Why Malaysia Decided to Stop Flying from Kl to Paris and Kl to Amsterdam in January 2016

QUESTION 1

Q: Air France launched flight from Paris to KLIA on April 2013, but decided to stop flying from Paris to Kuala Lumpur in October 2015. Analyse the decision making.

A:

Alliances

Some routes work for some airlines, some do not. Sadly, for Air France, their Paris – Charles De Gaulle to Kuala Lumpur International route isn’t that viable it seems. The route will be terminated from the start of the winter timetable on the 25th October 2015, with the four days a week service suspended. The airline will also cancel its services to Stavanger in Norway, Verona in Italy and Vigo in Spain from September as part of a cost-cutting restructure. Like Lufthansa, Air France is dropping its Stavanger service at the end of the summer season, having only launched the route in March 2014. Routes to Verona in Italy and Vigo in Spain will also be dropped from the end of October, though both of these leisure destinations might potentially be re launched next summer by Air France’s in-house LCC Transavia. The dropping of the airline’s thrice-weekly service to Kuala Lumpur comes just 30 months after the route was launched in April 2013. According to the airline the problem on this route was low yields rather than demand, so Malaysia Airlines will soon be able to enjoy a monopoly on the route once again.

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Retaliation

The airline group Air France-KLM will stop flying unprofitable routes, reduce capacity on some long-haul flights and review its investment plan for new planes as the company tries to cut costs at a time of slow revenue growth.

The airline, Europe’s largest by traffic, said it would cut routes to Stavanger, Norway; Verona, Italy; Vigo, Spain; and Kuala Lumpur, Malaysia. The company added it would reduce the frequency of flights and the size of the aircraft on routes to Tokyo, Rio de Janeiro and Moscow.

The company has been ravaged by a slow European economy as well as additional competition from low-cost budget airlines on its short-haul flights and from Middle Eastern carriers on its long-haul ones. So Air France is fighting to boost its profitability while still burdened with heavy debt and high costs

Explaining the reason behind the suspension, Aude-Lise Combier, country manager for Air France-KLM in Malaysia, said: “While there is good load factor, the yield is low and we don’t see a short term improvement in yield.

The carrier's network and connections will still allow passengers from Kuala Lumpur to continue to fly daily from Kuala Lumpur to Paris via Singapore or Amsterdam from October 26 and the Air France–KLM office in Kuala Lumpur will continue to operate as usual.

Abdul Rahman Mohamed, deputy general manager, channel management of Mayflower Acme Tours, said: “With only Malaysia Airlines flying on the Kuala Lumpur–Paris-Charles de Gaulle route from October 26, I foresee a shortage in capacity to Paris during the peak outbound travel period during the year-end school holidays.

Decision Making

Air France launched his flight from Paris to KLIA in April 2013 and decided to stop in October 2015. Air France will cancel its route between Paris Charles de Gaulle and Kuala Lumpur. It will no longer operate flights AF246 and AF241 from October 25. The airline will also cancel its services to Stavanger in Norway, Verona in Italy and Vigo in Spain from September as part of a cost-cutting restructure.

Air France launched the flight because of the strong bilateral relations between Malaysia and France. Conscious of the leading role we can play with the customers, partners, suppliers and the industry, we enshrine innovation alongside citizenship and environmental commitment at the heart of our business strategy. It is also complemented by the growing economic development, as well as its attractiveness as a tourist destination. This decision makes it a very good proposition for Air France - KLM to use Kuala Lumpur as a location to increase the tourist presence in South East Asia. In addition, the customers that wishing to travel to Indonesia from Europe will also get benefit from this connecting opportunities to Jakarta offered by KLM.

After operating their flight from Paris to KLIA for 2 years, Air France decided to stop the route. The route will be terminated from the start of the winter timetable on the 25th October 2015, with the four days a week service suspended. The alternative services for those who want to travel on a SkyTeam airline will be available with KLM (and their codeshare partner that is Malaysia Airlines). Between this flights operate a dual daily service between Amsterdam and Kuala Lumpur International Airport (KLIA). This is because if a route doesn't pay, it's a waste to try to keep going.

Competition

Air France decided to cut routes to Kuala Lumpur as its flights to the Middle East and Asia became unprofitable routes. Since 2011, every year the Air France has lost money in Europe airline undermine by low-cost airlines such as EasyJet and Ryanair and attacked on long-haul routes by Middle Eastern rivals such as Emirates, Etihad and Qatar Airways.

The current strike is about cutbacks on long-haul routes, because those to Asia are being taken over by the Middle Eastern airlines. Between 2010 and 2013, Emirates increased the total distance that its passengers travelled by 46 per cent; Qatar Airways and Etihad matched that performance. Air France-KLM barely saw an increase as Air France has been struggling in increasing competition from the aggressive Middle Eastern Airline. The airline aim is by 2017, its want to reduce its haul capacity by 10 present. Hence Air France is struggling to boost its profitability while still faces heavy debt and high cost.

Air France cuts winter flight to Kuala Lumpur as revenue comes under pressure. Due to competition air France is struggling to maintain to profit after four year making losses. The pressure competition from low cost carrier on regional routes such as EasyJet Plc and Gulf carriers which includes on Dubai based Emirates on long haul, making air France to cut more 7,500 jobs over three years. Therefore, management is still struggling to win backing from Air France pilots for its savings plans and said wholesale route cuts will be necessary without a deal.

As it Perform 2020 programme, The Franco-Dutch carrier says it will stop to making loss on unprofitable routes and reduce others. Air France-KLM reviews a possibly postponing delivery of aircraft including Airbus A350 and Boeing 787. The airline’s management is considering legal action to force the pilot union, Syndicat National des Pilotes de Ligne, to accept the remaining measures of this year’s cost cutting efforts.

QUESTION 2

Q: British Airways stop flying from Heathrow, London to KLIA for 14 years in 2001 but decided to continue flying again in 2015.Analyze this decision making.