British Airways Returns To KLIA After A Decade?

After several failed attempts, Australia's Qantas wants to work with Malaysia Airlines (MAS) to expand its network within Asia.

At the other end of the aviation spectrum half-way around the world, however, British Airways (BA) may cut ties with Qantas over its code share. If this materialises, it will augur well for MAS to work towards filling this void on the London-Asia-Australia connection.

MAS group chief executive officer Ahmad Jauhari Yahya, when contacted by StarBiz, said, “We are open to the idea of working with Qantas on Asian routes.

“We need to engage it first to fully understand how the proposed partnership would benefit both airlines, given the current partnerships in place. The benefits must also include our customers.”

To recap, MAS and Qantas had failed to strike a deal in the past. The last negotiation in March 2011 saw MAS walking away from the negotiating table because the deal was not in its favour.

But the situation is somewhat different now, as MAS is a member of oneworld and both Qantas and BA are founding members. It was Qantas that had sponsored MAS' entry into oneworld. Rising costs and intense competition have rendered it necessary for airlines to work together in the current climate. As alliance members, they will have to carry each other's traffic. MAS was selected as a member because of its wide linkages into South-East Asia.

The likelihood of a deal being struck now is higher, more so since Qantas, which plies the Australia-Singapore route at the moment, is not likely to partner Singapore Airlines (SIA) for the Asian connectivity since SIA is already allied with Qantas' rival, Virgin Australia.

Qantas announced a new strategy on Monday to work with Asian carriers, including MAS, Japan Airlines, Jet Airways, China Eastern and Cathay Pacific, for its Asian connectivity. It is considering new destinations such as Beijing, Seoul, Mumbai, Delhi and Tokyo-Haneda as well.

Those in the know claim that Qantas may ride on MAS' network to service the South-East Asia region and even for flights into India.

As Qantas reworks its routing and timing, the British carrier may also be looking at alternatives for connectivity into Asia and Australia since Qantas now has a new partner in Emirates.

Both Qantas and BA have a 17-year code-share agreement that ends on March 31. The Australian Financial Review has reported that BA has told Qantas that it would not reinstate the code-share agreement between the two airlines for connecting flights from Asia to London when the agreement ends.

But a BA spokesperson said that “we are currently transitioning our relationship with Qantas and it's nonsense to suggest that we are cancelling all our codeshares.”

All the talks surrounding a possible end to the BA-Qantas code share arose after Qantas entered a deal with Emirates months ago. Under the alliance with Emirates, which is still awaiting final approval from the Australian competition regulator, Qantas flights to London will transit via Dubai instead of Singapore beginning March 31.

That leaves BA at a loss, although for Qantas, the Emirates deal appears to be a significant step forward in fixing its international business.

Hence, it is no surprise, say experts, that BA may look at new arrangements for access into Asia and Australia, with the KL International Airport (KLIA) once again appearing on its radar screens. BA departed from KLIA more than a decade ago, albeit retaining its London-Singapore route.

“In my discussions with BA, it has indicated keenness to come back to Kuala Lumpur, but is still evaluating the viability of its operations. It will also depend on the availability of aircraft and suitable slots,” Malaysia Airports Holdings Bhd managing director Tan Sri Bashir Ahmad said in replies to queries from StarBiz.

The CAPA Centre for Aviation, in a report, said code share talks between BA and MAS have not begun, but the two carriers expect to discuss cooperating on the Kuala Lumpur-London route as well as to regional destinations in Asia and points beyond Heathrow.

It added that MAS also had more regional international capacity in South-East Asia than any other full-service carrier except SIA, which is only about 15% larger. MAS has about 10% more seat capacity in the regional international market than Thai Airways and is significantly larger than Garuda and Vietnam Airlines, both of which are more focused on their domestic markets.

BA's return would be a big boost to KLIA, and for MAS, a code share with BA for the London-Asia-Australia sector would help its load factor rise, which hopefully translates into better yields and earnings, said an expert. This is notwithstanding the fact that they have access to each other's network by virtue of being oneworld members.

MAS' passenger load factor for December, at 81.4% was the highest ever in its recorded history since April 2002. For full-year 2012, the figure stood at 74.7%.