticipated, and that it remains on track to post a profit in 2018. First-half figures were buoyed by reduced procurement costs and the legacy of 6,000 job cuts and a trimmed route network in the wake of the crashes.

Bellew said the airline needs to do more to boost revenue. Malaysian’s pricing structure will be revamped with fewer bargain-basement tickets available and less of a range between the highest and lowest prices, and the company has begun a major marketing offensive that consciously makes greater play of its brand, cabin crew and standards of inflight service.

“There’s really an atmosphere of positivity around the airline again,” he said. “We want to show the world that we’re back in business.”