Saturday July 16, 2011

Firefly MD Eddy Leong answers your 10 questions

Firefly is competing with AirAsia in many areas, including Johor. Soon Singapore Airlines (SIA) will launch its long-haul low-cost carrier. What will be the impact on the airline and its southern hub? Yusoff Hakimi, KL

Firefly's primary objective is to be the growth vehicle of the Malaysia Airlines (MAS) group, especially for the “value” market segment, which is experiencing a very high growth rate in this part of the world.

We believe the MAS-Firefly dual-brand strategy presents the best opportunity to position MAS as “Asia's Number One Airline” targeting the premium market segment and Firefly as “Your Community Airline” targeting the value market segment.

Our strategic intent for the southern hub based in Senai International Airport is to be the growth catalyst for Iskandar Malaysia, in support of one of the largest Government-led development projects in recent times.

From a MAS group perspective, it was decided that Firefly's product positioning and cost structure would be the ideal vehicle to lead this profitable growth.

SIA's intention to start a long-haul low-cost airline is definitely very welcome. Iskandar Malaysia's unique attraction is precisely because it is located next to Singapore, which is Asean's biggest financial and air travel hub.

All airlines currently operating in Senai International Airport and Changi Airport will definitely benefit from increased connectivity to each other whilst establishing certain niche respectively. A living example of this is Hong Kong and Shenzhen.

Why can't Firefly's B737 flights have the same services as the ATR72 flights, such as provision of refreshments and baggage allowance? William Tan, KL

The ATR72 flights are designed to maximise convenience, comfort and access for flights averaging one hour flight time. Passengers who have experienced our flights at Subang will certainly attest to that.

Our ATR72 operations are very popular with frequent commuters, whose number one concern is time criticality. Consequently we have designed our services to be totally hassle-free.

Tickets are available for purchase online, via call centre or from our airport ticketing offices. We have 30-minute check-in cut-off time, standard 20kg checked-in baggage allowance, complimentary in-flight refreshments, etc. The emphasis is to make travel as hassle-free as possible and this has worked very well for Firefly.

Our B737 flights, however, is designed to offer “choice”, whilst staying true to our pledge to deliver convenience, comfort and access for flights that are longer in flight time.

This is why Firefly chose to operate from the Kuala Lumpur International Airport, with world-class airport facilities such as aerobridge, train/bus/taxi services, extensive F&B and shopping outlets, etc.

It is our belief that low fares can come with excellent facilities and world-class services. Consequently we attract a very diverse range of customer segments ranging from backpacking super-value seekers who only want a seat in the aircraft, to top executives and VVIPs who want the full suite of services.

In a scenario like this, we believe it is preferable to put the power of choice back in the hands of our passengers. By separately listing out the ancillary items and pricing them outside the ticket price, our passengers can exercise their right to buy only the items they need for the travel and nothing else. I believe this is how the idea of charging for use of toilet onboard was mooted by the most popular low-cost carrier in Europe.

Rising oil prices are a concern for airlines. How much of your fuel is hedged and at what prices? Will you impose fuel surcharges if oil prices rise further? Mohamed, Johor

Firefly currently does not hedge our fuel requirements and we do not intend to impose a fuel surcharge in the foreseeable future.

We do not believe imposing the surcharge is a tenable method to offset escalating fuel prices. Fuel consumption is a direct result of aircraft type, and that is the key to fuel management.

With the ATR72-500, we've found the ideal aircraft that is high-performing, fuel-efficient and cost-effective. But we are not stopping here as we continue to work closely with ATR to further improve overall performance of the aircraft.

As for the narrow-body jet aircraft, we are closely following industry developments to ensure when we finally choose the long-term aircraft type, it will be one that will bring us all the way to 2030 and beyond, where the economy is driven by sustainability and not wasteful consumption.

You have steered Firefly to regional recognition, and there are accolades from passengers. As an accountant, who is often perceived as figures-centric, how do you become business-savvy? Huang, Singapore

I guess I have some similarity to the likes of Tengku Datuk Azmil Zahruddin (MAS CEO), Michael O'Leary (Ryan Air CEO), Tan Sri Tony Fernandes (AirAsia CEO), Gary C Kelly (Southwest Airlines CEO), etc.

Your aircraft is maintained by the MAS engineering team. Do you have plans to set up your own engineering department? Azafzan, KL

For the ATR72, yes. This is because the ATR aircraft is significantly simpler compared to jet aircraft ranging from B737 to A380, and hence, more cost-effective and efficient to be maintained separately. As for our jet fleet, maintenance will continue to be outsourced to MAS's maintenance and repair organisation unit.

Is there cannibalisation of MAS routes when Firefly flies the same routes? Wouldn't it be more sensible to delineate distinctly, say, for MAS to concentrate on routes with more than three flight hours, while Firefly on shorter routes? Ambrose Lo

The MAS-Firefly dual-brand strategy is designed to maximise profitability and ensure sustainable growth of the MAS group. Decisions regarding our network development are closely coordinated to ensure we position the right brand, product, service level, price structure, cost base, etc, to match market demand, thereby resulting in the best profitability.

As a group, we view cannibalisation as a natural development and therefore, the appropriate response is to ensure we have a portfolio of products and services to continue to capture the changing demands.

Firefly's pricing for the Subang-Singapore route is stiff. You should lower it and not monopolise your position in that sector. Your thoughts? Victor Tan, Penang

Firefly probably has the least capacity serving the Kuala Lumpur-Singapore route compared to other carriers, which use jet planes.

Since liberalisation, this route has experienced tremendous capacity increment and I doubt we have any real monopoly over the route.

As explained in my reply to Question 2, what we offer for the Subang-Singapore route is a product and service designed for frequent commuters with emphasis on convenience, comfort and access.

We package into the air fare what other airlines would require you to purchase separately and frequently, more expensively. We believe we offer our passengers incredible values at low fares. That said, we continue to encourage our passengers to purchase their tickets well ahead of time to take advantage of our early bird discounts.

What are Firefly's expansion plans, and what are the new destinations that you are looking to fly to? Is Alor Star on the cards? Bernard KH Lim, Penang

Firefly will take delivery of two more ATR72-500 this October, intended to supplement our current network with more frequencies. I'm pleased to say that one of the routes earmarked for additional frequencies is Subang-Alor Star.

Firefly already has six B737-800s and one B737-400. We will have taken delivery of one more B737-400 by end July and another B737-800 by November. We will take another six B737-800 in 2012, seven in 2013, five in 2014 and five more in 2015, making it a total of 30 B737-800s by 2015.

Our network expansion in 2011 and early 2012 is primarily focused on domestic routes, especially flights to Sabah and Sarawak. From mid-2012 onwards, we plan to commence our international flights to major and secondary Asean cities.

Since starting our B737 operations, we have been receiving daily requests to operate into various locations. We believe our low fare with world-class service quality' approach has opened up a whole new dimension previously not believed to be possible. We are very encouraged by this show of support and will certainly do our best to serve our passengers better.

Firefly has not even placed an order for more aircraft. How are you going to compete with AirAsia, which has more planes and routes? Osman, Kuantan

We actually don't spend much time thinking about our competitors. Our focus has always been our customers what they want (or what we think they want) and what they are willing to pay for.

I believe this has served us very well and continues to be a source of inspiration to every single staff in Firefly. Each of us wakes up every day all geared up to serve our customers better because we know ultimately that means better profitability to the company. How dreadful it would be if we were to spend our lives worrying about what the competitors will do.

Regarding aircraft, as mentioned in my reply to Question 3, we are following closely the industry developments to ensure we put our money in aircraft that will propel us into the future of sustainable growth and increased environmental standards.

Size is not a major consideration as Firefly is leveraging on the critical mass already achieved by the MAS group. We prefer to grow organically and profitably.

Meanwhile, we continue to source our aircraft requirements in the leasing market. So far, we have been very successful in securing leases at favourable terms.

There are many Nepalis working in Malaysia but no airline from Malaysia flies to Kathmandu, Nepal. There are also many Malaysians who would like to visit Nepal. Would Firefly have a long-haul low-cost arm? James JL Foo, KL

Kuala Lumpur-Kathmandu is a route being considered favourably by the MAS group. We have not yet decided who will be operating the route and the timeline for it. Will Firefly have a long-haul low-cost arm? Well, never say never!

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Saturday July 16, 2011

Firefly MD Eddy Leong answers your 10 questions